US proposes new World Bank climate fund

The US is proposing that a new international climate change fund be launched as part of any Copenhagen agreement, and is controversially recommending that the World Bank be given the task of managing it.

Treasury officials told the New York Times this week that they had submitted a plan to negotiators involved in the Copenhagen Process that would see a new fund launched to help finance climate adaptation and clean technology projects in the developing world.

William Pizer, deputy assistant secretary for environment and energy at the US Treasury Department, said the fund would contribute to a wide range of projects from "building a solar park or creating a financial vehicle to support investments in energy efficiency to creating an insurance mechanism for disasters or crops".

Pizer failed to give details on the scale of the fund or the US contribution to it, although hopes are mounting that the US will provide details on how much funding it is willing to offer at the Copenhagen talks.

However, the proposals are likely to face opposition from many developing countries which remain sceptical about the effectiveness and neutrality of the World Bank. There are also concerns that the US plan would require large emerging economies such as India and China to pay into the fund, effectively limiting the finance they receive from rich nations to help tackle climate change.

The news comes as the World Bank announced yesterday that it has raised $130m (£78m) through its third green bond issue.

The money raised through the bonds will support projects in client countries that meet specific criteria for low-carbon development, according to Warren Evans, director of the environment department at the World Bank.

"Climate action in developing countries – specifically, mitigation and adaptation initiatives – will require important financing by the international community, from both public and private sources," he said.

The bonds were bought by a wide range of firms, including the California State Teachers’ Retirement System and Swedish life insurance provider SEB Trygg Liv, as well as Swedish national pension funds.

The World Bank issued its first green bonds in November 2008 and raised $350m. It was the first time the World Bank had offered bonds to raise funds for a specific purpose. This third green bond transaction brings the total amount raised through World Bank green bonds to about $800m.

Such financing is critical for raising money for low-carbon projects, according to Klas Eklund, senior economist at SEB. "The World Bank green bond provides a good investment and safe return, while offering investors the opportunity to actually help combat climate change," he said.

In related news, senior Democrat senator John Kerry this week called on the Obama administration to treble US funding for overseas climate-related projects next year from $1bn to $3bn.