Rich and poor countries are divided over several issues in Cancun, including how to disburse climate finances and how to account for actions taken. However, India appears to be making some concessions.
Delegates say China should be more accountable for its CO2 emissions
As the UN climate talks in Cancun enter their third day, Climate negotiators have struggled to reach agreement over proposals that would abolish a two-decade divide between rich and poor on scrutiny of greenhouse gas emissions.
A main point of controversy in Cancun is how far rich and poor countries report their pledges and whether these should be subject to international scrutiny.
Developed countries say fast-growing emerging economies like China, which has become the world's top carbon emitter, have to do far more to prove their emissions reductions.
"For China, there needs to be much tighter rules for measurement, reporting and verification compared to a small poor country," Artur Runge-Metzger, a senior European Union negotiator, said.
India is proposing that all major economies, developed and developing, would report their emissions, while the rich would also detail climate aid.
"It's an offer which could solve a lot," said Greenpeace's Siddharth Pathak of the Indian proposal.
Bangladesh is constantly threatened by the effects of climate change
India's proposal marks a big concession by a major emerging economy and would dilute differences between rich and poor. According to current rules, only 40 developed nations are required to report their emissions annually.
Many poor nations oppose changing a 1992 UN convention that obliges the rich, who are mostly responsible for climate change, to take the lead in dealing with the problem.
Cancun will also try to seek agreement on a "green fund" to channel aid to the poor.
The so-called Copenhagen Accord promised immediate financial aid to the tune of 30 billion dollars for countries most affected by climate change in the years 2010 to 2012.
On Wednesday, the government in Bangladesh called on this funding to be made available quickly.
"It must be disbursed quickly among vulnerable nations by 2012," Environment Minister Hasan Mahmud said. "The number of storms, floods, tidal surges and droughts hitting Bangladesh has gone up in the past 100 years. It has worsened poverty."
The low-lying country is vulnerable to the catastrophic impact of global warming with natural disasters killing nearly 200,000 people in the last 30 years, Mahmud told reporters in Dhaka.
What's stalling the release of funds is a lack of agreement and transparency.
It remains unclear how much of the money is new, and how much is to be recycled out of existing development aid budgets.
If the negotiations in Cancun don't bring transparency to this area, there's less chance that the parties will agree on climate funds for the period after 2020. From then on, 100 billion US dollars will be spent each year on climate action in developing countries - both on adaptation and CO2-reduction measures.
NGOs like Oxfam are desperate to reach an agreement in Cancun
It is also unclear who will manage the money. Many industrial countries - notably the US - want the World Bank and the International Monetary Fund to administer it. But many developing countries don't have a very good experience of theses two UN institutions.
"It is the small developing countries, which have indeed felt the consequences of climate change most strongly, are of course against financial institutions like the World Bank also funding climate aid, because they have no say there," said Greenpeace climate expert Martin Kaiser.
Another sticking point is whether the climate funds should be loans or grants.
The European Union said on Tuesday that it would honor it's Copenhagen pledge by mobilizing 2.2 billion euros (2.9 billion dollars) out of the EU's 7.2-billion-euro promise of "fast-start" financing, aid for climate projects in poor countries by 2012.
But half of the EU's funding would involve loans instead of grants to the poor, a move quickly criticized by environmentalists, who say loans were the wrong tool for industrialized societies to help poorer countries that have not caused global warming but are feeling its effects.
"That would be the same as if I take my car and I drive it into your car, and then I offer you a loan to repair the damage," said Tove Ryding of Greenpeace.
The EU's chief negotiator in Cancun, Artur Runge-Metzger, defended the use of loans as helpful for many clean energy projects that had high start-up costs but would actually save money over time.
Runge-Metzger said the loans would only go to countries that were not highly indebted already, thereby making sure that borrowers could pay the money back, without pushing debt-ridden governments further into trouble.
While some of the repaid loans would go back into other climate projects, he acknowledged some of the money could also flow back to cash-strapped EU budgets.
If representatives of the 194 countries do not succeed, at least to agree on key points, there's a risk that the negotiations may fail completely, and so the credibility of the whole UN process is at stake.
Time is also running out for the Kyoto Protocol, whose first commitment period expires at the end of 2012. It is still the only binding agreement that regulates CO2 emissions in the industrial nations which signed it.
Neither the US nor China is bound by the Kyoto Protocol.
Author: Natalia Dannenberg, Helle Jeppesen (AFP, Reuters)
Editor: Nathan Witkop