Climate fund to cost NZ up to $50m a year

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Helping developing countries combat climate change is likely to cost New Zealand up to $50 million a year after Prime Minister John Key conceded the Government would have to contribute to a proposed US$10 billion annual fund.

But he says it is a "modest" sum in exchange for getting countries whose economies are most vulnerable to greenhouse gas cuts to agree significant targets at a crucial United Nations summit in Copenhagen next month.

In a landmark deal, the Commonwealth Heads of Government Meeting in Trinidad and Tobago has agreed members will push for an "operationally binding" agreement on cuts at the Copenhagen talks.

Such a deal would essentially mean countries were expected to begin action to meet their targets, though they would not become legally binding – meaning financial or other penalties for falling short – till a final deal was signed next year.

In return, the Commonwealth wants industrialised countries to pay US$10b a year by 2012 to help developing countries meet the targets. Ten per cent would be set aside to help countries directly threatened by rising sea levels and other effects of climate change.

If agreed in Copenhagen, the proposed fund, put forward by British Prime Minister Gordon Brown, would begin next year.

Mr Key said on Saturday that New Zealand would argue its contribution should be ring-fenced to the proposed Kiwi-led global alliance to share research and technology on curbing greenhouse gases with developing nations. But he said yesterday it was now likely that would not be enough.

"We think that the contributions we're making to the global alliance in some part might count, but wouldn't fully cover our contribution, so it is likely that there'll be some payment from New Zealand, albeit a relatively modest one."

A "back-of-the-envelope estimate" put New Zealand's contribution through both streams at $10m to $50m a year by 2012, though it was more likely to be a mid-point of about $30m. It would be over and above existing international aid, but could be funded in part by planned increases in that area.

The Commonwealth agreement on the approach at Copenhagen is significant as the grouping represents the full spectrum of the debate, from low-lying island states in dire danger from rising sea levels to heavy-polluting but still developing countries such as India and fully industrialised countries that signed the Kyoto protocol but have struggled to meet their targets and face big bills.

The deal was brokered as world leaders from outside the Commonwealth pushed hard for a significant statement ahead of the Copenhagen talks, which begin next week.

Pressure is mounting for all heads of state to attend the leaders' session on December 17 and 18.