Climate change to loom large at APEC finmin meeting

By Wayne Cole

SYDNEY (Reuters) - The economic challenges of climate change will top the agenda when finance ministers of APEC's 21-members meet in the Queensland coastal resort of Coolum next week.

The five-day meeting, a prelude to the high-profile summit of Asia-Pacific Economic Cooperation forum leaders in Sydney in September, has a busy agenda covering energy security, government finances and global capital flows, including how Asia's vast U.S. dollar reserves might be better invested at home.

And South Korea this week said it plans to raise the issues of a persistently weak yen and yen carry trades during the meeting. Minister Kwon O-kyu will propose international collaboration to deal with problems related to the weaker yen.

Australia has been using its chairmanship of APEC to make the finance ministers' meeting more of a policy body and less of a talking shop, aiming to generate recommendations on a range of challenges starting with climate change.

The ministers will be focusing on market-based mechanisms for cutting carbon emissions, with a care to limiting the adverse impact for poor members such as Peru and Vietnam to developing powerhouses, such as China and Russia.

"The finance ministers will be concerned with the economic costs of climate change, so they will report directly to the leaders on their perspectives and outcomes," said Australian Treasurer Peter Costello this week.

Bowing to public pressure at home, Australian Prime Minister John Howard recently proposed a national carbon trading scheme to start from 2011.

Just this week Australia's first private carbon trading market went live, with 1,600 tonnes of voluntary emission reductions changing hands on the first day.

Building a consensus on climate action among such diverse countries will be hard, but any progress would be welcome given the economic muscle of the bloc.

SAVINGS CONUNDRUM

APEC boasts over a third of the world's population and generates half its economic output with a combined gross domestic product of $US19.25 trillion (A$21.75 trillion).

Costello also aims to discuss the flow of Asian savings abroad, in part to fund the United States' trade deficit, when the region could do with more investment itself.

This savings conundrum has been highlighted by the head of Australia's central bank, who wondered whether Asian investors were doing themselves and their countries a disservice by sending so much money abroad.

"Is it optimal for so much saving to be funding investment in the developed world when the social return to investment at home surely ought to be higher?" said Reserve Bank of Australia Governor Glenn Stevens in a speech this month.

"Does that point to the need for further efforts at improving governance frameworks and regulatory environments, deepening capital markets and so on?" asked Stevens, foreshadowing the very topics APEC will be wrestling with next week.

The July 30 to August 3 meeting culminates on Friday with a joint ministerial statement and a news conference. The heads of the International Monetary Fund, the World Bank and the Asian Development Bank are also due to attend.

Security will be tight at the Hyatt Regency Coolum meeting, with the authorities anxious to avoid a repeat of the clashes between protesters and police that tarnished the Group of 20 meeting in Melbourne last November.

APEC's ocean-spanning membership comprises Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, United States and Vietnam.