$10 billion clean tech fund gets skeptical response

WASHINGTON (Reuters) - A planned $10 billion global fund for cleaner emissions technology backed by the Bush administration drew a skeptical bipartisan response from members of Congress and environmentalists on Thursday.

David McCormick, the U.S. Treasury undersecretary for international affairs, explained the plan to a U.S. House of Representatives panel, noting the Bush administration has asked Congress to commit $2 billion to the fund over three years. The commitment for fiscal 2009 would be $400 million.

"What about the money?" asked U.S. Rep. Ron Paul, a Texas Republican and presidential candidate. "Has anybody considered how we're going to pay for this?"

The fund would be administered by the World Bank, a fact that drew criticism from some lawmakers and other witnesses before a House panel on monetary policy, trade and technology.

"The World Bank has not compiled a record that most environmentalists approve of in its general operation," said Rep. Barney Frank, a Massachusetts Democrat. "It's like they do their environmental work one day a month and then they undo it. ... The World Bank should not be funding projects that would go counter to a concern for clean technology."

The fund aims to bridge the cost gap in developing countries between using the newest and cleanest commercially available power and industrial technologies as opposed to older and cheaper, but dirtier, technologies.

"We are aiming, along with our donor partners in the G8 and beyond, at a global effort of up to $10 billion over the next three years with the U.S. as the lead donor," McCormick said in prepared testimony.

The fund will use a mix of concessional loans, grants, equity investments and credit guarantees to make cleaner technology more affordable in developing countries, McCormick said. It will focus on countries "with high expected emissions growth," he said, and projects with significant emissions reduction potential.

"For example, if the difference between building a traditional fossil fuel power plant and a wind farm in a recipient country were $10 million, the Clean Technology Fund could help the recipient country finance the additional cost associated with the wind farm," McCormick said.

Brent Blackwelder of the environmental group Friends of the Earth was dubious about the World Bank's commitment to clean energy technologies, noting the bank has recently made loans for coal plants that are only marginally less dirty than the dirtiest.

"Having looked at and tried to convince the World Bank to shift the energy lending over 25 years into newer (energy) technologies that countries actually wanted, they have refused and continue to this day to fund very damaging projects," Blackwelder said.

Britain and Japan have pledged unspecified amounts to the fund and along with the United States, were working with donors in the Group of Eight major economies and others to launch the fund this summer, with the first projects funded by year-end.

The fund is expected to be a major topic of discussion at the G8 finance ministers' meeting in Osaka, Japan, on June 13-14.

McCormick and U.S. Treasury Secretary Henry Paulson solicited donations from officials in Gulf nations over the weekend and said they received strong interest. Paulson also said he believes it is "morally wrong" to build new facilities using older, dirtier technologies when newer, cleaner technologies are commercially available.

The World Bank has estimated that in the power generation sector alone, the incremental cost of deploying clean energy technologies in developing economies would be $30 billion a year.

"If we take no action to provide developing countries with the right incentives, their investments today could lock in a legacy of highly polluting, less efficient technologies for which we would all eventually pay through the accelerated effects of climate change," McCormick added.

(Additional reporting by David Lawder; editing by Neil Stempleman)