U.S. to seek more donors to clean technology fund

WASHINGTON (Reuters) - The United States will try to persuade more rich nations to donate to a new international clean technology fund at the Group of Seven economic chiefs meeting next week in Japan, a senior U.S. Treasury official said on Tuesday.

David McCormick, Treasury undersecretary for international affairs, said the United States, Britain and Japan looked like “the beginning of a core of donors” to the fund which aims to help developing nations make greater use of clean energy technologies.

In his annual State of The Union speech, U.S. President George W. Bush on Monday pledged $2 billion to the fund over the next three years.

McCormick said he and Treasury Secretary Henry Paulson would promote the fund with their G7 counterparts in Tokyo on February 9.

“The secretary feels very strongly about this, and it’s a real priority for the president. So any time we have a chance to be in the room with some key ministers who would have some influence over this, we talk about it as an important component of the broader climate change agenda,” McCormick told reporters at a news briefing.

The fund aims to close the financing gap between more expensive advanced technology that reduces greenhouse gas emissions and energy use and older, cheaper technology that pollutes more. It could assist its first project this year, he said.

Companies and government entities in many developing countries often prefer to use the lowest-cost alternatives to stretch their resources in developing power and industrial infrastructure.

In the power sector alone, developing countries would have to pay $30 billion more through 2030 in order to install existing clean technologies instead of older, dirtier technologies, according to World Bank estimates.

McCormick said Britain had pledged part of its 800-million pound ($1.6 billion) Environmental Transformation Fund toward the effort and Japan also had pledged support, but had not specified a funding amount.

He said the United States has held talks with potential donors among both industrialized and developing nations, so there could be cases where countries are both donors and recipients of assistance.

“Donors will have a lot of control over where the money is devoted and focused,” McCormick said.

The group aims to develop criteria soon for determining the most deserving projects. Those that have the biggest effect in reducing greenhouse gas emissions will receive high priority and awards will be based partly on local country policies that are environmentally sustainable, McCormick said.

The cost gap between new and old technologies will not necessarily be covered with a grant from the fund. Instead, fund awards may be used to leverage additional private sector investment in a project, subsidize conventional financing, or support local government co-financing, McCormick said.

Editing by Mohammad Zargham