EU finance chiefs to tap industry for climate fund

* Industry should supply most of climate fund for poor -draft

* Draft says any new mechanism should be carefully assessed

BRUSSELS, March 5 (Reuters) - Industry should be the main source of money for a climate fund to coax the world's poorest nations into a global deal to tackle climate change in December, a draft report for a European finance ministers meeting said.

The draft report for the meeting on March 10 also warned against creating new mechanisms to deal with the climate issue, alarming environmentalists who say fresh tools are vital.

Success at the Copenhagen talks to find a successor to the Kyoto protocol -- the U.N.'s main tool against global warming -- will largely hinge on whether funding can be found to persuade poor nations to help tackle the problem.

They blame rich countries for causing climate change and say they do not do enough to help the poor adapt to its impacts, by means such as creating crops that are resistant to drought or floods and helping build barriers to rising sea levels.

Europe and the United States are seen as the main donors, and the EU is now debating the size and source of its share.

"The Council recognises that international financial support is crucial for reaching an ambitious agreement in Copenhagen," said the draft, seen by Reuters on Thursday.

"The Council underlines that for financing mitigation and adaptation actions... private funding will be, via appropriate policy frameworks, the main source of the necessary investments," added the draft, which may change during the ministerial meeting.

That would imply that the EU is moving towards funding poorer nations through a scheme linked to carbon markets, like the EU's Emmissions Trading Scheme, rather than contributions from governments mulled by environment ministers on Monday.


"The Council stresses the important role of existing financial mechanisms and holds that the creation of new instruments should be carefully assessed in terms of their value added to existing structures," the draft added.

Greenpeace campaigner Joris den Blanken said finance ministers should not rule out new funding mechanisms. "This is very worrying, as existing mechanisms have been proven to be insufficient," he added.

The European Union has shied away from naming how much it might contribute to poor nations, but EU reports say global investment to fight climate change will need to rise to around 175 billion euros ($220 billion) a year by 2020.

Over 90 billion of that will need to be spent in developing nations, the reports say, sharply at odds with the existing funds for poor nations.

A U.N. Adaptation Fund, funded by a levy on investments in green projects in developing nations, is worth only about 50 million euros ($62.9 million) -- far short of what most nations say will be needed as temperatures rise.

According to U.N. projections, the fund could swell to $300 million a year by 2012.

Developing nations at the last U.N. climate talks in December in Poland accused the rich of blocking a deal on a wider funding mechanism to raise about $2 billion a year. (Additional reporting by Alister Doyle, writing by Pete Harrison, editing by Anthony Barker)