The Green Climate Fund, designed to channel about US$100 billion (Dh367.31bn) a year to emerging nations, may try to wean recipients off of fossil-fuel subsidies.
The move would be part of a bid to encourage nations to put a price on carbon, according to an overseer.
The fund may guarantee bank loans in developing nations for projects ranging from wind farms to building insulation and less-polluting agricultural equipment, Naoko Ishii, chief executive officer of the Global Environment Facility in Washington, said yesterday.
Ms Ishii heads one of two secretariats governing the fund.
Climate projects may be able to receive private-sector finance augmented by guarantees from the fund, alongside discounted loans from government or development banks, she said.
The 24-member board of the Green Climate Fund is likely to make loans or guarantees conditional on the recipient having the right environmental policies in place, Ms Ishii said.
"I know that conditionality is a very sensitive word but, from the donor point of view, if the money is to be impactful, there must be some policy environment put in place," she said.
United Nations envoys from about 200 nations meeting in the Qatari capital Doha are seeking to extend the Kyoto Protocol and lay the groundwork for a global climate agreement for 2020.
Financing from richer nations to the developing world for the next seven years will help to cut emissions before the new deal comes into force, Ms Ishii said.
Envoys should recognise the climate crisis is deep enough to warrant developing-nation policies that help to protect the public money available for emission reduction and adaptation, she said.
Measures may include so-called feed-in tariffs that provide higher rates for renewable-energy producers or a carbon price and phase out of fossil-fuel subsidies, added Ms Ishii.
A key question for UN envoys is whether to withhold climate funds for nations that do not have a carbon price in place, she said. The International Chamber of Commerce said on Monday companies and pension funds were hoarding cash rather than spending it because climate-protection rules are lacking.
"Tell us what the rules are going to be so we know how to integrate them into our business," said Jean-Guy Carrier,the secretary general of the chamber, based in Paris and whose members represent businesses from Qatar to the United States.
Renewable subsidies last year including biofuels amounted to $88bn, the International Energy Agency in Paris said last month
Over the period to 2035, they need to amount to $4.8 trillion, more than half of which has already been committed to existing projects or needed to meet 2020 targets, the agencysaid.
* Bloomberg News
