Brazilian Oil Royalties to Fund Energy, Climate Research

Brazil will set aside hundreds of millions in government oil revenue to pay for efforts to reduce carbon emissions and adapt to climate change.

Brazil's national climate fund, signed into law in 2009, will receive $113 million next year, Brazilian officials said, and could eventually spend about $500 million annually, with about half of the cash coming from government royalties on oil production.

Several developing nations, including Indonesia and Bangladesh, have established domestic climate funds, but Brazil's is the first to be financed with oil money. "It's something novel because it sends a price signal by taxing the emitting fuel," says Clifford Polycarp, a policy expert at the World Resources Institute in Washington, D.C., who works on climate financing mechanisms.

The money will be available to researchers studying the impact of climate change, as Brazil tries to map where effects will be greatest. The fund will also pay to educate farmers about potential changes in rainfall and weather, in addition to efforts to reduce greenhouse gas emissions.

Until now, developing nations have primarily vied for ways to capture cash from rich donor nations. In 2008, for instance, Brazil launched the Amazon Fund to pay for efforts to slow deforestation, the source of half the country's carbon emissions. That effort is financed by foreign donors, including $107 million given by the government of Norway.

But international donors and climate funds, such as the U.N.'s Global Environment Facility, have been slow to pass on resources.

That has led some poor countries to start committing their own resources. In July, for instance, India launched a $1-a-ton tax on coal production that could raise $535 million for a green energy fund.

"We have not seen this kind of money flow from international sources, so the Brazilian and Indian efforts are very sizeable," Polycarp says.

Brazilian officials announced the funding last week at an international meeting on semi-arid regions held in Brazil's poor northeast region, where officials said climate change is expected to increase flooding and droughts.