Climate finance is one of the hottest areas of debate at the negotiations.  This new field focuses on the question of how developing countries are going to pay for the climate change mitigation steps that are widely thought necessary to prevent catastrophic climate change risks.  Getting the right amount of money into the right hands, via the right mechanisms, is one of the central challenges that we face in combating climate change.

Because advanced economies are more technologically developed, and have already built a substantial amount of their energy infrastructure, most of the easiest and lowest cost opportunities to reduce or sequester greenhouse gas emissions exist in the developing world.  While the advanced countries have already leveled a great deal of their forests, and are now busily protecting the rest, some developing countries are still in a rapid phase of deforestation.  They are also in the process of rapidly expanding energy production, and it is substantially cheaper to make investments now in efficiency, smarter transmission, and cleaner generation, rather than cleaning up facilities that have already been built.

But while the best opportunities to make rapid gains in emissions reductions (or sequestration) exist in the developing world, a significant amount of the money to pay for these projects will have to come from developed countries.  China, India, and Brazil, along with other developing countries throughout Asia, Africa, and Latin America, would justifiably balk at the idea they should invest a substantial amount of their scare resources in climate change mitigation.  Many of these countries have extremely low per capita emissions, especially when compared to the United States.  Developing countries, also, have less money to work with and many other pressing problems, like ensuring access to basic necessities like food, water, and shelter.

Figuring out how to set up this massive "climate financing" project is a major challenge.  Academics are just starting to wrap their heads around the problem - a recent project at NYU Law centered on the issue was recently launched with several events here in Copenhagen.  Collecting experts from academia, business, NGOs, and government, the idea is to pull together the disparate actors looking at a range of issues, from technology transfer to offsets, tradable permits to direct foreign aid.  As we are building this architecture, we need to identify as many possible snags and challenges - including tax treatment, governance issues, and monitoring and verification - that will arise and come up with creative solutions sooner rather than later.