Australia is in the middle of a stand-off between developed and developing countries over climate aid in climate-change negotiations under way in Bangkok.

This is the issue that, as much as an elusive agreement on binding emissions reductions targets, threatens to prevent the Copenhagen meeting at the end of the year from reaching a workable international agreement.

Developed countries, including Australia, have demanded that developing countries itemise their adaptation actions as the basis for discussion of what level of climate-aid funding developed countries will agree to. Developing countries have refused, saying developed countries must identify what funding they are prepared to commit to and the means by which it will be allocated.

The stand-off feeds into other key areas, such as  commitments to action by developing countries, who won’t commit to anything resembling targets, trajectories or “schedules” without any idea of how they’re going to pay for it.

Yesterday, South Africa responded to Australia’s advocacy for an “actions first” approach, saying it had detailed an adaptation plan long ago but no assistance had been forthcoming.

Developing countries also want climate aid to be provided through a single multilateral framework with appropriate arrangements for accountability and transparency, rather than through a patchwork of bilateral agreements that will enable donor countries to control and place conditions on climate aid designed to benefit donors themselves.

Australia is currently providing $150 million to Pacific countries for adaptation measures. A new round of allocations from that funding was believed to have been key to preventing governments of smaller island states from disputing the softer emissions reductions targets demanded by Australia and New Zealand at last month’s Pacific Islands Forum.

That $150 million is the only commitment made by Australia on climate issue despite there being only weeks until the Copenhagen meeting. The European Union has suggested paying €2-15 billion a year out of a global public funding package of €22-50 billion. Gordon Brown has proposed an “initial offer” of $US100 billion. The Waxman-Markey bill set aside 3-12% of the proceeds from permit sales for climate aid. The Kerry-Boxer bill is more obscure on the issue, but there is speculation that that will be clarified in coming days.

Australia’s commitment, suggestion, thought-bubble, initial offer, call it what you will is … we think it’s an important issue.

At least several developed countries have put their hard targets on emissions reduction targets on the table ahead of Copenhagen. We’re not even close to that on climate aid, and Australia is right at the back of the pack. According to NGOs, bureaucrats within the Department of Climate Change have been working on the issue, but Penny Wong has remained tight-lipped, as have our negotiators in Bangkok.

One of the problems is that the sort of numbers we are talking about are enormous and continue to get bigger every time someone looks at the issue. This week the World Bank — hardly the most extreme institution on the planet — suggested $100 billion a year was required for adaptation in developing countries alone — that is, without even thinking about the cost for developing countries of moving to renewable energy or improving their transport systems.

One of the key questions over the Bangkok negotiations is whether it will succeed in reducing the current 180-page treaty document, filled with each country’s preferred text, down to a manageable document. An important prerequisite for success at Copenhagen will be whether leaders and ministers work to resolve genuine disputes that only they can work through, or whether they arrive to a document that officials have yet to winnow down to the key issues. Copenhagen will be a waste of time if leaders and ministers are busy discussing textual issues rather than coming to grips with basic issues such as targets and money.

Unhelpfully, the Europeans have been pushing for an entirely new document that would combine the new agreements and the Kyoto Protocol. The US and Australia have expressed some limited support for that, but have also suggested they are not averse to keeping the Kyoto Protocol and a new agreement separate, as preferred by developing countries. There was briefly some concern during the week that Australia was trying to undermine the Kyoto Protocol by joining the European push to renegotiate everything. The view of developing countries is, why start changing the whole framework for the documents at this late stage?

According to observers, there are signs that major developing countries such as India are prepared to offer specific binding commitments to “responsibilities”, if not binding targets, if developed countries acknowledge their historical responsibility for climate change, lock in binding targets and commit to serious climate aid.

That sounds promising — but also shows why the money is looming as the deal breaker at Copenhagen.

*Listen to yesterday’s Canberra Calling, “The two 22s and a large fried rice podcast“