DURBAN, South Africa Negotiators are close to agreeing the shape of a Green Climate Fund, which is designed to help poor nations tackle global warming and nudge them towards a new global effort to fight climate change.
Rich countries have pledged up to $100 billion (63.7 billion pounds) a year by 2020 to aid poor states most directly affected by rising global temperatures to adapt their economies and protect themselves from adverse weather.
But critics say it could remain a hollow shell unless there is also agreement on where the actual funds come from -- and how the money is spent.
"I have a fair amount of confidence this is going to get done in a positive way," U.S. climate envoy Todd Stern told reporters on Wednesday. Only a few technical operational details remained to be thrashed out, he said.
China has said it wants the fund set up before it will make its domestic climate efforts binding under an international agreement from 2020. Other important developing countries also want the fund's design agreed in Durban.
"It is our priority to have the fund adopted and functional in South Africa," Brazilian climate envoy Luiz Alberto Figueiredo told Reuters.
Mexico, which hosted climate talks last year and has offered to host the headquarters of the planned fund, said a deal was "within reach" and could lead to progress in other parts of the climate change negotiations.
"It helps a lot," said Luis Alfonso de Alba, Mexico's lead negotiator.
Nevertheless, some sources said the United States was still haggling over where the long-term finance would come from and how to measure the needs of poorer countries.
When asked how much money could be available, U.S. envoy Stern said most donor countries were waiting for the fund to get up and running before making contributions.
Some cash could come from imposing a charge for carbon emissions on international shipping, but it is unclear whether ministers will adopt that proposal made in draft texts.
Previous U.N. talks have also tried to include a clause on shipping emissions but it never survived to the final draft
"Even if the fund is established this week, then practical realities will likely limit its impact for a number of years. It will take at least 12 months to set up and the appraisal process means it will probably not be spending until 2015," said Nick Robins, climate change analyst at HSBC.
Those who have worked on the fund for years say agreeing the design is already a major achievement and that it would be easier to find cash once the institution had been created.
"Since the U.S. was the last major hold out on the GCF, it looks like we're in good shape to celebrate," said Andrew Light, a technical expert who has worked on the fund for three years.
"In the last five weeks I've been shuttling around between parties trying to create space to resolve the differences between the U.S. and other countries. There are still just a few issues to resolve but I'm confident they'll get there," he said.
Broader talks are deadlocked on how to move forward after a vital clause of the Kyoto Protocol mandating carbon cuts expires at the end of next year.
The European Union has said it is open to signing up to an updated Kyoto Protocol but wants assurances the world's biggest emitters, including China, the United States and India, which account for nearly 50 percent of the world's carbon emissions, will sign up too.
(Additional reporting by Jon Herskovitz and Barbara Lewis; Editing by Jon Boyle)