Looking for gold in water investments

By Manuela Badawy

Mon Dec 12, 2011 10:13am EST

n">(Reuters) - Money manager Bill Brennan spends most of his waking hours thinking about something most Americans take for granted: water.

It may be the most essential of all commodities because without it none of us would be alive. But as an investment, water has had neither the glitter of gold nor the allure of oil.

But Brennan, a 49-year-old mechanical and biomedical engineer, is one of a small group of investors who are increasingly seeing an opportunity to make money from water.

"We look at water 100 percent all the time," said Brennan, a portfolio manager of the San Diego-based Summit Global Management, a 12-year-old hedge fund established by John Dickerson.

Summit, which Brennan says has about $500 million in assets under management, is one of a handful of U.S. funds that specialize in investing almost solely in stocks of water companies, reservoirs, land sitting atop aquifers and pipelines.

It is a niche corner of the investment world with about $6 billion in assets. There are fewer than a dozen of pure-play water-investment funds globally, a drop in the bucket compared with other commodity-based funds.

But the sector is one that some see as an opportunity to make money as fresh water becomes scarcer in parts of the globe due to population growth, farming and industry.

They say water funds are poised to reap the rewards of the need to replace aging and crumbling water and sewer systems. Infrastructure needs in the United States alone will require at least $500 billion over the next 20 years, according to the U.S. Environmental Protection Agency.

But skeptics say water investing carries a good deal of risk and the market's small size is an indication that many money managers are not sold on the growth potential. Others note pure-play water funds are often heavily invested in illiquid assets -- like water rights -- which can be hard to value or trade.

"We typically wait for a disaster to give us a wake-up call to invest in change -- or if we take a big hit in the wallet." said Dawn Van Zant, president and founder of Water-stocks.com.

THE MAN BEHIND WATER

For a water bull like Brennan, the absence of competition is an opening. He says he regularly looks at about 400 companies that derive at least one-third of their revenue from water-related businesses. Some of the businesses on his potential shopping list include pump or filter companies, as well as engineering and construction.

Among Summit's top stock picks are American Water Works, Brazilian company Companhia de Saneamento Basico and ITT Corporation.

About half of Summit's money is invested in stocks, says Brennan. The firm's most recent 13-F filing with the U.S. Securities and Exchange Commission reports that its funds hold $96 million in U.S. stocks, and Brennan said the fund also holds foreign securities for a total of some $250 million worth in equity holdings.

Summit Global also owns $250 million in water rights, or entitlements to access water sitting beneath working farms in the western United States and southeast Australia, where acute water scarcity and open markets allow for the development of water trade.

"For some people it may be boring and may not be fast enough," Brennan said. "The water business is an ideal investment for endowments, family offices and people that have a long-term horizon and understand the underlying growth metrics in the business and are looking for those expected returns of 6, 8 or 10 percent a year."

The compounded annual return for one of Summit's main funds is 9.4 percent since its launch in 1999, according to an October 31 marketing document seen by Reuters. Over that same period, the Russell 2000 small cap has returned 5.8 percent.

The marketing documents show that some of Summit's best returns came from 1999 to 2006, when it averaged high double-digit gains. But since then, returns have come back down to earth. In 2010, the fund returned 7.76 percent and through October this year it was down 1.3 percent.

"Our underperformance the last few years versus the S&P is correlated to our value approach. The risk trade from March 2009 has been a difficult time for many institutional value investors," Brennan said, adding that the large exposure to utilities capped gains, as they did not participate in the market rally.

"Since we look at five- and 10-year performance vs. quarter-to-quarter or year-to-year, our approach is suited for a patient and prudent investor with a longer horizon as an investor and not a trader."

One of Summit's few U.S. competitors is hedge fund Water Asset Management, which has been around since 2006 and is fully invested in water, with some $300 million in assets.

Competition also comes from mutual funds that are eyeing the space. The best-known U.S.-based actively managed mutual funds are Allianz RCM Global Water Fund with $72 million in assets, PFW Water Fund with $17 million, and Kinetics Water Infrastructure Fund with $16 million.

The largest funds are in Europe, led by Geneva-based Pictet Global Water Fund with $3.4 billion in assets, SAM Sustainable Water Fund based in Zurich with $1.3 billion in assets, and Kleinwort Benson Investors, the adviser for the Ireland-based Calvert Global Water Fund with $62 million.

Todd Petzel, chief investment officer at Offit Capital Advisors, which manages $6 billion for wealthy families and non-profit institutions, says it is difficult to find a pure-water play. He quips that many so-called water funds "are polluted" with other non-water investments.

Petzel's says his strategy for clients looking to invest in water is to find specific projects via a private equity deal where clients have a long-term stake in water rights in an aquifer.

PICKENS TRADE

Maybe one of the best-known water investors is Texas billionaire T. Boone Pickens, more commonly known as an oil man. He is the largest individual water owner in America, with rights over the Ogallala Aquifer in the Texas panhandle, the third-largest underground aquifer in the world.

It supplies 27 percent of all irrigation in the United States and 70 percent to 90 percent of the irrigation water in Kansas, Texas and Nebraska, three of the most important grain producers in the country, according to industry data.

Another way to play water is to invest in desalination technology, which produces fresh water from sea water.

Companies such as California-based Energy Recovery Inc, which through its high-efficiency devices has reduced the high cost of desalination, could benefit from clean water demand. The company has more than 80 percent of the global market share in energy-saving pressure exchangers for desalination, but just 8 percent of its business comes from the United States, its CEO Thomas Rooney told Reuters.

Although the United States is the largest single water market, most of the companies in the water-funds derive their revenues from emerging markets, especially from Asia. China alone has 21 percent of the world's population but only 7 percent of the renewable water resources.

"Water is at the heart of everything you do. You can't manufacture or grow anything without the availability of water," said Neil Berlant, head of the water group at Crowell, Weedon & Co, managing about $70 million.

(Reporting by Manuela Badawy; editing by Jennifer Ablan, Matthew Goldstein and Maureen Bavdek)

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Congress cannot accelerate Keystone decision: State Department

WASHINGTON | Mon Dec 12, 2011 7:33pm EST

WASHINGTON (Reuters) - The U.S. State Department warned on Monday that a plan by congressional Republicans to fast track the Canada-to-Texas Keystone XL pipeline decision would violate environmental laws and force it to withhold approval.

"Should Congress impose an arbitrary deadline for the permit decision ... the department would be unable to make a determination to issue a permit for this project," the State Department said in a statement.

Republicans in the House of Representatives have said they plan to include approval of the TransCanada Corp's Keystone XL in a payroll tax cut bill, raising the political stakes on the issue.

President Barack Obama has warned he would veto any bill that linked quick approval of the Keystone pipeline to extending a tax cut for American workers that is due to expire on December 31.

Both Republicans and Democrats want to pass an extension of the payroll tax cut in the next two weeks, but they are divided on how best to do it.

The Keystone measure helped Republican leaders secure support for their bill, but it still needs to pass the Democratic-led Senate, where some lawmakers have already urged Majority Leader Harry Reid to reject it.

Approval of the pipeline, which would carry 700,000 barrels per day of crude oil from Canada's tar sands, now rests with the State Department. The Republican measure seeks to take the decision out of Obama's hands and accelerate approval in part to create U.S. jobs.

Obama directed the State Department last month to conduct an additional environmental review of the $7 billion pipeline. That would punt the decision on whether to approve the project until after next year's presidential election.

The State Department underscored it had long-standing authority to supervise permitting for cross-border pipelines and had led a "a rigorous, thorough and transparent process" that must run its course.

A short-cut pushed through by Congress "would not only compromise the process, it would prohibit the department from acting consistently with National Environmental Policy Act requirements by not allowing sufficient time for the development of this information," it said.

Environmentalists say the pipeline would threaten Nebraska's Sand Hills region and lead to higher greenhouse gas emissions, and had threatened to hold back on campaigning for Obama in the election.

The State Department is now obtaining additional information on possible alternate routes that avoid the Sand Hills in Nebraska, and believes this review could be completed in time for a decision to be made in first quarter 2013, it said.

(Reporting By Andrew Quinn; editing by Christopher Wilson)

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New U.N. climate deal struck, critics say gains modest

1 of 5. United Nations (UN) Framework Convention on Climate Change Executive Secretary Christiana Figueres speaks with Brazil's Minister of Environment Izabella Teixeira (L) and chief climate envoy Luiz alberto Figueiredo during a plenary session at the United Nations Climate Change Conference (COP17) in Durban December 10, 2011. The conference has gone an extra day in an attempt to iron out an agreement on climate change policies.

Credit: Reuters/Rogan Ward

By Nina Chestney and Jon Herskovitz

DURBAN | Sun Dec 11, 2011 2:57pm EST

DURBAN (Reuters) - Countries from around the globe agreed on Sunday to forge a new deal forcing all the biggest polluters for the first time to limit greenhouse gas emissions, but critics said the plan was too timid to slow global warming.

A package of accords agreed after marathon U.N. talks in South Africa extended the 1997 Kyoto Protocol - the only global pact enforcing carbon cuts - allowing five more years to finalize a wider pact which has so far eluded negotiators.

Kyoto's first phase - due to expire at the end of next year but now extended until 2017 - imposed limits only on developed countries, not emerging giants like China and India. The United States never ratified it.

Those three countries and the EU held a last-ditch huddle in the conference centre before finally agreeing to wording that commits them to a pact with legal force, although exactly what form it will take was left vague.

Countries also agreed the format of a fund to help poor nations tackle climate change.

But many small island states and developing nations at risk of being swamped by rising sea levels and extreme weather said the deal marked the lowest common denominator possible and lacked the ambition needed to ensure their survival.

Agreement on the package, reached in the early hours of Sunday, avoided a collapse of two weeks of climate talks and spared the blushes of host South Africa, whose stewardship of the fractious negotiations came under fire from rich and poor nations.

"We came here with plan A, and we have concluded this meeting with plan A to save one planet for the future of our children and our grandchildren to come," said South African Foreign Minister Maite Nkoana-Mashabane, who chaired the talks.

"We have made history," she said, bringing the hammer down on the Durban conference, the longest in two decades of U.N. climate negotiations.

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Link to final text unfccc.int/2860.php

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Delegates agreed to start work next year on a new, legally binding accord to cut greenhouse gases, to be decided by 2015 and to come into force by 2020.

The process for doing so, called the Durban Platform for Enhanced Action, would "develop a new protocol, another legal instrument or agreed outcome with legal force" that would be applicable under the U.N. climate convention.

That phrasing was used by all parties to claim victory.

Britain's Energy and Climate Secretary Chris Huhne said the result was "a great success for European diplomacy."

"We've managed to bring the major emitters like the U.S., India and China into a roadmap which will secure an overarching global deal," he said.

U.S. climate envoy Todd Stern said Washington was satisfied with the outcome: "We got the kind of symmetry that we had been focused on since the beginning of the Obama administration. This had all the elements that we were looking for."

Yet U.N. climate chief Christiana Figueres acknowledged the final wording on the legal form a future deal was ambiguous: "What that means has yet to be decided."

Environmentalists said governments wasted valuable time by focusing on a handful of specific words in the negotiating text, and failed to raise emissions cuts to a level high enough to reduce global warming.

Sunday's deal follows years of failed attempts to impose legally-binding, international cuts on emerging polluters, such as China and India, as well as rich nations. Poor countries argue they should deserve leeway to catch up in development.

Sunday's deal extends Kyoto until the end of 2017, ensuring there is no gap between commitment periods. EU delegates said lawyers would have to reconcile those dates with existing EU legislation.

LEAST-BAD OPTION

India's Environment Minister Jayanthi Natarajan, who gave an impassioned speech to the conference denouncing what she said was unfair pressure on Delhi to compromise, said her country had only reluctantly agreed to the accord.

"We've had very intense discussions. We were not happy with reopening the text but in the spirit of flexibility and accommodation shown by all, we have shown our flexibility... we agree to adopt it," she said.

Small island states in the front line of climate change, said they had gone along with a deal but only because a collapse of the talks was of no help to their vulnerable nations.

"I would have wanted to get more, but at least we have something to work with. All is not lost yet," said Selwin Hart, chief negotiator on finance for the coalition of small states.

Tosi Mpanu-Mpanu, head of the Africa Group, added: "It's a middle ground, we meet mid-way. Of course we are not completely happy about the outcome, it lacks balance, but we believe it is starting to go into the right direction."

U.N. reports released in the last month said delays on a global agreement to cut greenhouse gas emissions will make it harder to keep the average rise to within 2 degrees Celsius over the next century.

"It's certainly not the deal the planet needs - such a deal would have delivered much greater ambition on both emissions reductions and finance," said Alden Meyer of the Union of Concerned Scientists.

"Producing a new treaty by 2015 that is both ambitious and fair will take a mix of tough bargaining and a more collaborative spirit than we saw in the Durban conference centre these past two weeks."

(Additional reporting by Barbara Lewis, Agnieszka Flak, Andrew Allan, Michael Szabo and Stian Reklev; editing by Jon Boyle and Peter Graff)

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Psychedelic gecko, "Elvis" monkey in new Mekong finds

n">(Reuters) - A wildly-colored gecko, a fish that looks like a gherkin, and a monkey with an Elvis-like hairstyle are among the more than 200 new species discovered in the Greater Mekong region last year, environmental group WWF said on Monday.

The area's diversity is so astonishing that a new species is found every two days, but regional cooperation and decision-making must take centre stage to preserve its richness, the group added.

The dangers posed to local wildlife were highlighted earlier this year, when WWF said that Vietnam's Javan rhinos have been poached into extinction.

"While the 2010 discoveries are new to science, many are already destined for the dinner table, struggling to survive in shrinking habitats and at risk of extinction," said Stuart Chapman, Conservation Director of WWF Greater Mekong, in a statement.

Among the new species highlighted in the report "Wild Mekong" is a gecko with bright orange legs, a yellow neck, and a blue-gray body with yellow bars on its bright orange sides, discovered on an island in southern Vietnam.

Then there is a black and white snub-nosed monkey whose head sports an Elvis-like hairstyle, found in Myanmar's mountainous Kachin state. Locals say the animal can be spotted with its head between its knees in rainy weather as it tries to keep rain from running into its upturned nose.

Other featured creatures among the 208 new finds include a lizard that reproduces via cloning without the need for male lizards, a fish that resembles a gherkin, and five species of carnivorous pitcher plant, some of which lure in and consume rats and even birds.

"Mekong governments have to stop thinking about biodiversity protection as a cost and recognise it as an investment to ensure long-term stability," Chapman said.

"The region's treasure trove of biodiversity will be lost if governments fail to invest in the conservation and maintenance of biodiversity, which is so fundamental to ensuring long-term sustainability in the face of global environmental change."

Despite restrictions, trade in wildlife remains an active threat to a range of endangered animals in the region, with some hunted because body parts -- such as rhinoceros horns -- are coveted ingredients in traditional Asian medicine.

Others, such as Mekong dolphins, face threats from fishing gear such as gill nets and illegal fishing methods, prompting the WWF in August to warn that one dolphin population in the river was at high risk of extinction.

The Greater Mekong region covers Cambodia, Laos, Myanmar, Thailand, Vietnam and the southern Chinese province of Yunnan.

(Reporting by Elaine Lies; Editing by Yoko Nishikawa)

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Canada first nation to pull out of Kyoto protocol

Environmental activists wearing masks with the faces of Canadian Prime Minister Stephen Harper (R) and European Commission President Jose Manuel Barroso (L) demonstrate outside a meeting of the World Business Council on Sustainable Development in Durban, December 5, 2011.

Credit: Reuters/Mike Hutchings

By David Ljunggren and Randall Palmer

OTTAWA | Mon Dec 12, 2011 7:20pm EST

OTTAWA (Reuters) - Canada on Monday became the first country to announce it would withdraw from the Kyoto protocol on climate change, dealing a symbolic blow to the already troubled global treaty.

Environment Minister Peter Kent broke the news on his return from talks in Durban, where countries agreed to extend Kyoto for five years and hammer out a new deal forcing all big polluters for the first time to limit greenhouse gas emissions.

Canada, a major energy producer which critics complain is becoming a climate renegade, has long complained Kyoto is unworkable precisely because it excludes so many significant emitters.

"As we've said, Kyoto for Canada is in the past ... We are invoking our legal right to formally withdraw from Kyoto," Kent told reporters.

The right-of-center Conservative government of Prime Minister Stephen Harper, which has close ties to the energy sector, says Canada would be subject to penalties equivalent to C$14 billion ($13.6 billion) under the terms of the treaty for not cutting emissions by the required amount by 2012.

"To meet the targets under Kyoto for 2012 would be the equivalent of either removing every car truck, all-terrain vehicle, tractor, ambulance, police car and vehicle off every kind of Canadian road," said Kent.

Environmentalists quickly blasted Kent for his comments.

"It's a national disgrace. Prime Minister Harper just spat in the faces of people around the world for whom climate change is increasingly a life and death issue," said Graham Saul of Climate Action Network Canada.

Kent did not give details on when Ottawa would pull out of a treaty he said could not work. Canada kept quiet during the Durban talks so as not to be a distraction, he added.

"The writing on the wall for Kyoto has been recognized by even those countries which are engaging in a second commitment," he said. Kyoto's first phase was due to expire at the end of 2012 but has now been extended until 2017.

Kent said Canada would work toward a new global deal obliging all major nations to cut output of greenhouse gases China and India are not bound by Kyoto's current targets.

The Conservatives took power in 2006 and quickly made clear they would not stick to Canada's Kyoto commitments on the grounds it would cripple the economy and the energy sector.

The announcement will do little to help Canada's international reputation. Green groups awarded the country their Fossil of the Year award for its performance in Durban.

"Our government is abdicating its international responsibilities. It's like where the kid in school who knows he's going to fail the class, so he drops it before that happens," said Megan Leslie of the opposition New Democrats.

Canada is the largest supplier of oil and natural gas to the United States and is keen to boost output of crude from Alberta's oil sands, which requires large amounts of energy to extract.

The Canadian Association of Petroleum Producers (CAPP) said all major emitters had to agree to cuts so that Canada did not put itself at a disadvantage.

Canada's former Liberal government signed up to Kyoto, which dictated a cut in emissions to 6 percent below 1990 levels by 2012. By 2009 emissions were 17 percent above the 1990 levels, in part because of the expanding tar sands development.

Kent said the Liberals should not have signed up to a treaty they had no intention of respecting.

The Conservatives say emissions should fall by 17 percent of 2005 levels by 2020, a target that CAPP president David Collyer said would oblige the energy sector to make sacrifices.

"It's a stretch and we'd be kidding ourselves if we said it wasn't," he told Reuters.

($1 = 1.03 Canadian dollars)

(Additional reporting by Louise Egan in Ottawa and Jeffrey Jones in Calgary; editing by Christopher Wilson)

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Analysis:Carbon markets still on life support after climate deal

By Nina Chestney and Jeff Coelho

LONDON | Mon Dec 12, 2011 12:05pm EST

LONDON (Reuters) - Carbon markets are still on life support after a U.N. climate deal agreed in South Africa on Sunday put off some big decisions until next year and failed to deliver any hope for a needed boost in carbon permit demand.

A package of accords agreed after marathon U.N. talks in Durban extended the 1997 Kyoto Protocol, the only global pact enforcing carbon cuts, allowing five more years to finalize a wider deal which has so far eluded negotiators.

Kyoto's first phase, which is due to expire at the end of next year but now will extend until 2017, imposed limits only on developed countries, not emerging giants like China and India. The United States never ratified it.

Many traders and analysts said the agreement will do little for carbon prices which are at record lows, as the two main European Union and U.N.-backed markets are stricken by flagging investments, an oversupply of emissions permits and worries about an economic slowdown.

"It's a sedative situation, in which a sick market needs a cure and instead of deciding which cure to use, the doctors keep using pain relief to gain more time to make the final prognosis," said Jacopo Visetti, carbon trader at AitherCO2.

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Graphic on carbon prices: link.reuters.com/fuk55s

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POSITIVE SIGNAL

The deal gave a positive signal to investors uncertain about the fate of Kyoto's Clean Development Mechanism (CDM), which gives developed nations and firms carbon offsets in return for investing in carbon-cutting projects in poor nations.

New investment in the CDM fell last year to just a fifth of its record high in 2007 of $7.4 billion as many clean energy project developers and traders scaled back their activities.

"We are more encouraged than we were last week," said Ian Simm, chief executive at Impax Asset Management, which has just over 2 billion pounds under management and invests in environmental markets.

"It confirms that there will be parts of the world that will continue to accelerate the development of markets for cleaner technology," he said.

But carbon offsets under the CDM, so-called certified emission reductions, were trading just above 5 euros a tonne on Monday, near record lows.

Many observers are doubtful of a rebound in demand for the permits.

"Thanks to Durban, the CDM will live to see another day, but demand for credits for these projects is lackluster," said Jonathan Grant, director of carbon markets and climate policy at PricewaterhouseCoopers.

DOLDRUMS

"Carbon markets are expected to stay in the doldrums, because of oversupply in the (European carbon) market as a result of the recession," Grant said.

The world's biggest carbon market, the EU's emissions trading scheme, caps the emissions of some 11,000 polluting power firms and industrial plants in 30 countries.

EU carbon prices have lost over half their value since June mainly due to economic growth concerns and over-supply, trading around record low levels below 8 euros a tonne on Monday.

Durban's deferral of some key decisions on new market mechanisms until next year left many frustrated.

"(It's) impossible to take any longer-term decisions," said Per Lekander, an analyst at Swiss bank UBS. "You don't know what to do and what (is the) validity of different instruments."

Without major emitting nations spelling out their emission reduction targets, the deal will do little to spur demand in carbon markets, already oversupplied with hundreds of millions of permits and international credits.

"It's an agreement between parties to arrange another agreement. It is more or less like a mother that tells her child 'ok, we will do it,'" said Matteo Mazzoni, carbon analyst at Nomisma Energia in Italy.

Instead, carbon prices are expected to be driven more by European growth prospects.

"It's possible that carbon prices have seen their floor. But the positive momentum given by Durban can only be sustained if the resolution on the European debt crisis continues on the right path," analyst Emmanuel Fages at Societe Generale said. "The uncertainty remains."

Trevor Sikorski, head of carbon research at Barclays Capital, said: "Supply is still the fundamental problem." He estimated a surplus of over a billion EU and international carbon credits during the period 2008-2012.

He expects the EU carbon market to be oversupplied through 2020, though sees some chance of carbon prices bouncing when big European utilities start hedging their sales of carbon-intensive power generation for 2013.

"A sustained increase in prices is probably not going to happen until the end of next year," Sikorski said.

(Editing by Jason Neely)

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Analysis: Durban deal may do little to cool heating planet

Greenpeace activists hold a mock party opposite the venue where the United Nations Climate Change Conference (COP17) is being held, in Durban December 10, 2011.

Credit: Reuters/Rogan Ward

By Jon Herskovitz

DURBAN | Mon Dec 12, 2011 10:03am EST

DURBAN (Reuters) - The world is forecast to grow hotter, sea levels to rise, intense weather to wreak even more destruction and the new deal struck by governments in Durban to cut greenhouse gas emissions will do little to lessen that damage.

Climate data from U.N. agencies indicates that the accumulation of heat-trapping gases will rise to such levels over the next eight years - before the newly agreed regime of cuts in emissions is supposed to be in place - that the planet is on a collision course with permanent environmental change.

Countries around the globe agreed on Sunday to forge a new deal forcing all the biggest polluters for the first time to limit greenhouse gas emissions by 2020. But critics said the plan was too timid to slow global warming.

For a reduction plan to have a major impact, analysts say, the world's largest emitter, China, needs to be weaned from coal-intensive power sources that are choking the planet with carbon dioxide (CO2) and developed countries must spend heavily to change the mix of sources from which they draw their energy.

But they see little political will to implement these costly plans and argue that the U.N. process showed, in two weeks of talks in the South African city of Durban, that it is bloated, broken and largely incapable of effecting sweeping change.

"The challenge is that we begin the talks from the lowest common denominator of every party's aspirations," said Jennifer Haverkamp, director of the international climate program for Environmental Defense Fund, a U.S. group which campaigns against pollution.

"For this effort to be successful, countries need to be ambitious in their commitments and to refuse to use these negotiations as just another stalling tool," she said.

Domestic political constraints make it unlikely that pledges in Durban for more green projects in the developed world and stepped up aid for developing countries will come to fruition given problems for government funding in Europe, the United States and Japan.

PROTOCOL ON LIFE SUPPORT

In about 20 years of negotiations, the U.N. process has produced one binding deal on emissions cuts, the 1997 Kyoto Protocol. It is seen as a fading accord affecting a handful of developed states that now account for only 25 percent of global emissions, and was kept on life-support by the Durban deal.

The latest agreement extends limits on advanced countries that would otherwise expire next year. But it is widely seen as not doing nearly enough to make a dent in emissions.

The pact, known as the "Durban Platform," produced the promise of a new legally binding deal by 2020 and set out a road map to get there. The worry is that by the time any new provisions take effect, they will have been diluted in negotiation to the point of being meaningless, analysts said.

China, the United States and India, the world's three biggest emitters accounting now for about half of all global CO2 emissions, are not bound by Kyoto and would not be bound to any legally enforceable numbers until at least 2020.

The three have been accused by environmental lobby groups for years of blocking tough measures, and all three cite domestic priorities in their defense. The U.S. Senate needs a supermajority to approve global treaties and does not have a broad enough coalition to sign off on a global climate deal.

India and China said curbing their emissions would hurt their fast-growing economies and put hundreds of millions of their people at risk as they try to escape poverty.

RISK OF PERMANENT DAMAGE

But those calling for tighter curbs on emissions say that those populations are being put at greater risk by climate change: "The people of the world are the biggest losers because the governments are kowtowing more to the corporate interests than the interests of the people for more aggressive action," said Alden Meyer of the Union of Concerned Scientists.

Myer, a veteran of the U.N. climate talks, called for greater ambition on emissions cuts and financial support for industrial change and for "a more collaborative spirit than we saw in the Durban conference centre these past two weeks."

National envoys to the U.N. climate process and scientists who brief them see a need to limit the global average temperature rise to at least 2 degrees Celsius over pre-industrial times to prevent the most serious climate change. Environmental groups have said even that is not enough.

The United Nations Environment Programme said in a report last month that emissions were on track to grow above what is needed to limit global warming to the 2-degree mark, with analysts warning that delays in cuts for developed states and curbing the furious pace of emissions growth in major developing countries increasingly put the planet at risk.

Myer said: "We are on a path to 3-3.5 degree Celsius increase if we don't make aggressive cuts by 2020.

"And there is nothing to suggest this deal will alter that."

As temperatures rise, so does the damage, which includes crop failures, increasing ocean acidity that would wipe out species and rising sea levels that will erase island states, U.N. reports said.

The Organisation for Economic Cooperation and Development said global average temperatures could rise by 3-6 degrees by the end of the century if governments failed to contain emissions, bringing permanent destruction to ecosystems.

The International Federation of Red Cross and Red Crescent Societies, the world's largest disaster relief network, saw the Durban deal as a collective failure to stem the destruction caused by climate change on the world's most vulnerable people.

"It is frankly unacceptable we cannot all agree when so many lives are at stake," Bekele Geleta, the group's secretary general said in a statement.

Selwin Hart, chief negotiator for an alliance of small island states, took some heart, however, that at least there was agreement to keep on talking: "I would have wanted to get more, but at least we have something to work with," he said.

"All is not lost yet."

(Additional reporting by Nina Chestney, Barbara Lewis and Agnieszka Flak in Durban; Editing by Alastair Macdonald)

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