(This story is part of a package of stories on climate change issued on Nov. 1)

By Gerard Wynn

LONDON, Nov 1 (Reuters) - A multibillion dollar trade deal to help poor countries cut their greenhouse gas emissions may sweeten talks this month on tackling climate change, providing an answer to the question of who pays to save the planet.

When delegates to the U.N. climate talks sit down in Kenya on Nov. 6, they will be mindful of this week's British report which warned of economic catastrophe if urgent and dramatic action is not taken to curb greenhouse gas emissions.

The cost of global warming will be at the heart of the Nairobi talks, meant to make progress on drawing up a successor to the U.N.'s Kyoto Protocol on cutting emissions, and agreeing much tougher emissions targets to those which run out in 2012.

But to get consensus the world will have to plug big cracks between rich and poor countries over the bill.

The United States -- the world's biggest emitter of greenhouse gases -- pulled out of the Kyoto Protocol partly because big developing countries like China were not included in the cuts.

China is the world's number two emitter but Beijing argues that as industrialised nations bear historical responsibility for most of the carbon dioxide in the atmosphere, it should be allowed to pursue economic growth without emissions limits.

One way round the problem is to set much tougher targets for developed nations only, but sweeten these by expanding Kyoto's Clean Development Mechanism (CDM), allowing them to pay developing countries like China and India to deliver the cuts.

The CDM allows rich nations to invest in developing nations -- ranging from hydropower dams in India to capturing methane from trash dumps in Brazil -- and then claim the credits back home for averted greenhouse gas emissions.

"The key term you'll be hearing in Nairobi is scaling up," said Michael Zammit Cutajar, head of the U.N. group set up to plot Kyoto's future post-2012.

"If we're heading to a much more energetic and ambitious emission reduction strategy beyond 2012 there'll have to be a bigger CDM."

BIGGER, BETTER

The British report on the economic consequences of global warming, by former World Bank chief economist Nicholas Stern, said that to avoid catastrophic climate change the world should cut emissions by some 50 to 70 billion tonnes of carbon dioxide equivalent -- 50-70 gigatonnes -- per year by 2050.

The CDM could contribute to a big chunk of that -- say 10 percent -- even though this would mean scaling up by a factor of 20 the emissions cuts pledged under CDM last year, said Janos Pasztor, an official at the U.N.'s climate change body.

"Potentially it (CDM) could be much, much bigger, " he said. "I don't see any inherent problem scaling up. All of this is feasible, let it come."

Expanded carbon trading under Kyoto could help raise $100 billion annually by 2050 to fund clean energy projects in poor countries, the head of the U.N.'s climate change secretariat Yvo de Boer said in September.

How can CDM grow so fast?

The Nairobi talks will broach this question -- but it seems there's no lack of scope.

First up could be a proposal to allow oil firms and others to earn carbon credits by burying carbon dioxide underground using an emerging technology called carbon capture and storage (CCS), considered a potentially vital climate change bandage.

A report last year by the Intergovernmental Panel on Climate Change (IPCC) estimated in all some 2,000 gigatonnes of CO2 could be buried, just the kind of volume Stern would find useful to balance the emissions books.

Next could be forest protection through "avoided deforestation."

Deforestation to make way for crops and pastures was responsible for more than 7 gigatonnes of greenhouse gas emissions in 2000 alone -- nearly a fifth of annual emissions -- according to the World Resources Institute. As trees burn and rot, they release carbon dioxide into the atmosphere.

"Industrial countries could pay the poor farmers for forest conservation, at some amount between $200 and $10,000 a hectare, and both parties would gain," said a detailed World Bank report published in October, which identified gains from including deforestation under CDM.

Expanding CDM to include carbon capture and storage and deforestation will not be cleared up in Nairobi, but support there could be a big step in that direction.

"Both CCS and avoided deforestation themes are in vogue, but both processes have some way to go," said Cutajar.

And he said CDM still had to solve perhaps its biggest problem -- a focus on big developing countries like China, Brazil and India, to the detriment of "greening" the economies of small countries that also need help, for example in Africa.

By October, around one third of the carbon credits in a CDM pipeline of hundreds of projects come from just 15 industrial-scale cases, according to Stern.

"It's not only an African problem, it's an issue for many smaller, poor developing countries, it's important to build capacity to design and host projects."

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