ARE, Sweden, (Reuters) – The European Union could  provide up to 2.5 billion euros ($3.55 billion) a year to help  poor nations protect tropical forests, the EU executive said in  a report to ministers meeting in Sweden yesterday.

The European Commission report will be discussed at the  meeting of EU energy and environment ministers in the mountain  resort of Are. The talks will also tackle energy efficiency and  preparations for global climate talks in Copenhagen in December.

Forests and finance for poor countries will be important  issues at the Copenhagen talks, which are intended to find a  successor from 2102 to the Kyoto protocol on limiting greenhouse  gas emissions.

Many experts regard the talks as the last chance to prevent  severe damage to the earth’s atmosphere, but are encouraged by  new signs of commitment from China and the United States.

Poor nations will need substantial funding to cut their own  emissions and to adapt to the worst effects of climate change.

The European Commission discussed funding options for the  Copenhagen talks, which Sweden has made a priority of its  six-month presidency of the 27-nation EU.

“Reducing emissions from deforestation and forest  degradation represents a particular challenge,” said the report,  which was seen by Reuters.

It proposed taking some of the funds to protect forests from  the EU’s Emissions Trading Scheme, which makes industry pay for  permits to emit CO2. “If 5 percent of the auctioning revenue was used to  contribute to global efforts to combat deforestation, 1.5  billion euros to 2.5 billion could be raised in 2020,” it said.

Overall, the EU expects to be contributing about 30 billion  euros annually by the same date to help poor nations adapt with  measures such as developing drought-resistant crops or finding  new water sources.

Those funds would help meet total funding needs of about  $100 billion a year by 2020. Once funding is raised, the world  faces challenges coordinating and delivering it to poor  countries, the Commission report said.

“Undeveloped and fragmented governance has been identified  as one of the challenges in delivering support,” it said.  “Existing mechanisms of delivery, including channels of aid  delivery should be efficiently used and, if need be,  strengthened before creating new mechanisms.”