A London-based coalition is launching a new funding scheme to address concerns about existing trade in carbon credits -- primarily that this excludes the world's poorest communities, which are most at risk from the impact of global warming.

"This is very much not a minor absolution for your carbon sins, but is honestly a compensation payment for the impact you know your personal carbon emissions will have," said Andrew Simms, policy director at the New Economics Foundation (NEF), coordinating the initiative with the International Institute for Environment and Development (IIED).

The consortium says its scheme differs from conventional carbon offsetting -- which has focused mostly on promoting renewable energy -- because it will also help vulnerable people cope with phenomena such as more severe droughts and floods.

In the jargon, it will fuse mitigation -- measures to curb carbon dioxide emissions -- with adaptation -- activities enabling people to deal with climate-related problems they are already experiencing. Over the coming year, the approach will be tested in regions expected to be worst and soonest hit by climate change in Africa, Asia and Latin America.

Pilot projects will prioritise adaptation: for example teaching Indian children to swim so they can survive floods, and planting the drought-resistant cashew trees whose fruit pulp families plan to sell to schools for income.

But they will also include mitigation steps such as providing solar-powered lighting for girls in Mauritania to do their homework after dark, and solar-powered freezers to store the Brazilian cashew apple pulp which makes juice. The partners -- including the UN Children's Fund (UNICEF), Greenpeace, CARE International and Trocaire -- describe the scheme as a way for charities, business and individuals to take responsibility for the damage caused by their carbon emissions in the short term.

They call people who help fund the scheme investors, rather than donors: the capital involved is human as well as financial. "It connects me with a human being at the other end of the world who's being affected by my pollution, and I then invest in that person and relate to that person, and feel there is solidarity between us," said Saleemul Huq, head of the climate change group at IIED.

"It's not buying and selling -- it is much more investing in people." WHERE THE MONEY GOES Some existing projects backed with money from unregulated or so-called voluntary carbon emissions trading have been accused of not delivering promised environmental and social benefits. Critics also say carbon credits offer polluters a guilt-free way to carry on emitting damaging greenhouse gases.

"Offsetting is something that people have little faith in because they don't know where the money goes," said Betsy Joseph of aid agency Mercy Corps, which has launched a separate initiative aimed at strengthening the relationship between carbon offsetting and poverty reduction.

Its "Cool Carbon" Web site invites individuals and businesses to calculate the cost of their carbon usage and donate that amount to carbon-neutral projects that also create jobs. In Bosnia, for example, it is partnering with a pastry manufacturer to convert used cooking oil into biodiesel that could power city buses in Tuzla.

"People can look at the progress of the projects online, and this should give them more faith that their money is going somewhere tangible, with more of a connection to those they are helping," said Joseph. The United Nations has called for around $86 billion in new financing by 2015 to help the world's poor cope with climate change.

But so far funds from governments and a levy on UN-regulated carbon trading amount to a fraction of what aid agencies say is needed. A growing number regard the sale of voluntary carbon offsets as one way to fill the gap. The market for voluntary carbon trades is growing rapidly, more than tripling between 2006 and 2007 to reach a value of $331 million, according to a report from environmental information providers New Carbon Finance and Ecosystem Marketplace.

But charities have found it difficult to access buyers in the voluntary market, partly because offset companies, which act as brokers, prefer large projects that deliver high volumes of emissions savings.

"The transaction costs are quite high for small projects," said Andrew Scott, policy director at Practical Action, which is planning to raise around 400,000 pounds ($782,000) over five years by selling carbon credits from four energy projects in Sudan, Peru, Sri Lanka and Bangladesh.

"It is a very slow, time-intensive process for the initial assessment and verification, and you do begin to wonder whether it is worth the effort." Michael Schlup, director of the Gold Standard Foundation, which administers a widely used quality label for clean energy projects that also support sustainable development, questioned whether the carbon market was the best place to raise money for climate change adaptation work.

"People see it as a miracle cure, but it could be a diversion from other policy measures," he said, adding his organisation had not yet tried to convert climate change adaptation into a service people could pay for. For potential investors, one of the key obstacles is that while tonnes of carbon dioxide emissions now have a price, it is difficult to put a value on measures to help people survive weather disasters and adapt to long-term climate stresses.

"I think this is a very valuable exercise but the hard thing is to see how to link it to the carbon market," said Schlup. "With mitigation, you have tonnes of carbon, but with adaptation, are you saving lives or dollars?" There are also tensions between market demands and the needs of poor communities. For instance in a Practical Action project in Bangladesh, an offset company chose a stove design that produced the lowest emissions but was not favoured by local women. "Human development and emissions savings objectives are not always win-win," Scott said.