China has been more than happy to keep a relatively low profile at Cancun, and seems quite content to let Japan take the rap as the resident bad guy. Copenhagen was coloured by the tension between China and the US, the two biggest economies and largest emitters, a situation that deteriorated further during the year, up to and including the particularly acrimonious pre-Cancun meeting at Tianjin.

Now, all is quiet. China and the US are going to great lengths to avoid confrontation, a fact recognised by China’s vice-premier Xue Zhenhua at the country’s first press conference at Cancun today: “I was at Bali, Posnan, Copenhagen and Cancun,” he said. “At Copenhagen we have seen very heated discussions, here we see atmosphere is relatively mild.”

Zhenhua had a few other interesting things to say. One was that China had reached a “consensus” with India on its proposals to find a resolution to the question of transparency, raising hopes that a solution can be found at Cancun.

The second was its indication that it would likely significantly expand its experiments with carbon markets — it has run pilot programs in three cities: Beijing, Shanghai and Tianjin — and will expand this to eight cities over the next year. It is highly likely, in fact, that China will have a national carbon market before the US.

China also made it clear that it felt that ambitious reduction targets should be led by rich nations, but left it to India to be provocative. Dismissing the US pledge to cut its emissions by 17% from 2005 to 2020, which relates to just a 4% cut from 1990 levels, India environment minister Jairam Ramesh said the US long-term target of a 50% cut by 2050 was meaningless: “We’ll all be dead by then.”

Our own climate change minister Greg Combet won’t be winning the “Morewalklesstalk” challenge set by Greenpeace, but only because he’s decided to negotiate the intimidating distances in the sprawling Moon Palace by hopping on a bike instead. Combet has been whizzing around the north-east section of the Moon Palace, where delegation offices are stretched from Tequila to Sunrise (no, really, they are the names of the buildings), going through Playa, Piñata and others in between. The bikes have no gears, but at least it is flat.

As mentioned yesterday, finance is the trickiest of the three issues thrust before Combet and his Bangladeshi counterpart. The task is to lock in the fast-start financing agreement that was more or less approved in Copenhagen — which is designed to provide $30 billion in the three years to 2012 — and agree on a mechanism to unlock $100 billion of funds a year to help poorer countries reduce emissions and adapt to climate change.

Part of the problem lies in how that money should be managed. Donor countries want an independent body such as the World Bank. Developing countries, many of whom dislike the World Bank with some passion, want it to be under the UN. The second challenge is to find a way to unlock private finance, given that most governments are strapped for funds. Most parties are confident that a compromise can be found, the trouble is that finance risks becoming a political football as one of the “non negotiable” outcomes for the major developing economies, running up against the two non-negotiables for rich nations — mitigation and transparency.

*Read the rest of this article – and more from Cancun – on Climate Spectator