"The fund can become operational ... at the beginning of 2008," Yvo de Boer, head of the UN Climate Secretariat, told a news conference of the preliminary deal.

The decision must now be approved by environment ministers at the end of the Dec. 3-14 meeting of 190 nations in Bali, which is also seeking to agree to start formal negotiations on a new internatioal climate pact beyond 2012.

The accord broke a deadlock on oversight of the fund by splitting responsibility between the Global Environment Facility (GEF), which funds clean energy projects, and the World Bank. The fund would have a 16-member board with strong representation from developing nations.

"I am happy and proud but when you read the decision there is still a lot of work to make the fund operational," Monique Barbut, head of the GEF, told Reuters.

She said that the money was tiny compared to the projected damage from desertification, heatwaves, a melting of the Himalayas that could disrupt river flows and agriculture in China and India, and rising seas that could swamp island states.

In Africa alone, up to 250 million people are projected to face greater stress on water supplies by 2020, according to the UN Climate Panel. The fund could help farmers get new drought-resistant crops, set up better early-warning systems for cyclones or build coastal barriers against rising seas.

Helping people adapt to the impact of climate change has often been overlooked in a fight against global warming which has focused overwhelmingly until now on how to cut emissions of greenhouse gases from factories, power plants and cars.

SUNTAN LOTION

"It will cost US$50 billion a year for all developing countries to adapt to climate change," said Kate Raworth of British aid agency Oxfam.

She said that too much debate in Bali had been about the management of the fund. "It may end up being perfect in structure but puny in size," she said.

And past promises of aid had often fallen short. A separate US$67 million fund to help the poorest nations "is the same amount as people in the United States spend on suntan lotion in a month", she said.

By contrast, building protective barriers around 50 of the coral islands making up the Maldives in the Indian Ocean to keep rising seas at bay could cost US$1.5 billion, said Angus Friday, head of a group representing small island states.

The Adaptation Fund is raised from a two percent levy on the UN's Clean Development Mechanism, under which rich nations can win tradeable credits by investing in projects such as windmills or cleaner industrial processes that cut greenhouse emissions in developing nations.