Expected tougher constraints on burning fossil fuels like gas and coal - under climate change policies - might make alternative, so-called clean energy including solar, wind and biofuels seem more attractive.

But investors are seen to be still wary of the novelty of the clean energy industry, as well as eying policy uncertainty and perceived high returns from a carbon-emitting oil and gas sector which is earning record profits.

"It's a relatively new phenomenon... (Investors) want to invest in clean energy, but want to extract a little more value from dirty energy first," said James Cameron, Vice-Chairman and Founder of Climate Change Capital, which has a $100 million fund investing in clean energy projects. "They will get there."

Returns on a basket of 86 clean energy companies are close to the 30 percent annual returns over the past three years on the oil industry index, Amex Oil, according to information providers New Energy Finance (NEF).

Global clean energy investment by private equity and venture capital funds edged up just $165 million to $1.6 billion in 2005, NEF says, while total clean energy investment, including stock market listings, public subsidies and project financing, reached $42 billion.

Clean energy funds currently raising some $6 billion-plus in new money may not all reach their published targets in terms of time or amount, said Michael Liebreich, NEF Chief Executive.

"For clean energy investment, you have to believe the future will be different than the past, that climate change doesn't go away, and oil depletion is a real problem."

CLEAN CREDITS

Most scientists say global warming will bring a more chaotic climate with more heatwaves, droughts and floods. NASA has said that 2005 was the warmest year at the earth's surface since records began in the 1860s.

Clean energy technologies aim to cut the output of heat-trapping gases such as carbon dioxide (CO2), and have received political support from the likes of British Prime Minister Tony Blair, who see a positive spin-off of improved energy efficiency and so competitiveness.

One problem for green investors is the short timescale of policy projects such as the Kyoto Protocol, which motivates greenhouse gas cuts between 2008 and 2012 but no targets thereafter.

European companies and countries that face emission constraints under Kyoto will theoretically be able to invest in clean energy projects in developing countries and earn so-called Certified Emission Reduction units (CER’s), and sell these back in an EU trading scheme.

While such deals could deliver up to $100 billion of clean energy investment in developing countries, project delays coupled with uncertainty post-2012 are halting investment, says the emissions trading body, the International Emissions Trading Association.

"The lead time to set up a project and generate CER’s for 2008 to 2012 maybe doesn't give the time to make the returns you need," said Edwin Aalders, an IETA manager.