Talks on a 190-nation deal to slow global warming were on a "knife edge" early on Friday as Brazil and Japan expressed guarded hopes of ending a dispute between rich and poor about curbing greenhouse gas emissions.
Negotiators were set to work well into the early hours of the morning seeking to end a standoff over the future of the U.N.'s Kyoto Protocol, which binds almost 40 rich nations to curb emissions until 2012, before the final day of the two-week talks on Friday.
"Time is running out," Mexico's Foreign Minister Patricia Espinosa, who is serving as the president of the talks being held at the Caribbean beach resort Cancun, told negotiators. If the negotiators fail to reach an agreement by Friday night they must face the reality of explaining that to their societies, she reminded them.
Some of the negotiators broke into groups in an attempt to hash out issues like financing for poor countries, technology transfers, and stopping deforestation.
"Intensive consultations are taking place. We are engaging heavily with other parties. And it is a good sign," Brazil's negotiator Luiz Figueiredo said earlier at the talks. "I am very hopeful we will have a good outcome."
Brazil and Britain are leading talks on the Kyoto pact.
Japan reiterated that it will not extend cuts under Kyoto beyond 2012, a position that has angered developing nations. Tokyo insists that all major emitters including China, India and the United States must instead sign up for a new treaty.
Akira Yamada, a senior Japanese official, added that the talks were seeking "some good wording with which we can accommodate, not only Japan, but other countries. This negotiation is rather difficult. However, we think we can reach agreement."
Developing nations say that rich nations, which have emitted most greenhouse gases by burning fossil fuels since the Industrial Revolution, must extend Kyoto before the poor sign up for curbs that would damage their drive to end poverty.
One draft suggested a formula that simply left the future of Kyoto open. It says that environment ministers call "for the conclusion as soon as possible of ... the negotiations for a second commitment period of the Kyoto Protocol."
If they solve the dispute over Kyoto, negotiators are aiming to set up a new fund to help developing countries cope with climate change, work out ways to preserve tropical forests and agree on a new mechanism to share clean technologies.
Ambitions for Cancun are already modest after a U.N. summit in Copenhagen last year failed to agree to a binding deal, partly because of opposition from a handful of nations, including Bolivia and Sudan.
Chris Huhne, Britain's energy and climate change secretary, said earlier that: "It's on a knife edge, we could well have a good outcome, but we could also have a car crash."
Bolivia's left-wing president, Evo Morales, reiterated calls for radical cuts in greenhouse gases by developed nations under Kyoto to protect what he calls "Mother Earth."
He said 300,000 people died annually from droughts, floods, desertification, storms and rising seas caused by greenhouse gas emissions since the Industrial Revolution. He described the deaths as "genocide" caused by capitalism.
"There are two ways: either capitalism dies or Mother Earth dies," Morales said. Bolivia's demands that rich nations halve their greenhouse gas emissions from 1990 levels by 2017 -- more radical than any other countries' requirements.
Some diplomats fear that Bolivia's position could derail the entire conference, where any deals require unanimity. But it has also distracted from other disputes, for instance on new funds, protecting tropical forests or sharing clean technologies.
World Bank President Robert Zoellick said that China, which has overtaken the United States as the top greenhouse gas emitter, would have to take on a new role as its surging influence blurs a traditional divide between rich and poor nations.
"China is a developing country, so is India," Zoellick told Reuters. "It's understandable that they don't want to be treated as an industrialized or developed country. On the other hand, people see that they're the biggest emitter," he said.
"People will have to find some place in between. The world doesn't fit easily into two different categories," he said.
Kyoto is the first legally binding U.N. pact meant to encourage trillion-dollar shifts in the world economy away from fossil fuels toward cleaner energies like wind and solar power by placing a penalty on greenhouse gas emissions.