The EU and a group of 134 developing countries, which includes China, have reached an “in principle agreement” at Cop27 to establish a loss and damage fund.
On Saturday afternoon, with climate talks in Sharm el-Sheikh, Egypt, in overtime, a compromise text finally emerged. Subject to approval in a closing plenary, the deal offers hope of relief for victims of climate disaster.
Shauna Aminath, environment minister of the word’s lowest lying islands, the Maldives, emerged from the negotiating rooms smiling, hugging colleagues and taking selfies in the Sharm el-Sheikh sunshine on Saturday afternoon.
“That’s the reason,” ambassador Nabeel Munir, of Pakistan, chief negotiator for the G77 group, told Climate Home News. “Of course, it has to go to all the others first and then we will see. But I’m hopeful that it will be done,” he said.
An EU source confirmed the terms of the agreement.
Both sides agreed to decide to establish the fund as part of broader funding arrangements to address the damage inflicted by the climate crisis. These would include channels outside the UN Climate Change process, such as debt relief, insurance and potentially taxing oil and gas profits.
We have pushed very hard until the last minute for a loss and damage fund @COP27P. A positive outcome is close. Not perfect or optimal, but one that addresses the basic demand of developing nations. I believe if we stick to our positions, stay united, we will make landfall. #G77 pic.twitter.com/z0OLuOO8mu
— SenatorSherryRehman (@sherryrehman) November 19, 2022
And they specified that the fund would support “vulnerable developing countries”.
Defining vulnerability
“Vulnerable” does not have an official definition in the UN climate process but has previously been applied to the poorest countries and small island states.
On Saturday morning, EU’s climate chief Frans Timmermans clarified the term should extend to middle-income countries like Pakistan. The country is struggling to rebuild from devastating floods that affected a third of its population.
“Let’s be very clear: if a country like Pakistan is hit by this tragedy that has occurred to them of course, they are a vulnerable country that would be eligible for support,” he said.
EU opens the door to a loss and damage facility – if China pays
It does not pin down who is responsible for paying into the fund. The EU and US have indicated they want to expand the donor base, against resistance from higher middle income countries.
The text hints at this, tasking a transitional committee with “identifying and expanding sources of funding,” among other operational details. These should be adopted at Cop28 next year, it says.
Whether China and other large emerging economies such as Qatar, Kuwait and Singapore should contribute will be part of that discussion.
For people on the front lines of the climate crisis, this draft text offers hope that there will be a fund to help them recover and rebuild in the aftermath of disasters.
But there are still major unanswered questions.
1/2— Teresa Anderson (@1TeresaAnderson) November 19, 2022
The committee could also narrow down the definition of vulnerability. An EU official told Climate Home it should be based on GDP per capita as well as a country’s vulnerability to climate impacts and ability to respond, they said.
How the US, the main holdout against setting up a dedicated fund, responds to the text is critical. American negotiators were in discussion with Australia and New Zealand as the news of the EU-G77 agreement broke.
David Waskow, of the World Resources Institute, was confident the US would support the text: “I think they’ll be fine with it,” he said, adding that the language reflected its own draft proposal on the issue, which was circulated on Friday night.