“History is made”. That was the verdict of one developing country negotiator on reaching an agreement on a climate loss and damage fund after months of difficult talks, which at times seemed set for failure.
An emergency 3-4 November meeting in Abu Dhabi saw a core group of negotiators, known as the Transitional Committee, finally agree on the recommendations for how to launch the fund. Those will now go to COP28 for global approval next month in Dubai.
Despite the problematic hierarchical description, the UN climate convention still follows rules set in 1992 in which countries are categorised as “developed” and “developing”, though the latter now includes higher-income countries like China and Saudi Arabia.
Developing countries said they made major compromises, accepting more uncertainty than they would have liked over funding arrangements as well as a controversial role for the World Bank, which will temporarily host the fund.
“It wasn’t the text we wanted, but the alternative was nothing,” Daniel Lund, the negotiator for Fiji, told The New Humanitarian.
“Nobody thinks the loss and damage will cover all needs, but there is now a space where loss and damage finance becomes a thing and can be recorded, and given metrics and tracked. That wasn’t the case in the past.”
Developed countries had long pushed back against financing to help countries recover from the destructive impacts of climate change, and the setting up of a loss and damage fund was only agreed upon in principle at last year’s COP27. Negotiators have been wrangling since then to shape that agreement into the basis of a working fund.
“In essence, we now have for the first time an instrument that will operationalise an international fund for grant-based financing of reconstruction, rehabilitation and relocation after extreme weather or slow onset events,” Avinash Persaud, the negotiator for Barbados, said in a statement. “This is an important step forward and will bring positive momentum to other climate actions.”
The existence of the fund is expected to further consolidate loss and damage as a key climate policy area, and provide a new route for accountability.
“Nobody thinks the loss and damage will cover all... needs, but... there is now a space where loss and damage finance becomes a thing and can be recorded, and given metrics and tracked. That wasn’t the case in the past,” said Olivia Serdeczny, an analyst at Climate Analytics who also advises the Least Developed Country (LDC) group in the talks.
The alternative is to “just have developing countries shoulder the cost”, Serdeczny told the New Humanitarian. She also praised the speed of the negotiations, in the context of the decades-long battle climate-vulnerable countries have been waging on loss and damage.
However, the joy at securing the agreement was tempered by disappointment among many developing countries and civil society campaigners at the concessions required to get the deal.
The outcome “was one of those things where success can be measured in the equality of discomfort”, wrote Persaud. “But if we had failed, it would have cast a long shadow over COP and started to unravel a host of climate actions that depend on mutual trust between developing and developed nations.”
A spanner in the works
A US proposal to involve the World Bank in the fund – which developing countries wanted to be an independent body – sparked fury in October among Global South negotiators and threatened to derail the talks. Campaigners are still unhappy at the World Bank’s inclusion in the deal.
“The so-called interim arrangement under the World Bank risks ending up as a permanent hosting situation and will undermine the fund's ability to meet the needs and priorities of communities,” said Lien Vandamme, senior campaigner at the Centre for International Environmental Law.
“Everybody knows transiting from [the] World Bank will not be… automatic,” said Serdeczny. “That’s definitely a massive compromise.”
Developing countries also made a big concession around how the fund should be financed, landing on an agreement that high-income countries would simply be among many urged to provide money to the fund. They had wanted more assurances that the wealthy nations that have contributed the most to climate change would provide most of the funding, and in grant form.
High-income countries “evaded their duty to lead in providing financial assistance to those communities and countries most in need of support to recover from the intensifying impacts of climate change”, said Harjeet Singh, head of global political strategy at Climate Action Network International.
The agreement “falls short of providing vulnerable communities with adequate assurance that their financial needs... will be met”, Singh added.
However, negotiators for developed countries said the system agreed would still allow those most in need to benefit.
“The fund’s resource allocation system, and in particular the minimum allocation floor for LDCs and SIDS [Small Islands States], will guarantee that the most vulnerable countries will be prioritised and will be guaranteed to access funds for loss and damage,” one European negotiator told The New Humanitarian. “This is absolutely critical,” they added, speaking on condition of anonymity due to the ongoing sensitivity around the negotiations.
In a sign of lingering tensions, committee chairs had to override disagreement from the United States on the final document, fuelling fears that loss and damage negotiations could yet be reopened at COP28.
“The way it ended suggests risk it will be reopened, but hopefully not,” said Lund, the negotiator for Fiji.
Revisiting loss and damage debates at COP28 could jeopardise the wider climate negotiations, where the world also needs to see clear progress in other important areas.
Edited by Andrew Gully.
