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Countries agree to create climate damage fund in historic COP27 deal

Despite a landmark deal on finance for ‘loss and damage’, the package agreed in Sharm El Sheikh falls short on plans to cut emissions and leaves room for expansion of gas

Environment 20 November 2022

Indigenous women embracing

Indigenous women embrace at the COP27 summit in Sharm El Sheikh, Egypt

SOPA Images/LightRocket via Getty Images

Delegates at the COP27 climate summit in Sharm El Sheikh, Egypt, have agreed to create a global “loss and damage” fund to provide cash for vulnerable nations hit by the impacts of climate change.

After more than 20 years of campaigning by developing countries battered by increasingly severe droughts, storms and other extreme weather, rich nations finally relented in the early hours of 20 November and backed plans for a compensation fund.

Details of how the fund will operate, including the crucial question of which nations will contribute, are still to be worked out, but activists and delegates from vulnerable nations said the agreement was a historic victory for climate justice.

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Saleemul Huq at the Independent University, Bangladesh has spent decades pushing for a global loss and damage agreement. “This has been a demand from the most vulnerable countries for a long time and has always been blocked by the developed countries,” he says. “This time all the developing countries were united under the leadership of Pakistan and managed to get the developed countries to finally agree to establish the fund for addressing loss and damage from human-induced climate change.”

However, the European Union, the UK and other developed nations walked away from the talks deeply unhappy with the final outcome. They argue the deal does little to advance progress on cutting emissions this decade – and therefore weakens any chance of limiting warming to 1.5°C above pre-industrial temperatures, the target set in the 2015 Paris Agreement.

On 18 November, the EU’s climate policy chief Frans Timmermans told reporters the bloc was willing to reverse its position and support the creation of a loss and damage fund. Observers said the move marked a breakthrough that ultimately paved the way for the final deal.

But the EU’s compromise offer came with conditions. In return for backing a loss and damage fund, the EU demanded tougher global commitments on cutting emissions this decade and phasing out coal, oil and gas use.

“We need to move forward, not backwards and all [EU] ministers… are prepared to walk away if we do not have a result that does justice to what the world is waiting for – namely that we do something about this climate crisis,” he told reporters at the summit.

Yet few of those “mitigation” demands made it into the final pact, despite hours of tortuous negotiations that ran late into the night. Attempts to push for tougher carbon cuts faced strong opposition from large polluting countries and petrostates including Russia and Saudi Arabia.

No progress on cutting emissions

COP26 president Alok Sharma said the UK and others “had to fight relentlessly to hold the line” on what was agreed at last year’s summit in Glasgow, UK, which saw countries urged to deliver more ambitious climate plans with faster emissions cuts this decade.

He expressed disappointment that the final agreement did not include any references to peaking global emissions before 2025, further action on phasing down the use of coal and the phasing out of fossil fuels.

In fact, the final text inserted a call for an increase in “low-emission and renewable energy”, which countries fear could be interpreted as allowing for an expansion in natural gas use.

“Friends, I said in Glasgow that the pulse of 1.5°C was weak,” Sharma said. “Unfortunately, it remains on life support. And all of us need to look ourselves in the mirror, and consider if we have fully risen to that challenge over the past two weeks.”

Without accelerating cuts to greenhouse gas emissions this decade, climate scientists warn it will be impossible to avoid a global rise in temperatures of more than 1.5°C.

Timmermans said the deal “does not address the yawning gap between climate science and climate policy.” “It does not bring a high degree of confidence,” he said.

Despite the discontent, the Egyptian presidency claimed victory. “We rose to the occasion,” Sameh Shoukry, the Egyptian foreign minister, told delegates. “We worked around the clock, day and night, but united in working for one gain, one higher purpose, one common goal. In the end we delivered. We listened to the calls of anguish and despair.”

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