A view of the entrance to the COP27 climate summit venue, Sharm el-Sheikh, Egypt, November 15, 2022. Photo: Reuters/Mohamed Abd El Ghany
- The fight between poorer and richer nations has come down to setting up a funding facility versus dialogues to provide funds for loss and damage.
- Poorer nations want to set up a loss and damage fund at COP27; the richer ones want to set up a process to facilitate more dialogue on the issue.
- Some richer nations also want to expand the donor base and are asking major economies to contribute to the fund.
- If this is formalised, India, China and Brazil will have to contribute to the ‘loss and damage’ fund as well.
- This in turn contravenes the principles of the UN climate convention, according to which richer nations are supposed to provide financial assistance.
Negotiations over ‘loss and damage’ have intensified as the COP27 climate talks at Sharm el-Sheikh, Egypt, moved into its final week. The inclusion of funding for ‘loss and damage’ in the agenda was seen as a victory for developing nations – but the fight for an actual deal remains far from complete, and for a meaningful deal far from possible.
At the heart of this fight is the question of ‘funding arrangements for loss and damage’ – which is climate jargon for ‘who will pay, to whom and how’.
That this issue was going to be a major faultline in this year’s edition of the talks became evident over the fight to include these issues in the agenda of discussions as well. After wrangling over 48 hours, the topic finally made it to the agenda – becoming the first time in the history of climate change negotiations that the question of money to pay for the consequences of the climate crisis would be discussed at a COP.
But the fault lines have become clearer as COP27 heads to its end. Different countries and negotiating blocs have made their submissions (documents expressing their demands and expectations on the matter). A draft negotiating text is also available to delineate the issues involved.
As with most funding issues in these talks, ‘loss and damage’ and ‘funding arrangements’ have also pitched economically developing countries against economically developed countries. And at the twilight of COP27, it boils down to form versus process. That is, to set up a funding facility versus dialogues to provide funds for loss and damage.
What developing countries are demanding
The 134 constituent countries of the Group of 77 (or G77) plus China have outlined their position in a submission. It proposes a framework for a funding facility – an institution to channel funds – which the countries want set up at COP27.
The submission also outlines a temporary body to iron out the rules and channels by which funds can be provided for ‘loss and damage’ by the next COP, to be held in 2023 in Dubai.
The submission has two key parts.
First, G77 + China want the funding facility to be set up now, and to conduct its first meeting in March 2023. This is important because the quickness would allow the group to address the problems faced by many developing countries on a more immediate basis.
Second, the group wants developed countries to provide funds to this facility.
India, while a member of G77, has insisted in a separate statement that the money channelled through this facility has to be “new and additional funding for addressing (not only averting or mitigating) loss & damage”.
“Addressing loss and damage” refers to the larger responsibility of developed countries. This is crucial because, as historical polluters, these countries have already agreed to bear a greater burden of the responsibility to fight the climate crisis in 1992, when the UNFCCC came into force.
This, in sum, is the ‘form’ that developing countries are proposing.
“There is very strong unity in the G77’s position on this. Now, it’s mainly a question of bringing convergence during the political discussion,” Prerna Bomzan, a researcher with the Third World Network, an independent international research and advocacy organisation, said.
What developed countries are proposing
Insisting on a ‘process’ over the ‘form’, developed countries have advanced an idea: to conduct a series of dialogues and workshops before any specific funding facility is set up.
Their position is set out in submissions made by negotiating blocs, like the European Union and the Environmental Integrity Group (EIG). A few developed nations have also expressed their demands through separate submissions.
The UK, for instance, has stated explicitly that at COP27, it wants to set up a process to “discuss how modalities such as workshops, ministerial dialogues, submissions and the Glasgow Dialogue [the Glasgow Dialogue was set up in 2021, with the mandate to conduct discussions between parties on funding arrangements for loss and damage] can feed into this process.” The country wants these discussions to stretch for a couple of years.
Echoing similar thoughts, the EU – a group of 27 countries – has advanced the idea to first set up a process to conduct a “gap analysis” in funding arrangements for ‘loss and damage’. It wants this issue to be analysed over this year and the next.
To further stall the push for a funding framework, the EU has brought another key proposal to the table, called the ‘Global Shield Against Climate Risk’. Launched on November 14, 2022, by the World Bank, the ‘global shield’ is an insurance scheme to protect against extreme weather events. Details on how it will work are still unclear, however.
The EIG, which consists of six countries – including Switzerland, Liechtenstein, South Korea and Mexico – has submitted a note on this issue. Its contents largely resemble that of the arguments of other developed nations – but also issues a call to expand the donor base for the ‘loss and damage’ fund. Specifically, EIG wants contributions to come from all parties, “based on their capacity to pay and their mitigation potential, including high potential economies, such as major economies”.
If this idea is formalised, India, South Africa, China and Brazil will also be expected to contribute to the fund.
The principal problem with this position is that some of these developing countries, including India, are already suffering ‘loss and damage’. So not only will they suffer irreparable damages, they also be expected to pay to deal with those damages!
This proposal goes against prior commitments by developed nations, to provide financial support to poorer countries to deal with the cost of climate change in the last three decades.
The technical dialogue on this issue has now ended. It will now be resolved through political discussion, stewarded by the representatives of Australia and Chile. The first meeting on this issue was held on November 16. A few more meetings will have to happen before the parties can be expected to reach consensus.
Radhika Chatterjee is a researcher with Land Conflict Watch, an independent network of researchers studying land conflicts, climate change and natural resource governance in India.