EU agrees to climate disaster fund to help poor countries

A major breakthrough has taken place at the COP27 UN climate summit in Egypt, where the European Union made a dramatic intervention to agree to key developing world demands on financial help for poor countries.

This move makes a breakthrough possible in the deadlocked global climate talks. Yesterday the European Commission vice-president, Frans Timmermans, launched a proposal on behalf of the EU that would see it agree to establishing a loss and damage fund. Rich countries had been holding out against this key demand, arguing it would take time to establish whether such a fund was needed, and how it would operate.

Timmermans told the meeting that the EU had listened to the G77 group of developing countries, for whom the establishment of a fund at this summit is a core demand. Loss and damage refers to the ravages of extreme weather on the physical and social infrastructure of poor countries, and the finance needed for rescue and reconstruction after climate-related disasters.

Timmermans said: “We were reluctant about a fund, it was not our idea to have a fund. My reluctance was because I know from experience it takes time before a fund can be established, and more time before it is filled, whereas we have existing instruments. I really believe we could move faster with existing instruments [for climate finance]. But since they [the G77] are so attached to a fund, we have agreed.”

How will the fund work?

Timmermans in articulating how the fund will work explained that “clear conditions” would be attached to any fund. It would be geared towards supporting the most vulnerable, with a broad financial donor base contributing.

The fund would not operate in isolation, but as part of a mosaic of solutions that includes reform of multilateral development banks, for example. At the same time, he EU wants more ambition on cutting emissions with stronger provisions on updated national plans for emissions cuts in line with the 1.5-degree target in the Paris Agreement and peaking global emissions by 2025.

“This would have to be a package deal,” Timmermans declared.

“The EU proposal crucially establishes the principal that payments to developing countries for climate adaptation must be matched by overall global reductions in greenhouse gas emissions, which after all is the central goal of the Paris agreement,” explained Paul Bledsoe, a former Clinton White House climate adviser, now with the Progressive Policy Institute in Washington.

Proposal being considered

Developing countries are considering the proposal with CARICOM Secretary General Carla Barnett giving an ambivalent response.

“There’s only one option for small island developing states, a financing fund that delivers a just pathway for the future of our countries. Division and delay tactics will not work. This is a matter we defend on the basis of justice,” Barnett said.

The Guardian reported that one G77 negotiator, who asked not to be named, was not impressed by the EU’s proposal. According to the individual, “it is a predictable attempt by the EU to break up the G77 in talks. Of course, it’s not a breakthrough. They are merely repeating its original negotiating position by making it sound like a compromise when they know very well that it is not. It is completely disingenuous.”

Others welcomed the proposal such as Mary Robinson, chair of The Elders and former president of Ireland, who commented: “This proposal from the ministerial co-leads Jennifer Morgan and Maisa Rojas on loss and damage finance puts us on the cusp of a historic breakthrough. We’ve gone from not even having loss and damage finance on the agenda at COP27 to having a fund, a mechanism, and a flow of finance all within our grasp.”

She added that, “if adopted, this could well ignite bold reform of the wider international financial system so multilateral development banks (MDBs) open their coffers for those in need of loss and damage financing. If this text is agreed at COP27 it not only delivers a UNFCCC answer to loss and damage finance, it could initiate the restructuring of international financial architecture to meet today’s global challenges”.

Australia said it welcomed the EU’s contribution and would “engage constructively with it”. On loss and damage, Australia was “very attracted to a new fund that benefits from a broad contributor base and focuses on the most vulnerable”.

There was concern that more clarity would be needed. However, the EU’s move throws the spotlight on the US, which has also objected to a fund and has not yet responded to the proposal.