EU Proposes Immediate Loss and Damage Fund, Emissions Peak Before 2025

A dramatic new offer from the plenary floor at COP 27, in which rich countries would immediately set up a loss and damage fund in exchange for a pledge to peak greenhouse gas emissions before 2025 and phase down oil and gas as well as coal, may have changed the tone and salvaged the outcome of climate negotiations that seemed hopelessly deadlocked just hours before.

This story was originally published by The Energy Mix and is part of Covering Climate Now, a global journalism collaboration strengthening coverage of the climate story.

A dramatic new offer from the plenary floor at COP 27, in which rich countries would immediately set up a loss and damage fund in exchange for a pledge to peak greenhouse gas emissions before 2025 and phase down oil and gas as well as coal, may have changed the tone and salvaged the outcome of climate negotiations that seemed hopelessly deadlocked just hours before.

The proposal from European Union Vice-President Frans Timmermans, literally an eleventh-hour pitch delivered Thursday at 11 PM local time, “came after days of sluggish talks in Sharm El-Sheikh, bogged down by fights over how to compensate developing countries bearing the brunt of climate change through flooding, droughts, and other disasters,” Bloomberg News reports.

“The European Union offer would include a commitment to immediately establish a new loss and damage response fund with details worked out over the next year as well as a commitment to examine debt and reform the mulitlateral development banks,” the news agency writes. “There also would be a pledge to ensure all financial flows are aligned with the Paris Agreement commitment to keep global warming to 1.5°C.”

In return, “countries would vow to peak global emissions before 2025 and phase down all fossil fuels—not just coal, which was spelled out in the Glasgow climate pact last year. That would come with some accountability, in the form of an annual report on progress toward implementing the phase down of unabated coal power.”

The idea “went down well with vulnerable countries and most other rich nations,” says Climate Home News. “China and Gulf states pushed back, while the U.S. kept quiet.”

But the deal isn’t nearly done, at least not yet. Early Friday local time, when the Egyptian Presidency finally brought forward a first attempt at an official conference declaration, or decision text, the draft “fell short of beefing up language on a phasedown of fossil fuels—a key condition for the EU and an indication that Timmermans’ offer may not yield the breakthrough he sought,” Bloomberg writes. The text did include a first reference to the “unprecedented” global energy crisis triggered by Russia’s invasion of Ukraine.

The drama was just one part of a complex, interwoven process that looks certain to go on through the weekend, well past the scheduled close of the conference later today. It wasn’t yet clear whether the EU’s intervention would fundamentally shift the direction of the negotiations or heal the deep frustration and disappointment percolating out of news reports from Sharm el-Sheikh.

As recently as Thursday, Egypt stood accused of letting crucial negotiations at COP 27 fall into dystopian disarray.

“Diplomats from rich and poor countries, observers from non-profits, and activists meeting in Egypt for the UN-sponsored climate talks are finding themselves in the unusual position of agreeing on something: This is chaos,” Bloomberg reported. “There is collective exasperation among attendees at the COP 27 summit over the status of talks.”

“With time running out for countries to agree on a road map for tackling climate change,” the Washington Post wrote, “rich and poor nations continued to disagree on an array of issues, including compensation for harms caused by a warming world.”

The blame is falling squarely on the Egyptian COP Presidency for “failing to anticipate and address some of the thorniest issues facing negotiators” and taking a “haphazard approach to organizing the high-stakes negotiations,” the Post added in a separate dispatch, citing a half-dozen interviews with veteran negotiators or observers at the annual conference.

No Text to Negotiate

For days, there has been talk and speculation about the COP 27 “cover decision”, the summary document that captures the major points of agreement among delegates representing 195 countries and multiple negotiating blocs. Against the urgency and front-line impacts of the climate crisis, negotiations at a UN summit come down to this—any progress takes the form of legalistic text to be negotiated, then finalized, with every bit of syntax and punctuation subject to scrutiny and debate in a process where all decisions must be made by consensus.

Those discussions take time, and usually begin earlier in the conference. This year, delegates woke Thursday morning to a 20-page draft, described by some as disorganized and disjointed, containing “the political statement outlining the goals and commitments that all climate negotiating parties are supposed to agree upon,” Bloomberg writes. “The presidency’s document confused delegations and was mistaken as a draft of the final declaration until Egyptian officials clarified it was just a collection of ideas.” It “came out late in the process, lacked key demands by some countries, and included statements that outraged others,” the news agency adds, citing interviews with several delegates and observers.

Bloomberg News says the draft “was slammed by developing nations seeking more ambition from the closing text, setting up a showdown at the two-week summit.” The news story has a rundown of the contents of the draft cover decision and the early critiques.

Carbon Brief Deputy Editor Simon Evans was out shortly after the document landed with a Twitter thread that summarized the contents, noting that key substantive issues like tougher emission reduction targets, climate adaptation, loss and damage, and many others remained unresolved.

With less than 48 hours remaining before the conference was due to end, “this is not a text that has been discussed by countries but elements reflecting what Egypt has gathered from consultations with countries. Formal negotiations on the text are yet to start,” Climate Home News writes. “If Egypt wants to secure a successful outcome, it urgently needs to bring the discussion into negotiating rooms.”

“It doesn’t feel like one single coherent vision pushed by the presidency but more a text that weaves together lots of ideas they’ve heard—many will get shot down from various groups,” said Tom Evans, a climate policy advisor at the E3G climate think tank. “There’s lots in there that all sides will dislike.”

The delayed release of such a preliminary text means that “this will be quite a long and difficult journey—I’m not sure where these talks will land,” European Commission First Vice President Frans Timmermans told media yesterday. Yet “if this COP fails we all lose, we have absolutely no time to lose.”

“These last two days are to take decisions,” said Manuel Pulgar-Vidal, the former Peruvian environment minister of Peru who led the COP 20 climate talks in Lima. “This COP has to deliver and we are not seeing that yet.”

“There should be a clear road map by those who are emitting a lot to start reducing their emissions,” said Zambian environment minister Collins Nzovu. “We are headed completely in the wrong direction—driving very, very fast into a ditch.”

COP President and Egyptian Foreign Affairs Minister Sameh Shoukry was quick to declare that the 20-page document was just a draft, not a final destination.

“Whatever circulation you might have seen is still a work in progress and I don’t think one should jump to any conclusions,” he said. “We are still in a phase of deliberations to see how best to provide a cover decision that responds to the interests of parties and doesn’t provide any form of backtracking or relinquishing of any previous commitments.”

No Language on Fossil Fuel Phasedown

One notable omission from the Thursday draft of the cover decision was India’s proposal that the COP endorse a phasedown of all fossil fuels. That followed language at last year’s COP 26 summit in Glasgow that called for a phasedown (but not a phaseout) of coal. Some discussions over the last week have cast a wider approach as a matter of international equity, since coal is the primary fossil fuel on which developing countries rely while richer nations are more dependent on oil and gas.

At first, there was concern that India’s intervention was meant to trigger objections from major oil and gas producers like Saudi Arabia and Russia, in response to which India could then try to water down the previous agreement to phase down coal. But that risk seemed to dissipate after Indian Prime Minister Narendra Modi endorsed the coal phasedown during the G20 leaders’ summit in Bali, Indonesia.

“My fear on that is a lot less” after the G20 reaffirmed its commitment to the coal phasedown and Modi agreed, said Alden Meyer, an E3G senior associate who’s attended all but one of the 27 COPs. That in itself wouldn’t stop Russia and Saudi Arabia from trying to block language on oil and gas. But “my view of that is, let’s build support for it, get it into the decision, and then let them explain why they think coal should be phased down but not oil and gas, in the view of the whole world in the closing plenary of the COP,” Meyer told a media briefing earlier this week.

In the end, India’s proposal received support from the European Union and the United Kingdom, and the United States said it would back the plan as long as it specified “unabated” oil and gas, leaving the door open for questionable carbon capture and storage technologies. But it wasn’t in the Thursday discussion document, nor did it show up in the draft cover decision. On Thursday, the Canadian government said it wouldn’t support including an oil and gas phaseout in the cover text, Environmental Defence Canada reported.

“Acknowledging only the need to phase down coal while ignoring oil and gas is hugely problematic. This predatory delay is out of line with the science and with 1.5°,” Collin Rees, campaign manager at Oil Change International, told Bloomberg. “At a COP shaped by more than 600 fossil fuel lobbyists roaming the halls, parties fighting for progress must push back against weak language that allows the fossil fuel industry to continue its deadly expansion.”

Multiple Moves on Loss and Damage

As expected, COP 27 has seen a great deal of discussion and considerable controversy over the decades-old demand that rich countries provide funding (they vehemently resist characterizing it as compensation or liability) for the irreversible impacts of climate change. The core of the argument, and the historical reality, is that the world’s wealthiest economies are those that have benefited the most from the fossil fuel era and produced the lion’s share of the emissions, while the countries with the smallest historical carbon footprint are bearing the brunt of the climate emergency.

“Developed countries such as the United States have long resisted the idea of loss and damage” for fear of being held financially liable for the carbon dioxide they’ve pumped into the atmosphere for decades,” The Associated Press explains. But more recently, “there has been a softening of positions among some rich nations that now acknowledge some form of payment will be needed, just not what.”

At this year’s conference, much of the debate has been on whether to set up a loss and damage funding mechanism, or “facility”, immediately, or build up to a decision in 2024 while taking time to decide how the new structure will operate.

German Foreign Minister Annalena Baerbock told AP there might be no agreement on loss and damage at this year’s COP. But she acknowledged that “countries that are particularly affected, who themselves bear no blame for the CO2 emissions of industrial nations such as Germany, rightly expect protection against loss and damage from climate change.”

“We’re all willing to find some substantial steps forward, but we’re not there yet,” said the EU’s Timmermans.

That isn’t sitting well with the Alliance of Small Island States (AOSIS), whose members are among the most vulnerable in the world to climate impacts like sea level rise. “We have come too far to fail on loss and damage finance. Three-quarters of humanity is relying on a favourable outcome at COP 27,” said AOSIS Chair Molwyn Joseph of Antigua and Barbuda.

“AOSIS has worked tirelessly this year to build consensus, devise a clear loss and damage response fund proposal, and ensure the commitment of the international community to come to COP 27 and negotiate on this issue in good faith,” he added. But now, “some developed countries are furiously trying to stall progress….not only are they causing the worst impacts of the climate crisis, they are playing games with us in this multilateral process.”

That position drew support from Oxfam, with climate policy lead Nafkote Dabi declaring that “more than 40 million people in the Horn of Africa are currently experiencing climate-induced hunger crisis. Pakistan is faced with $30 billion worth of loss and damage from the recent mass floods that left a third of the country under water. It is crucial that developing countries can access a formal fund to pay for the damages and losses they are already suffering today.”

“A two-year delay to assess whether or not to create a dedicated loss and damage fund would be utterly unacceptable, given the urgency of the climate crisis, and the delays that lower-income countries have already had to endure in receiving funds to combat climate impacts,” agreed Dr. Jeni Miller, executive director of the 130-member Global Climate and Health Alliance.

No ‘Stylish’ Walkout

But Pakistani climate minister Sherry Rehman said she had no plans for a “stylish” walkout, whatever the outcome of COP 27 negotiations on loss and damage, even though her country places 147th out of 182 in an index of climate vulnerability and readiness and went through the devastating floods that helped set the stage for this year’s deliberations.

“We are not asking for reparations,” Rehman said, during a panel session at the Pakistan pavilion in Sharm el-Sheikh. “It sounds really good. It’ll get you into all the headlines. I’d be a real hero.”

But while some participants at the COP are looking for harder-line demands on loss and damage, she explained that calls for reparations wouldn’t be an effective way to “keep the country in the discussions, to be responsible players at COP, which let me remind you is one vote, one country. One veto, one country. We would be laughed out of the room as irresponsible activists.”

At the same time, “we really, really need to work with completely focusing our energies on producing something in this COP 27 something that is tangible,” Rehman’s colleague Nabeel Munir, the lead negotiator for the G77+China bloc, told Bloomberg. “Something that we can take home and tell our people that we’ve been able to achieve something.”

So far, some of the shifts on loss and damage at this COP have included about $300 million in new funding pledges for a variety of loss and damage initiatives, pressure on India and China to contribute to eventual funding program, and a proposal from Barbados Prime Minister Mia Mottley that would see the world’s biggest polluters compensate smaller countries for loss and damage. One concern about the funding announced so far is that the lion’s share is devoted to the Global Shield, an insurance-based program led by Germany and the V20 bloc of vulnerable countries that would be tailored to individual countries’ needs and pay out quickly, but would not be suitable for all forms of loss and damage.

“It’s all voluntary, small bits of money,” said Rachel Cleetus, climate and energy policy director at the Union of Concerned Scientists, adding that the approach leaves out the biggest climate impacts that are ultimately uninsurable. “When you’re talking about sea level rise gobbling up land, what are you insuring at that point?”

German officials acknowledged to E&E News that Global Shield isn’t a comprehensive solution, but maintained it’s still a useful contribution.

“It is not a kind of tactic to avoid formal negotiations on loss and damage funding arrangements,” said Development Minister Svenja Schulze. “We need a broad range of solutions and respective funding for tackling loss and damage, including for loss and damage for slow onset processes and non-economic damages.”

Egypt Takes the Blame

It isn’t unusual for UN climate negotiations to continue beyond their scheduled close, and a poor or uncertain outcome at a late stage in the process doesn’t necessarily mean the conference will fail. But the problems to date at this year’s COP have been severe even by COP standards, and the pre-emptive blame for that failure has been falling on the host country.

The first week of the conference saw a constant drumbeat of concern over Egypt’s abominable human rights record and onsite logistics so poorly organized that it was difficult (and occasionally intensely unpleasant) for participants to do their work. The second week saw COP President Shoukry criticized for being absent from the process and hands-off in his approach.

“To be an effective COP president, you have to be clear on what you want to achieve,” Pulgar-Vidal said. But “That has not been clear this COP.” Instead, “we are suffering from a lack of clear vision.”

The Egyptian Presidency “got off to a slower start, and all the big negotiating issues are still on the table,” Meyer said. “So they are a little behind the curve and playing catch-up to try to get an acceptable outcome.”

Last year, an early outline of the cover decision was deemed “non-sensical” for its failure to mention energy or fossil fuels, but it at least appeared five days before the conference was due to close, in time to serve as a catalyst for intensive debate and negotiation.

But that timing was only possible because working groups had begun sorting through the “real crunch issues” weeks in advance, Meyer said. This year, four of the five working groups were only appointed earlier this week.

While the main blame for this year’s process is falling on the Egyptian Presidency, Meyer acknowledged that negotiating countries bear some of the responsibility for the slow pace. “Clearly, waiting late in the game to get going on the cover text and engaging ministers was the presidency’s decision,” he told Bloomberg. “But part of it is the games that are being played by other countries—both developed and developing countries in this process—to take negotiating hostages and hold their cards until the very last minute.”

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