The 'only success' from COP27 'light on details'

A pot of money for developing nations affected by climate disasters has been three decades in the making. 

A pot of money for developing nations affected by climate disasters has been three decades in the making. 

Developed nations have finally agreed to put money into a “loss and damage” fund that would be paid out to poorer countries most affected by, but least responsible for, climate change. 

A three-decade push for the establishment of this fund came to an end at 3am local time on Sunday when the president of the COP27 struck with his gavel, making an agreement on what is considered the biggest success of COP27. 

Under the proposal, developing nations would expect about $US2 trillion a year from countries like the UK and the US, and possibly Australia, as well as international financial institutions. 

As a form of climate change reparations, developing nations would be granted the money when they suffer climate disasters like fires, floods, droughts, or famines.

"It’s a success for the conference and the only success of the conference. There wasn’t a lot else (in the way of successes) that I can discern," Director of ANU Institute for Climate Mark Howden said.

History was made today at #COP27 in Sharm El-Sheikh as parties agreed to the establishment of a long-awaited loss and damage fund for assisting developing countries that are particularly vulnerable to the adverse effects of climate change. pic.twitter.com/spmWVUjTva

— COP27 (@COP27P) November 20, 2022

Scarce on details

It is not yet clear which countries will pay, how they will pay, or how much. It is also not clear which countries will receive the money and when.

There is debate around countries such as China and Saudi Arabia, the world's largest greenhouse gas polluted and world's largest exporter of oil respectively, which are classed as 'developing' but are among the biggest carbon emitters. The European Union and the US have demanded China contribute to the fund, rather than benefit from it, but China is not ready to agree to it.

Professor Howden said it would be the "logical position" that China and other large developing nation emitters contribute to the loss and damage fund.

"Politics might count against it but it's consistent with the evidence that they are causing huge carbon net costs."

The fund won't get off the ground until COP28, held in the United Arab Emirates in 2023. Next year, a "transitional committee" will draw up recommendations to then be adopted at the summit. 

Which countries are likely to receive compensation?

The money will likely go toward the most vulnerable nations, including Pakistan, African countries including Nigeria, Pacific Island nations like Vanuatu, and other island states like the Maldives, which are under threat of rising sea levels.

It is expected the money will be granted on a case-by-case basis such that if a country in the Caribbean is badly hit by a hurricane, funds would be allocated to support them.

Why has a "loss and damage" fund taken so long to establish?

A compensation fund was first suggested by Vanuatu in 1991. 

Developed countries have avoided these agreements in the past because it could have opened them up to legal action.

At Copenhagen in 2009, it was agreed that developed states would provide $100 billion per year in climate finance to developing nations by 2020, but they failed to make good on this promise.

Melbourne Climate Futures Deputy Director Kathryn Bowen said, given this failure, she was "reserved" about how the fund would be implemented.

"Will it be the same for the loss and damage fund, which goes even further and delves into new territory?"

"Until we see the details - how it will play out, how the funds will be dispersed, who makes the decision, who receives and provides the money, there's a lot of detail we don't know yet - I'm positive but a little reserved," Professor Bowen said.

Yet Professor Howden was more optimistic this one "would stick", saying the fund was agreed upon by a full conference of parties, and there would be significant consequences if countries were to go back on it.

How did Australia contribute?

The Albanese government supported the loss and damage fund being put on the agenda for the COP27, which happened only a few weeks before the Summit commenced.

Australia’s climate change minister Chris Bowen was around the negotiating table and Australia has agreed to the fund.

"We can't say just yet (whether Australia put money into the fund) but that's the expectation given we agreed to the fund and the principles around the fund is that developed countries contribute to it," Professor Bowen said.

The fund will presumably be a big feature in Australia’s bid for COP31 in 2026. 

"More broadly (at the summit), Australia is now being seen as a government that can play a critical part in terms of negotiations. They didn't play a large part around the loss and damage fund, but as a whole, we were called on to share our leadership particularly given our important role in the region." Professor Bowen said.

“Loss and damage” fund a success, COP27 a failure?

Not a lot has changed since COP26. 

The summit did not agree to tougher cuts to carbon emissions despite CO2 emissions continuing to grow. Also, a plan to phase out fossil fuel production was blocked.

The target for future warming will remain at 1.5C, which has drawn criticisms from experts. President of COP26 Alok Sharma said the “pulse of 1.5 degrees was weak” a year ago in Glasgow and “unfortunately it remains on life support”.

As economist @nickihutley, who's in Egypt, put it:

"We are creating a bill we can’t pay for."

"Unless we immediately accelerate the transition from fossil fuels to renewable energy, then no amount of funding will be able to address the loss and damage that will result.

— Climate Council (@climatecouncil) November 20, 2022

While COP27 urged the need for more climate finance and referred to a clean and healthy environment as "a human right", there were "no significant steps forward" beyond the loss and damage fund. 

In some areas, the COP27 went backward, Professor Howden said.

"The Glasgow text included phasing out of coal which was watered down and the text associated with phasing out of fossil fuel subsidies was watered down," he said.

"The text also markedly weakened the Glasgow COP26 language to accelerate the phasing out of coal by instead referring to the phase down of unabated coal power, thus leaving a major loophole for coal producers which could significantly delay emission reduction."