The money fight that could ‘break’ the climate summit

“We’re at a breaking point,” warned Avinash Persaud, the lead negotiator for Barbados, after negotiations on how to set up the fund broke down last weekend. If countries don’t find a compromise in the coming days, “it will break COP. I feel that not enough people are sufficiently worried about that.”

Last year’s summit, known as COP27, yielded an agreement to set up a fund to pay for loss and damage, as the social and economic costs of climate change are known in U.N. jargon. That fragile consensus came after years of resistance led by the U.S., which has pumped more carbon dioxide into the atmosphere than any other country and has been wary of opening any legal avenue to compensation claims.

Yet as negotiations have started to drill down on the form the fund should take, and who should run it, what little progress has been achieved has been put on hold.

Governments tasked a 24-member, multi-country committee with making recommendations before COP28 begins on how the system should work. But the committee has struggled to find consensus on fundamental matters, such as how the fund is structured, who pays and who benefits. Even the name remains in question: The U.S. is pushing to call it the “Resilient Futures Fund,” while developing countries want a reference to loss and damage.

A series of meetings in Abu Dhabi this coming week may be the last chance to agree on key details before it risks complicating the main event in Dubai. But the mood among negotiators is glum.

Mohamed Nasr, chief negotiator for the U.N. talks’ outgoing Egyptian presidency, is warning that governments like the United States and the European Union could face legal claims for compensation if they don’t pledge cash for the fund’s coffers.

“If this fund ends up as an empty shell, this could revive the calls for liability, historical responsibility and compensation,” he told POLITICO.

A ‘retreat to volunteerism’

Talks on the fund have become increasingly fraught in recent weeks, and any threat to reopen the question of liability is likely to ratchet up tensions.

Developed countries like the U.S., responsible for the bulk of planet-warming emissions in Earth’s atmosphere, had long blocked efforts to even discuss loss and damage over fears that they could face legal obligations to pay reparations to countries hit by ever-intensifying climate disasters. To guard against such a possibility, they worked to insert language into past agreements, including the Paris accord, stating that loss and damage is not about liability and compensation.

After finally agreeing to a fund last year, the U.S. and the EU also insisted that wealthy emerging economies, such as the Gulf countries or China, should also be asked to pay. They’re also reluctant to sign up to any financial commitments or offer pledges before the fund is up and running.

EU climate commissioner Wopke Hoekstra told a panel in Brussels on Friday that a loss and damage fund was a priority for the bloc, but indicated that the Europeans would not offer money before the details are clear. “If there’s agreement on the setup and governance of the fund, I believe first pledges will be possible,” he said.

The United States has said all contributions should be voluntary and is pushing for a variety of sources beyond government contributions, such as philanthropies and so-called “innovative sources,” such as voluntary carbon markets. The Biden administration also faces a major political obstacle at home: With Republicans controlling half of Congress, putting any U.S. tax money into the fund would be supremely difficult.

Developing countries worry that without a commitment or acknowledgement of responsibility written into the system, the fund would depend on the charity of rich countries.

“The developed countries appear to want to retreat to volunteerism. Climate change has shown that to be a failed approach,” said Persaud, the Barbados negotiator, who co-chaired talks on funding sources at this month’s committee meeting.

Wealthy countries have yet to deliver on a 2009 pledge to deliver $100 billion a year in climate finance by 2020, a broken promise that has significantly undermined trust in climate talks.

“One of the ways in which developed countries can change the dynamic of the negotiations is by putting some money on the table,” Persaud said. “They need to come up with a number and say, if the fund is agreed, we will put in $X hundred million.”

Besides funding, the two other main roadblocks are how the money should be distributed among developing countries and where the fund should be hosted. What was meant to be the final committee meeting broke down in mid-October after the U.S. and other developed countries pushed for the fund to be folded into the World Bank, an institution they dominate as shareholders.

But both developed and developing country negotiators identified the issue of who should cough up the cash as the most difficult to solve as the committee meets again on Nov. 3.

An increasingly nervous COP28 presidency has also scheduled a last-minute ministerial discussion on loss and damage at Tuesday’s pre-COP meeting in Abu Dhabi. COP28 President Sultan al-Jaber — who also heads the United Arab Emirates’ state-owned oil company — said it was “essential” for the committee to come up with a set of recommendations in early November.

The size of the fund is also still under discussion. Developing countries, whose needs could easily reach trillions of dollars, have proposed an “initial commitment” of $100 billion a year by 2030, echoing the totemic climate finance sum.

That amount would be sourced not only from governments, Persaud noted. “I think that the landing ground is one which recognises that developed country aid budgets will not be the only sources, maybe not even the main sources in the end when we add innovative new sources, but recognises that they should take the lead,” he said.

Persaud described reopening the question of liability as unhelpful, and other negotiators also raised concerns that doing so could jeopardize the entire process.

But Nasr, the Egyptian negotiator, said developing countries had been willing to sidestep the issue of responsibility only as long as rich countries would eventually put money on the table.

At COP27, “there was a clear understanding that if we avoid liability and compensation and focus on delivery and solidarity, this would unlock the discussion and support,” he said.

“While the first part was agreed and delivered … developed countries are reluctant to put in the document that they will contribute and that there will be regular replenishment.”

A ‘non-starter’ for the U.S.

Liability is where Washington, in particular, draws a line. A draft proposal states that the new fund “is based on cooperation and facilitation and does not involve liability or compensation,” and the U.S. indicated it would walk away from talks if that paragraph was removed.

“The fact that we’re even having a discussion in here to take this language out is unacceptable to us,” said Christina Chan, the U.S. negotiator on the committee, during the meeting in mid-October. “It would be a non-starter, and if that is taken out, we don’t see a pathway to an outcome.”

Preety Bhandari, a senior adviser at the World Resources Institute, suspects that threats to reopen the issue are more of a negotiating tactic as countries vie to regain lost ground, in part by attempting to reinterpret what countries agreed to at last year’s climate talks.

“It’s like nothing is agreed until everything is agreed,” she said. “I know it’s a hackneyed phrase, but at this point in time if concessions are not being made on both sides then we seem to be moving towards a stalemate.”

The challenge is that everyone has a lot to lose if language on liability is revisited, Bhandari said.

Perhaps none more so than small island nations at risk from rising sea levels and destructive storms.

“The issue of justice and compensation is tricky,” said Aminath Shauna, the climate and environment minister of the Maldives, an island nation that holds one of the 24 committee seats.

She worries that revisiting language from the Paris Agreement — which specified that the accord does not “provide a basis for any liability or compensation” — could risk progress on getting a loss and damage fund up and running.

“We can’t be stuck here,” Shauna said. “I know I’m saying this as someone from one of the most vulnerable countries, but we have to move forward.”

Bhandari said it’s going to be critical that negotiators put forward recommendations at the upcoming committee meeting if the broader talks in Dubai are to succeed.

“If there is going to be a second failure,” she said, “it will make the COP a very tense scenario not only on this issue, but it will spill over to other issues as well.”

The talks on loss and damage gained a heightened emotional note on Sunday with news that Bangladeshi scientist Saleemul Huq had died. During a three-decade crusade that took in every U.N. climate conference, Huq was the most prominent, and sometimes lonely, voice calling for rich countries to pay to heal the unavoidable harm climate change would bring to countries like his own.

In a letter accepting an invitation to advise the COP28 presidency earlier this year, he told the UAE organizers: “If all you can say at the end of COP28 is that ‘progress’ has been made on the issue of funding loss and damage, that will be the kiss of death.”