Cop27: EU agrees to divisive ‘loss and damage’ fund

The European Union has agreed to a key demand from the developing world regarding financial support for poor countries hit hard by the impact of climate change.

On the final day of the Cop27 UN climate summit in Egypt, Frans Timmermans, vice-president of the European Commission, proposed that the EU establishes a “loss and damage” fund that would address the financial impact of extreme weather on poor countries.

The G77 coalition of 134 developing countries has made the establishment of such a fund a core demand at this year’s climate summit, but the topic has proven divisive.

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Timmermans said he was initially “reluctant” to give the go-ahead, suggesting that it could be more efficient and effective to progress with “existing instruments” for climate financing. But, he added, since the G77 nations “are so attached to a fund, we have agreed”.

One G77 negotiator told The Guardian that they were not impressed with the EU’s proposal. “Of course, it’s not a breakthrough,” they said. “[The EU is] 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.”

Yamide Dagnet, director for climate justice at the Open Society Foundations, said clarity was needed on the EU’s definition of “vulnerability”. Its proposal lays out that only the “most vulnerable countries” should benefit from the fund. This begs the question of “who is included and who is excluded into this framing”, she added, “which could limit the benefits of the fund”.

There are also questions over which wealthy countries will pay into this fund. Timmermans is hoping to expand the number of contributing countries to include major polluters like China, a country he described as “one of the biggest economies on the planet with a lot of financial strength”.

According to the BBC, the US does not like the concept of a loss and damage fund, favouring instead a “‘mosaic’ of financial arrangements”.

The idea of “loss and damage” compensation – otherwise known as climate reparations – has been under debate since UN-backed climate talks began in the mid-1990s.