Photo: Xinhua

Industrialized nations have not delivered on their promise to provide vulnerable states with $100 billion by 2020 to fight the impact of climate change related to carbon emissions, largely produced by developed states. Will a clear mechanism of compensation be established at COP27, or will it be all lip service again?

The 2022 United Nations Climate Change Conference, also known as the Conference of the Parties of the UNFCCC (COP27), kicked off on November 6 in Sharm el-Sheikh, Egypt, with participants of the event agreeing on Sunday to discuss whether wealthy developed countries should compensate vulnerable states for climate-related disasters.

"Loss and damage" is a general term used by UN climate negotiators to refer to the impact of developed nations that have emitted most of the carbon dioxide historically fuelling climate change, on poorer nations that have not contributed significantly to the problem, but nonetheless suffer from it.

Loss and damage financing envisages aiding countries in their recover from climate change's adverse impact and also covers the effects of climate change, which are not avoided by mitigation, adaptation, and other measures, such as disaster risk management.

The list of industrialized nations legally obliged to provide climate finance under the UN climate convention comprises 24 economies (including the G7), collectively called "Annex II" countries.

According to the World Resources Institute, over four billion lives have been impacted and $2.9 trillion lost to disasters, most of which are attributable to extreme weather events, since 2000. Moreover, it is estimated that the economic cost of loss and damage in developing countries will be between $1-1.8 trillion by 2050, according to the World Economic Forum (WEF) .

At the close of COP26 in Glasgow in 2021, developing nations called for the creation of a loss and damage Finance Facility, through which financing could be channeled to the world's most vulnerable communities. However, rich countries, including the US and EU, fell short of establishing funding mechanisms: instead, they agreed to launch the Glasgow Dialogue on Loss and Damage, which would focus on discussing possible funding arrangements.

The first session of the forum took place in June 2022 in Bonn, Germany. Developing countries again raised the alarm over the urgency of creating a finance facility to deliver aid to those suffering from climate change-related disasters. They further argued that existing mechanisms, such as the Green Climate Fund (GCF), the Global Shield, InsuResilience, and the UN Office for Disaster Risk Reduction, are inadequate for funding "loss and damage" needs.

The Group of 77 (G77) - a coalition of 134 developing countries, designed to promote its members' collective economic interests - and China, together representing over five billion of the world's population, insisted on including the issue of funding arrangements for loss and damage in the agenda of the November COP27.

Industrialized countries don't walk the talk

The concept of loss and damage first emerged during the global climate negotiations in 1991, with a South Pacific Ocean nation Vanuatu proposing the establishment of an international insurance pool to compensate small developing island countries for the effects of sea-level rise.

The term was next mentioned in the negotiated text of the "Bali Action Plan" at COP13 in Bali in 2007.

At the COP15 climate summit in 2009, rich countries committed to providing $100 billion for climate reparations to developing states by 2020 to help them curb carbon dioxide emissions and adapt to climate change. However, the target was missed. According to Carbon Brief, a UK-based investigative journalism website, the US should have been paying nearly $40 billion towards the $100 billion climate-finance target in 2020. Still, the US actually gave only $7.6 billion (or 19% of its fair share) in 2020.

Likewise, Canada, Australia, and the UK gave 37%, 38%, and 76% of their fair share, respectively. Even though Germany, France, and Japan "provided proportionally more than their contribution to historical warming," according to the website, much of their finance was in the form of loans rather than grants.

Developed countries' failure to deliver on their commitments prompted the G77 to actively campaign for loss and damage compensation.

Prior to the November 2022 summit in Sharm el-Sheikh, Wael Aboulmagd, the Egyptian diplomat in charge of running the negotiations at the COP27, lamented the fact that industrialized nations keep making positive commitments on climate change, but deny them later.

"Political statements and pledges are made, and commitments to the global effort are made in front of the cameras, but in the negotiating room we are back to the adversarial approach where 'I need to get every single thing or I'll hold [up] progress,'" he told reporters.

Symbolically, the COP27 is taking place against the backdrop of catastrophic flooding in Pakistan and Nigeria, and record droughts in the Horn of Africa.

Compensation for poor nations: too little, too late

Meanwhile, the British press reported on Monday that on November 6, UK negotiators backed a last-minute agreement to address loss and damage issues during COP27.

UK Prime Minister Rishi Sunak pledged £65.5 million ($75.12 million) for green technology in developing countries, particularly Kenya and Egypt. According to the UK government's website, Britain will also launch a new Forests and Climate Leaders' Partnership and commit more than £150 million ($172.16 million) to protecting rainforests and natural habitats, including the Congo Basin and Amazon.

Still, No 10's pledge raises two issues: first, the proposed sum appears to be too little, too late, given that the $100 billion target has not been met since 2020; second, the UK is currently struggling to reduce the "£60 billion ($68.7 billion) financial black hole" in its budget in order to bring the country's economy back on track.

When it comes to the US, John Kerry, President Joe Biden's climate envoy, challenged the idea of compensating vulnerable states in September 2022: he particularly claimed that it was more important to focus on securing financing for adapting to the future impacts of climate change. However, in October 2022 he changed his tune by saying that Washington was open to seeking middle ground on the loss and damage issue.

"We believe we have to step up, and we have a responsibility. We accept that," Kerry told reporters, falling short of specifying what exact commitment or financial aid package the US could offer to developing countries.

In addition to that, the US climate czar warned developing nations against making rich countries "liable" for not paying their fair share. According to Kerry, it is "going to be a problem for everybody, not just for us."

The US mainstream media say that senior US officials believe that negotiators could set up a framework for discussion on any special financing mechanisms at the COP27 summit and put off talks for an actual deal for two years.

Among other developed states, Denmark offered specific loss-and-damage funding of $13.1 million in September 2022, while German Foreign Affairs Minister Annalena Baerbock signaled that Berlin backs discussions on the loss and damage issue.

Meanwhile, in September 2022, UN Secretary-General Antonio Guterres stressed that the solution to the loss and damage matter could not be delayed further:

"Loss and damage are happening now, hurting people and economies now, and must be addressed now," he said. "This is a fundamental question of climate justice, international solidarity and trust."

Remarkably, at the time, as G7 nations appear to be scrambling to find money for climate compensation, they are funneling billions of dollars' worth of weapons to Ukraine. According to the Germany-based Kiel Institute for the World Economy, the US, EU, and several other countries committed a total of €93.73 billion ($93.62) in military, financial, and humanitarian aid to Ukraine between January and October 2022.