Climate crisis talks resume on funding for poorest countries

World leaders will reconvene in Abu Dhabi before UAE’s Cop28 after talks broke down two weeks ago

Governments will meet this weekend for a last-ditch attempt to bridge deep divisions between rich and poor countries over how to get money to vulnerable people afflicted by climate disaster.

Talks over funds for “loss and damage”, which refers to the rescue and rehabilitation of countries and communities experiencing the effects of extreme weather, started in March but broke down in rancour two weeks ago.

Countries have reconvened in Abu Dhabi for a final two-day meeting, ending on Saturday night, to try to resolve the outstanding problems ahead of the UN Cop28 climate summit, which begins in the United Arab Emirates at the end of this month.

Forging a compromise this weekend is viewed as essential to making progress on loss and damage at Cop28, as campaigners fear if there is not broad agreement before the summit the plans will become bogged down in the complex Cop negotiations.

Harjeet Singh, the head of global political strategy at Climate Action Network International, said: “The meeting is a make-or-break moment that will determine the success or failure of the new loss and damage fund. We must bridge the trust gap, operationalise the fund, and provide the necessary support to those who need it most. We cannot afford to fail as the lives and livelihoods of millions are at stake.”

But there remains a chasm between developed countries, who want cash contributions to be voluntary and to come from large emerging economies such as China and Gulf petrostates, as well as traditional donors such as the US and Europe, and poor nations who are concerned over how the fund will be governed and how they will be able to access the rescue funds they desperately need.

All of the world’s governments agreed last year at Cop27 in Egypt that a loss and damage fund should be set up – a historic first step that developing countries had been seeking for more than a decade. Poor countries have contributed least to the climate crisis, with tiny carbon footprints compared to the rich world, but they bear the brunt of extreme weather around the world, owing to geography, the basic state of their infrastructure and a lack of resources.

The floods that devastated Pakistan just over a year ago, and the drought that brought crippling hunger to the horn of Africa, are two examples of extreme weather driven and exacerbated by the climate crisis, where loss and damage funds could have helped vulnerable people in dire need. Disasters such as these are forecast to become much more frequent as global temperatures rise further, and hundreds of billions of dollars a year will be needed to repair the damage.

The main areas of contention are over how the fund should be governed, who should contribute to the fund, and who should be allowed to access the cash.

Some rich countries, including the US, have pushed for the fund to be hosted by the World Bank, arguing that it provides a ready-made structure to enable cash to be gathered and flow as quickly as possible. Setting up a new fund from scratch would be slower, more cumbersome and costly, they contend.

But many campaigners reject this, suspecting that rich countries favour the World Bank as it gives them, as large donors, more control. They point to the World Bank’s overheads – at least one similar fund has been charged 24% of its funds as a “hosting fee”, which pays for the bank’s bureaucracy, including its staff pension funds.

Accessing World Bank funds is slow and difficult, and much of the finance provided comes in the form of loans rather than grants. Many also have longstanding grudges against the Bank for its failure to focus on climate finance, which led to the ousting of the Trump-appointed president David Malpass earlier this year.

Brandon Wu, director of policy and campaigns at the charity ActionAid, said: “These positions [by rich countries] are absolutely unacceptable for a fund that is meant to support developing countries and be responsive to the needs of vulnerable communities. Developed countries are negotiating with their own narrow interests in mind, rather than trying in good faith to design a fund that would be the most effective possible option for supporting vulnerable people.”

The Guardian understands that having the World Bank host the fund is not a negotiating “red line” for the US, and the UN and some other parties believe the question of where to locate the fund will be solved. “This is not the main issue,” said one developing country representative closely involved in the talks.

The question of who should access the fund could also be close to resolution, as countries agree that the most vulnerable in developing countries should be favoured. Some governments believe the fund should be open to all countries that were classed as developing in 1992, when the UN Framework Convention on Climate Change, parent treaty to the 2015 Paris climate agreement, was signed.

This could lead to countries such as Saudi Arabia or UAE, host of this year’s Cop, being eligible, despite their high per capita income and carbon footprint. However, it is likely that a definition of “most vulnerable” would effectively focus on the least developed countries.

The biggest fight is likely to be over the sources of funding for loss and damage. Campaigners want rich countries to pay for their “historic responsibility” for emissions. This would put the US on the hook for the lion’s share of funding, which is difficult for the White House as the Republican-controlled US Congress is likely to oppose attempts to increase climate finance.

The US and other rich countries would like to broaden the sources of funding, potentially to include the proceeds from selling carbon offsets, and contributions from the private sector. Groupings of developing countries have also suggested funding mechanisms such as a frequent flyer levy that would target well-off consumers in rich and poor countries, or a charge on shipping, which is a big source of emissions. Gordon Brown, the former UK prime minister, has floated a windfall tax on fossil fuel profits.

As many of these sources as possible are likely to be needed, in some form, as the sums required are likely to reach hundreds of billions of dollars. But the crucial tension is over the status of countries such as China, India, South Korea and other large emerging economies, and petrostates such as Saudi Arabia, Qatar, Russia and the host country UAE. These countries were all classed as developing in 1992 and therefore had no requirement to provide funds to poorer countries.

But they are all now major emitters – emissions from China, India and Russia are now so large they approach the cumulative emissions of European countries – or have benefited massively from the sale of fossil fuels. All have much bigger economies than the vulnerable countries who will benefit from the loss and damage fund.

Amina Mohammed, the UN deputy secretary general, said: “It’s a whole new era, not just for climate, for any funding today it is about broadening the base. In this case, there will be tensions of those who feel that there is a historic lean on that and so therefore certain parties will have to foot the bill. And others think that, no, we’ve gone past that now, and we’re going into the future so we need to broaden the base and resources.”

Resolving this core tension will be hard, as campaigners made it clear they would resist any attempts to draw distinctions between the position of big economies such as China, and those of the smaller and most vulnerable nations. Lien Vandamme, a senior campaigner at the Centre for International Environmental Law, said China and the G77 group of developing countries would stand united and rich countries such as the US, the UK and the EU must front up cash. “[They] continue to deny their responsibility to pay for the loss and damage caused by their climate inaction.

“This is inexcusable and only a drastic change in wealthy nations’ approach to these talks will allow for the fifth meeting to achieve what the fourth could not. A failure to deliver will not make the communities whose rights are at stake and who are entitled to remedy go away.”