EU climate finance proposal upends COP27 talks

Neither China nor the US are thrilled with a last-minute EU idea to compensate countries for loss and damage from climate change.

Climate talks were thrown into disarray by a surprise proposal from the European Union to send financial aid to vulnerable nations by getting countries including China and the U.S. to pay up.

That's setting off a power struggle among the world's top three economies which are also the top three greenhouse gas emitters as the COP27 climate summit runs into its final hours.

The EU move deepened schisms with China — which insists on being treated as a developing country when it comes to paying for climate change. The United States, which has refused to offer details about where it stands on climate aid, was silent on the EU plan.

The issue — known as compensation for loss and damage — has been the focus of this year’s negotiations.

“We see this as a climate justice issue and if this continues to be kicked down the road we will see it as justice denied,” said Sherry Rachman, environment minister of Pakistan, where record-breaking floods this year cost the country more than $30 billion. “Vulnerability should not become a death sentence because that is what many economies and countries and people are facing.”

This year’s talks on the Red Sea come at a time of political and economic turmoil and rising inequality in the face of more extreme climate-fueled disasters. That has hardened countries’ positions on issues like climate aid, threatening agreement in a process that depends on consensus.

The impromptu proposal from the European Union Thursday night for a loss and damage fund earned tepid support from some countries — and silence from others.

It would create a dedicated fund for the most climate-threatened countries that draws on a “broad donor base” and a “mosaic of solutions,” including levies on air travel, shipping and fossil fuels, said EU climate chief Frans Timmermans.

It also seeks steeper emissions cuts from major economies to help stave off disasters.

“The most vulnerable countries will push for his offer as they want a loss and damage finance fund and they want more emissions reductions so they can mitigate the harm they suffer today and the damages they’ll face ahead,” said Jake Schmidt, director of the international climate program at the Natural Resources Defense Council.

A large negotiating bloc at the talks is comprised of 134 countries that range from small-island nations to emerging economies like China.


Aiming at china


The EU attached a rider to its proposal that sought to draw funding from big emerging economies like China. European and American officials have insisted that it is now time for China, the third-largest historical emitter of greenhouse gases and the largest today, to be obligated to contribute funds for climate aid.

China responded to the EU proposal by saying it wasn’t time to rewrite the Paris Agreement.

On Friday, the Egyptian government hosting the talks laid the blame for stalled progress on developed countries, saying they had failed to pledge as much support to various climate funds as they did last year.

“It doesn't help,” said a senior Egyptian official, adding that the “mood in the room” had continually returned to issues of financial delivery.

Countries getting pummeled by the impacts of a warming planet say the climate talks will be a failure if there's no progress on loss and damage funding.

“If you can get agreement on the loss and damage funding piece, I think everything else falls into place,” said Alden Meyer, a senior associate for climate think tank E3G.

The EU proposal strikes at the heart of the geopolitical divide within climate politics. China relies on a 1992 convention that absolves a list of countries defined as developing from any obligation to pay into climate funds. The EU and U.S. succeeded in blurring that line in the 2015 Paris Agreement.

With China now the world's second-largest national economy, German Foreign Minister Annalena Baerbock said on Thursday that a new tool should not be “shaped according to the reality of 40 years ago, but that it is designed for the reality of the 40 years to come.”

The proposal is the EU's “final offer” on the issue of loss and damage, Timmermans told reporters Friday morning.


Pushback


The senior Egyptian official said there was broad support for the creation of a fund, but said the EU plan is unworkable. “You cannot say, 'Ah I'll give you a fund, but you need to do 1-2-3-4-5-6-7.' You are not giving anything,” he said. “It was obvious … the conditions that were put forward were not acceptable by some.”

Delegates from the U.S., traditionally the strongest opponent of climate finance, were silent on the EU announcement.

They were “not amused, I understand,” said one EU official, who spoke on condition of anonymity. When Timmermans was asked if the U.S. could support the proposal, he said: “I don’t know at this stage.”

Tuvalu Finance Minister Seve Paeniu said the plan left the U.S. with “no option now” but to back consideration of a fund.

“The U.S. might end up being isolated from the entire conversation and therefore has no other choice but to come on board,” he told reporters Friday.

Money for loss and damage isn’t the only contentious issue.

A draft text released Friday largely reflected decisions made at last year’s climate summit in Glasgow, Scotland, by reiterating a call to phase down coal, limit global temperature rise and “rationalize” inefficient fossil fuel subsidies rather than phase them out.

“This does need to be somewhat stronger,” said David Waskow, head of international climate at the World Resources Institute. “It would be important to get to the floor of Glasgow, but that really should be a floor.”

Ministerial discussions will continue throughout Friday, but hopes of reaching an agreement before the weekend are fading fast. Meyer from E3G said a lot of countries would be calling for the Egyptian presidency to include language in the text for the phaseout of all fossil fuels, not just coal.

With many divides remaining, U.N. Secretary-General António Guterres flew to Egypt Thursday to try and salvage the talks.

“I am here to appeal to all parties to rise to this moment and to the greatest challenge that humanity is facing,” he said from one of the plenary halls. “The world is watching and has a simple message to all of us: stand and deliver.”

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