Countries at UN Climate Talks Agree to ‘Loss and Damage’ Fund to Pay for Poor Nations

Egypt's Foreign Minister Sameh Shukri, heads the closing session of the COP27 climate conference, at the Sharm el-Sheikh International Convention Centre in Egypt's Red Sea resort city of the same name, on Nov. 20, 2022. Joseph Eid/AFP via Getty Images

At the United Nations COP27 summit in Sharm el-Sheikh, Egypt, representatives from nearly 200 countries have agreed to set up a “loss and damage” fund intended to help vulnerable countries cope with natural disasters.

The agreement early Sunday will establish a fund in response to “loss and damage associated with the adverse effects of climate change.”

The deal was regarded as a win for poorer nations that have long called for monetary support after having faced worsened floods, droughts, heat waves, famines, and storms.

The United Nations climate agency published a draft proposal for the deal on Saturday, which said that parties would “Decide to establish new funding arrangements for assisting developing countries that are particularly vulnerable to the adverse effects of climate change, in responding to loss and damage, including with a focus on addressing loss and damage by providing and assisting in mobilizing new and additional resources, and that these new arrangements complement and include sources, funds, processes, and initiatives under and outside the Convention and the Paris Agreement.”

The “loss and damage” fund is largely intended to benefit the most vulnerable nations. But middle-income countries severely affected by natural disasters could potentially also receive aid.

The draft proposal states that a “transitional committee” would make recommendations for representatives of the countries to then review and adopt at the next climate summit, COP29, in November 2023.

Those recommendations would cover “identifying and expanding sources of funding,” which refers to deciding which countries should pay into the new fund.

The fund would initially seek to receive funding from developed countries, as well as other private and public entities, including international financial institutions.

China—the world’s biggest emitter of carbon—and other major emerging economies would not initially be required to contribute to the fund, but the option would be negotiated in the future, according to the agreement Sunday. This is a key request by the European Union and the United States; the two had argued that China and other large polluters currently classified as developing countries have enough money and are also obliged to pay into the fund.

According to the proposal, the transitional committee “shall have 24 members, to be nominated no later than 15 December 2022, comprising 10 members from developed country Parties and 14 members from developing country Parties.”

In particular, the group will be composed of three members from Africa, including a representative of the President of COP27; three members from Asia and the Pacific, including a representative of the incoming President of COP28; three members from Latin America and the Caribbean; two members from small island developing States; two members from the least developed countries; and one member from a developing country Party not part of the other categories.

After the decision on the fund was approved, talks were put on hold for 30 minutes so delegates could read texts of other measures they were to vote on.

The Associated Press and Reuters contributed to this report.