Intense disagreements over who manages and receives the money are threatening to derail a landmark agreement at last year’s COP 27 climate summit in Egypt—the decision to set up a loss and damage fund to help the world’s most vulnerable countries respond to climate impacts more severe than anyone can adapt to.
“A mission 30 years in the making has been accomplished,” Antigua and Barbuda Environment Minister Molwyn Joseph, chair of the Alliance of Small Island States (AOSIS), said almost a year ago, in the closing hours of the last round of UN climate negotiations.
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“The establishment of a fund is not about dispensing charity,” added Pakistan Climate Minister Sherry Rehman. “It is clearly a downpayment on the longer investment in our joint futures.”
But “countries left the details to be worked out later,” Agence France-Presse recalls. And with this year’s COP 28 conference just a few weeks away, a crucial two-day negotiating session in southern Egypt broke down Saturday, in a disagreement over whether the funds should be held by the World Bank or a new, independent agency.
That failure “is a clear indication of the deep chasm between rich and poor nations,” said Harjeet Singh, head of global political strategy at Climate Action Network-International. “Developed countries must be held accountable for their shameless attempts to push the World Bank as the host of the fund, their refusal to discuss the necessary scale of finance, and their blatant disregard for their responsibilities” under international climate agreements.
“Today’s disappointing outcome is a blow to communities… facing an unrelenting onslaught of climate impacts,” agreed Rachel Cleetus, policy director with the climate program at the U.S.-based Union of Concerned Scientists. “The United States and other rich countries seem more focused on evading or minimizing their responsibility than engaging in good faith negotiations.”
U.S. Power Grab
Developing countries attending the negotiations in Aswan were “outraged” by what they saw as a “U.S. power grab,” Climate Home News reports. “And rich-poor divides persisted on how to define the vulnerable’ groups eligible for funds and who gets to control spending.”
On Thursday, Pedro Luis Pedroso Cuesta of Cuba, chair of the G77+China negotiating bloc, told media that “at this late hour, a small group of nations responsible for the most significant proportion of the stock of greenhouse gases have tried to bargain potential support for a (loss and damage) fund on one side with eligibility and administrative arrangements.” Accepting that deal “would break the COP when we need the greatest internationalism and solidarity to solve climate and other global challenges,” he added.
The Cuban diplomat said he didn’t want to single out any particular country, but identified one negotiating team that arrived at the talks with the “fixed idea” that the World Bank should house the fund. “Since you’re asking,” he told reporters, “we have been confronted with an elephant in the room—and that elephant is the U.S.”
As far back as last year’s COP, some countries have been concerned that a new agency would be slow to set up, losing valuable time when the world’s most vulnerable are feeling climate impacts today. But “developing nations have argued that the World Bank is too slow, inefficient, unaccountable, and lacks the organizational culture to tackle climate change,” Climate Home says.
“It’s just a question of logic,” said Michai Robertson, lead finance negotiator for small island states. “Why is there this pressure to push it back to this institution that we need to reform, that was created in the ’40s by mostly colonial powers at the time?”
The other sticking point is developed countries’ preference to prioritize funding “based on vulnerability,” when climate vulnerability has not been clearly defined. “Developing countries fear that in practice ‘vulnerability’ criteria mean funds will be restricted to just the world’s least developed countries (LDCs) and small islands developing states (SIDS),” Climate Home explains. “The 46 LDCs are mostly in Africa and parts of Asia. Major nations like China, India, Brazil, Nigeria, and South Africa are neither LDCs nor SIDS.”
Climate Home has details on further disagreements over how funding should be allocated, as well as a decision that developing countries will hold the majority of seats on the fund’s board.
Finding the Dollars
Some of the discussions leading into the COP are homing in on where some of the required funding might be found.
A week before the meeting in Egypt, World Bank President Ajay Banga “called into question the vast amounts of money that governments spend subsidizing fossil fuels,” euronews.green reports. During the bank’s annual meeting in Marrakech, “Banga said the US$1.25 trillion (€1.18 trillion) that goes towards making fuel, fisheries, and agriculture cheaper every year is too much.”
“I’m not saying to get rid of all of those,” he said. “I consider some of those subsidies mission-critical to the social contract with the government and its citizens. But I don’t believe that $1.25 trillion qualifies.”
Earlier in the month, Kenyan President William Ruto and three other authors pointed to the bigger-picture issues poor countries must face before they can focus squarely on climate change.
“When poor countries are forced to default on their foreign debt, as Ghana and Zambia have done, they pay a heavy price,” Ruto wrote for the New York Times, along with African Commission Union Chair Moussa Faki Mahamat, African Development Bank President Akinwumi Adesina, and Global Center on Adaptation President Patrick Verkooijen. “Cut off from credit of any kind, spending on health, education, and dealing with the damaging effects of climate change comes to a juddering halt.”
Wealthy countries “often plead with us to invest in the kind of ambitious resilience projects we need to survive in a warming world,” they added. “But in Africa, we can’t fix the climate issue unless we fix the debt issue,” a burden that is “skyrocketing as a result of factors beyond its control: the aftershocks of the pandemic, rising fuel and food prices, higher interest rates, and climate catastrophes that weaken our economies and sap our ability to repay creditors.”
Those factors have Africa paying $50 billion per year in debt service charges that could go into essential climate resilience investments, like infrastructure that can withstand torrential rain and flooding. The. solution, the four authors say, is to rejig an 80-year-old global financial system that is now “outdated, dysfunctional, and unjust”, moves too slowly and incrementally to respond to today’s challenges, and discriminates against the poor countries for which it was originally meant as a safety net.
Politics of a Fossil Fuel Phaseout
In the lead-up to COP 28, pressure is building for an agreement to phase out “unabated” fossil fuels—installations that don’t have ever more tenuous carbon capture and storage (CCS) systems bolted on. Yesterday, 131 businesses with $987 billion in combined annual revenue urged COP delegates to “lay the groundwork to transform the global energy system towards a full phaseout of unabated fossil fuels and halve emissions this decade.” That would require “a global target of tripling renewable electricity capacity to at least 11,000 GW and doubling the rate of deployment of energy efficiency by 2030.”
Signatories to the letter, coordinated by the We Mean Business Coalition, included industrial giants like Danone, Heineken, Hewlett Packard, Iberdola, Ikea, Interface, Nestlé, Ørsted, SAP, Unilever, Vodafone, and Volvo. No Canadian companies appear to have signed on.
While the “exponential growth” of climate solutions has “made clean energy cheaper and more accessible than ever before,” the companies wrote, “global emissions continue to rise because we haven’t addressed the primary cause of climate change: the burning of fossil fuels.”
With companies “feeling the impacts and cost of increasing extreme weather events resulting from climate change,” the letter added, “we recognize the need to transition in a way that safeguards our future collective prosperity on a liveable planet. That means reducing our emissions, adopting clean solutions, and reducing our use of fossil fuels to limit global heating in line with the Paris Agreement’s ultimate goal of 1.5°C.”
It called on financial institutions to invest in the clean energy transition, fossil companies to set short- and long-term decarbonization plans, and governments to “set the enabling conditions, policies, regulations, and investments for a just clean energy transition.”
We Mean Business published the letter a week after African nations and India called on rich countries to move farther, faster in phasing out fossil fuels, relative to developing regions with often vastly lower historical emissions. African negotiators “want rich countries to stop greenlighting new fossil fuel production projects by 2030, while India is calling on them to go beyond net zero and start sucking carbon out of the atmosphere by 2050,” Climate Home writes.
Climate Home News contrasts those calls with the European Union’s pitch for global goals “like a tripling of renewable energy capacity by 2030 and a global phaseout of fossil fuels ‘well ahead of 2050’.”
The difference turns on the “common but differentiated responsibilities” that are a key principle in UN climate talks. “While many developed countries have restricted support for fossil fuel production projects abroad, major nations like the U.S., UK, Australia, and Norway have continued to approve oil and gas pumping at home and have not set end dates for fossil fuel production,” Climate Home explains. Through 2030, most of the world’s fossil production growth is expected to come “from developing—but not African—nations like Saudi Arabia, Russia, and India. The U.S., Canada, and Australia also plan to produce more oil and gas.”
That adds up to more than double the fossil fuel production in 2030 that would support a 1.5°C limit on average global warming, the United Nations Environment Programme’s Production Gap Report warned in 2021.
In response, the African Group of Negotiators is calling for “differentiated pathways” to a phaseout “where no further exploration of fossil fuels in developed countries is targeted well ahead of 2030, whilst affording developing countries the opportunity to close the global supply gap in the short term.”
A ‘Dour Outlook’ for COP 28
With the arguments and divisions that have stymied rapid progress at past UN climate conferences showing up again ahead of COP 28, risk management consultants DNV warned earlier this month that governments are “less likely than ever” to reach the 1.5°C, Axios reports. “Globally, the energy transition has not started, if, by transition, we mean that clean energy replaces fossil energy in absolute terms,” said DNV CEO Remi Eriksen.
The firm sees energy-related emissions peaking in 2024 but falling only 46% by 2050, so that average warming hits a likely 2.2°C by 2100.
The report “explores how rapid deployment of renewables and other climate-friendly tech is greatly slowing fossil fuel growth, preventing some of the worst future climate outcomes,” Axios writes. “But while coal has levelled off, clean sources have yet to reverse overall fossil growth—let alone start shoving emissions downward fast enough to keep the 1.5°C north star in view.”
Meanwhile, controversy and uncertainty are swirling around the location of next year’s United Nations climate summit, COP 29. It’s Europe’s turn in the UN rotation to host the event, but Russia is unwilling to see the conference convene in any European Union country. And as for the two other options, Armenia and Azerbaijan, “each is expected to veto the other, amid heightened tensions after Azerbaijan retook the breakaway region of Nagorno-Karabakh with a military operation last month,” Reuters reports.
Those dynamics have “left nations scrambling to find an alternative in time to organise the massive global event.”
With “no solution at the moment,” Bulgarian Environment Minister Julian Popov told the news agency, countries are now exploring “how to save COP” for next year. Options include hosting a series of smaller conferences in different Eastern European countries. And at one point a couple of weeks ago, petro-state United Arab Emirates offered to host for a second year in a row after controversially appointing the CEO of its state oil company, Sultan al Jaber, to chair this year’s talks.