Organizational Governance

COP27 Yields Landmark Deal to Compensate Developing Nations for Climate Damage, But Backpedals on Phase-Out of Fossil Fuels

COP27 ended with an agreement to create a funding facility to compensate vulnerable nations for ‘loss and damage’ from climate disasters; but weakened language around the phase-out of fossil fuels opens a dangerous loophole that could threaten decarbonization before it’s too late.

Published 2 years ago | About a 6 minute read

Image: Gugum Gumilar

In the early hours of Sunday morning (November 20), more than 36 hours after its scheduled end, COP27 finally came to a close with the formation of a landmark agreement on a new funding deal that will see developed nations finally helping compensate developing countries for their growing losses and damages due to climate change.

“This COP has taken an important step towards justice. I welcome the decision to establish a loss and damage fund and to operationalize it in the coming period,” UN Secretary-General António Guterres said in a video message on the overdue conclusion of the conference, underscoring that the voices of those on frontlines of the climate crisis must be heard.

During this COP, developing countries once again made strong and repeated appeals for the establishment of a loss and damage fund, to help compensate them — the countries that are now the most vulnerable to climate disasters, yet who have contributed little to the climate crisis. As Adeline Stuart-Watt — a Policy Fellow (Adaptation and Resilience) at the Grantham Research Institute on Climate Change and the Environment — explained in a recent post, climate-vulnerable developing countries have been calling for finance and technical support to minimize and address their loss and damage from climate change for two decades. But developed countries have viewed providing finance for ‘Loss and Damage’ as a major red line — in case it is seen as an acceptance of legal liability.

“Clearly this will not be enough, but it is a much-needed political signal to rebuild broken trust,” Guterres underscored, stressing that the UN system will support the effort every step of the way.

Ahead of action on the texts, COP27 President Sameh Shoukry, who is also the Foreign Minister of Egypt, said that the draft decisions were “a gateway that will scale up implementation and will enable us to transform to future of climate neutrality and climate-resilient development.”

After missing their Friday night deadline, exhausted delegates were finally able to reach conclusions on the most difficult items of the agenda — including a loss and damage facility expected to commence next year (with a commitment to set up a financial support structure for the most vulnerable by next year’s COP), a post-2025 finance goal. Another new development is a so-called mitigation work program that would reduce global greenhouse gas emissions (GHGs) faster, catalyze impactful action, and secure assurances from key countries that they will take immediate action to raise ambition and keep us on the path towards 1.5°C.

Yet, while agreement on these issues was seen as a welcome step in the right direction, there was little forward movement on other key issues — particularly on the phasing out of fossil fuels, and tightened language on the need to limit global warming to 1.5°Celsius.

Not only that, but softer language was introduced that includes “low-emissions” energy alongside renewables as the energy sources of the future — a significant loophole, as the vague term could be used to justify new fossil fuel development, against the clear guidance of the IPCC and the International Energy Agency. The final text largely keeps to what was officially stated last year at COP26 — aside from a “phase-out of fossil fuels” being changed in the final hours to a “phase-down,” significantly weakening the text.

The fight against climate change continues

Guterres reminded the world of the remaining priorities regarding climate action — including continued efforts to reduce GHGs and keep alive the Paris Agreement’s 1.5° Celsius limit, and pull humanity “back from the climate cliff.”

“We need to drastically reduce emissions now — and this is an issue this COP did not address,” he lamented, saying that the world still needs to make a giant leap on climate ambition and end its addiction to fossil fuels by investing “massively” in renewables.

He also reiterated the importance of changing the business models of multilateral development banks and international financial institutions: “They must accept more risk and systematically leverage private finance for developing countries at reasonable costs,” he said.

Our planet is still in the emergency room

The UN chief said that while a fund for loss and damage is essential, it’s not an answer if the climate crisis washes a small island state off the map — or turns an entire African country into a desert. He renewed his call for just energy transition partnerships to accelerate the phasing out of coal and scaling up renewables and reiterated the call he made on his opening speech at COP27: a climate solidarity pact.

“A Pact in which all countries make an extra effort to reduce emissions this decade in line with the 1.5° goal. And a Pact to mobilize — together with international financial institutions and the private sector — financial and technical support for large emerging economies to accelerate their renewable energy transition,” he explained, underscoring that this is essential to keep the 1.5° limit within reach.

‘I share your frustration’

Guterres also sent a message to civil society and activists which had been so vocal since the conference’s opening day: “I share your frustration.”

Guterres said that climate advocates, particularly young people, have kept the agenda moving through the darkest of days and they must be protected: “The most vital energy source in the world is people power. That is why it is so important to understand the human rights dimension of climate action.”

Echoing this sentiment, Kenyan environmental youth activist Elizabeth Wathuti, said: “COP27 may be over, but the fight for a safe future is not. The interconnected food, nature and climate crisis are right now affecting us all — but the frontline communities like mine are hardest hit. How many alarm bells need to be sounded before we act? It is now more urgent than ever that political leaders work to agree a strong global deal to protect and restore nature at the upcoming Global Biodiversity Summit in Montreal."

Time is running out

In his closing remarks, UNFCC Executive Secretary Simon Stiell said: “This historic outcome does move us forward and it benefits the vulnerable people around the world. [But] there is no need in putting ourselves through all that we have just gone through if we are going to participate in an exercise of collective amnesia the moment the cameras move on,” and called for all Parties and delegations to hold each other accountable for these new decisions.

His remarks hit on a widespread cynicism that has developed around the COP meetings — that they produce pronouncements and pretty promises, but little in the way of much-needed changes in policy and process. Case in point: progress toward the Paris Agreement, which the UN recently says remains “insufficient” seven years later.

And as Guterres reminded the world in his closing video, “We are already halfway between the Paris Climate Agreement and the 2030 deadline. We need all hands on deck to drive justice and ambition.”