COP27 summit agrees on landmark climate ‘loss and damage’ fund, but does little to encourage rapid cuts to fossil fuel use
An ambitious agreement to set up a landmark fund to compensate ‘loss and damage’ caused by climate change could save millions of lives and trillions of dollars in cost by reducing greenhouse gas emissions, but the agreement does little to encourage rapid progress and falls short of its target to reduce emissions by 40% by 2030.
A draft version of the agreement, agreed at COP27 in Poland on Tuesday and published on Wednesday, contains some ambitious targets for the new fund, but falls short of achieving its main goals. It also contains several important omissions, leaving the potential for its success uncertain.
The fund, if passed, would set up a mechanism to compensate countries suffering losses due to rising sea levels, wildfires and droughts, as well as the impacts of more intense storms. It would also set up a mechanism to ensure that developing countries are not unfairly short-changed when it comes to climate finance.
If fully implemented, the new fund could mean $80 billion (€59 billion) per year for the first phase, although the final figure still needs to be agreed – an area where the agreement falls short of the ambitious goals it sets out.
A total of $60 billion would be dedicated to cover ‘loss and damage’ arising from natural disasters in developing countries, and $20 billion for the same in developed nations.
By focusing on the first year of implementation and only funding five years of the 40m-mile (64km) Keystone XL pipeline, the fund would cost a maximum of $12bn, compared with the initial ‘loss and damage’ fund proposal’s $160bn estimate.
But the agreement only specifies that the fund should have at least $60bn of cash over the first year of its implementation, before the government spends the full amount that would be committed.
An important area where the agreement falls short of its key goals is in its ability to create an international fund, rather than having a domestic fund (with only five years of commitment) – a major gap compared with previous negotiations.
The draft text contains numerous other