COP27 Heralds ‘New Paradigm’ For Climate Action. Now The Hard Work Truly Starts

Island nations are under threat from rising seas. Drought threatens wide swathes of Africa. And flooding will inundate countries across the globe.

For years, the developing countries most vulnerable to climate change warned of these threats and demanded that their wealthier counterparts help pay to address these climate-induced losses. Wealthy countries, who have caused the problem with decades of burning fossil fuels unchecked, instead insisted that they would help vulnerable countries expand clean energy and fund efforts to adapt to extreme weather. Paying to address so-called loss and damage, it seemed, represented a bridge too far.

This week, the dam finally broke. At COP27, the United Nations climate conference in Sharm El-Sheikh, Egypt, that concluded early Sunday morning, delegates from countries around the world agreed to create a fund to funnel money from the Global North to the Global South to help pay for the mounting costs of climate-related damages. Nations also accelerated a program to provide technical assistance to vulnerable countries. And they called for a reworking of institutions like the International Monetary Fund (IMF) and World Bank to address climate-linked loss and damage.

All told, the result represents a groundbreaking shift in how the world understands climate policy. Yes, climate policy is partly about solar panels and wind turbines, elevating streets and building sea walls. But now it is officially, for the first time at this global scale, also about paying for the inevitable losses.

“This is the start of a new paradigm that truly accounts for the burdens of climate change,” said Lia Nicholson, a negotiator representing the Alliance of Small Island States (AOSIS) at the conference’s closing session. “Establishing this fund signals to the world that loss and damage will no longer solely be borne by those governments and people least responsible; today is a step towards climate justice.”

This step forward brings the world into a new era of climate policy where paying to compensate for the worsening effects of climate change receives top billing in international climate discussions—and questions of how to pay for it enters the conversation in capitals of developed countries around the world. COP27 concludes a hard fought battle—but it also marks a beginning; and decisions made over the next few years will define what this new paradigm looks like.

The push for policies to address loss and damage dates back to the very beginning of U.N. discussions on climate change. In 1991, then the chair of AOSIS, the island nation of Vanuatu proposed a scheme to pay small island states when their land became unlivable as a result of sea level rise. From the beginning, those conversations were sidelined and kicked down the road by big developed countries whose negotiators feared that recognizing loss and damage would open up rich countries to unlimited liability. In major climate conferences over the coming decades, vulnerable countries repeatedly raised the topic with paltry results.

But ignoring a problem will not make it go away. Climate-linked damages have accelerated in recent years and many delegates gathered in Egypt agreed that the devastation of recent months made the loss and damage conversation impossible to sidestep. “We listened to the cause of anguish and despair resonating from one end of Pakistan to the other—a country with literally more than a third of its area flooded, a resounding alarm of the future that awaits us,” said Sameh Shoukry, the Egyptian Foreign Minister who served as COP27 president, as the talks came to a close.

And so over the past two weeks negotiators haggled over the details of what such a fund might entail. Crucial questions involved who might receive funding and who should contribute. Developed countries remained adamant that the fund should be open to a range of finance sources—including from countries like China that have become big emitters, even though they weren’t 30 years ago when the U.N. climate process was established. At the same time, developed nations sought to prevent finance from going to countries like Saudi Arabia, which are technically developing countries but have access to far greater means than many of their more vulnerable counterparts. Both of these questions remain to be determined in the coming years. Delegates also debated how contributing countries might finance these programs. A suggestion from the European Union that taxes be levied on fossil fuels, air travel, and shipping to pay for loss and damage raised eyebrows across negotiation teams.

“The establishment of a funding mechanism is the story of COP27, and a huge milestone,” says Cassie Flynn, head of climate policy at the United Nations Development Program. But “this is just the beginning of the journey on funding for loss and damage, and negotiators are going to have to face some questions very quickly around brass tacks: who provides into this fund, who can receive into this fund?”

No matter what happens, no one expects the new fund to provide sufficient finance to actually address the scale of the loss and damage challenge, and so a range of other solutions have been presented. Over the course of the conference, delegates discussed an insurance scheme organized by Germany to help cover certain losses, and the creation of a program known as the Santiago Network that will provide technical assistance to vulnerable countries. A proposal from Barbados to alleviate the debt of cash-strapped developing countries as they struggle with climate challenges gained support from countries across the globe, rich and poor, large and small. The topic will rank high on the agenda in the months ahead of the IMF and World Bank’s spring meetings.

“Loss and damage is a complex issue that impacts our immediate, medium, and long term,” Shauna Aminath, the minister of environment, climate change, and technology in the Maldives told other delegates on the morning of Nov. 20. “We need a mosaic of solutions.”

It may not be clear at first glance, but, between the lines, the COP27 deal also contained a win of sorts for big developed countries like the U.S. Those wealthy nations successfully fought back any attempt to be held formally liable; contributions to the loss and damage fund will be voluntary. After the decision had been finalized, a U.S. State Department official noted that “there is no liability or compensation in the agreement.” In the coming years, it’s safe to assume that lawyers from the U.S. will fight tooth and nail to ensure the fund stays that way.

But the conversation will inevitably evolve. On Friday, Vanuatu announced that 86 countries now support its plan to request the International Court of Justice (ICJ), the U.N.’s judicial body, to issue an advisory opinion on countries’ obligations to address climate change. Vanuatu plans to bring the issue to the U.N. General Assembly in December, and, if passed, the ICJ will take up the issue to offer an opinion that includes what rich countries owe for their historic emissions. It’s an opinion that could influence a range of court rulings around the globe.

“It will impact everything,” says Ralph Regenvanu, Vanuatu’s climate minister. “If you were sitting opposite someone, and you’re both equally aware that there are these legally defined obligations, perhaps there is now a shadow of a stick.”

It’s clear the conversation is only just beginning.