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Rich countries okay 'loss and damage fund' at COP27. What is it?

Amrutha Pagad
Amrutha PagadNov 21, 2022 | 15:47

Rich countries okay 'loss and damage fund' at COP27. What is it?

Fridays for Future stage protest at COP27 Summit in Egypt. Photo: @Fridays4future/Twitter

Climate change talks at the global level are seldom history makers. But the latest one has indeed made history. COP27 concluded with rich countries agreeing to set up a "loss and damage fund" to compensate poor nations for the destruction brought on by climate change. 

What happened: The agreement did not come easy. After years of resistance, two weeks of the COP27 summit, and a night of high drama, the demands by developing countries including India were accepted. In fact, the negotiations had almost broken down when the EU decided to intervene.

  • The European Commission Vice-President Frans Timmermans announced the EU's proposal agreeing to establish a loss and damage fund.
We were reluctant about a fund, it was not our idea... I know from experience it takes time before a fund can be established, and more time before it is filled, whereas we have existing instruments. I really believe we could move faster with existing instruments. But since they [the G77] are so attached to a fund, we have agreed.
- Frans Timmermans, EU VP
  • Developed countries like the US, UK, and Australia had been pushing for a donor-based fund that included contributions by developing countries.
  • The countries had sought to quash "the principle of common but differentiated responsibilities".

India's reaction: India welcomed and hailed the decision to set up the fund.

Union Environment Minister Bhupender Yadav, 

The world has waited far too long for this.
- Union Environment Minister Bhupender Yadav

What will the fund do? The fund is expected to be paid to developing countries suffering from destruction brought on by climate change. For example, Pakistan suffered heavy losses due to massive flooding. 

  • However, a lot about the fund is unclear and it might take several years before a plan is proposed and agreed on for the fund to become functional. 
  • Details on how the fund will be operated, who will pay how much money and who will receive the money and when, need to be negotiated. 

Why are developed countries being taxed? Developed countries are being taxed for their historic contribution to climate change. For long, developing nations have protested against unfair plans proposed by developed nations to counter the impact of the changing climate. 

  • Developing nations like India and China argue that it is unfair to expect them to cut down on the use of fossil fuel and such when they are in the economic development process. While the developing countries proposing the idea, got away with climate abusive tactics historically to advance their economies. 
  • According to a study published earlier this year, Dartmouth College (US), found that the US, the world's largest historical emitter, owes the world over $1.9 trillion in reparations over climate damages for the period of 1990-2014. 
  • Similarly, countries like China, Russia, India, and Brazil also owe the world $4.1 trillion for the same time period. 

While the loss and damage fund seems to be a huge achievement coming out of the COP27 summit, disappointingly, no agreement was reached to keep global temperature rise within 1.5-degree-Celsius or a cap on the use of fossil fuel.

Last updated: November 21, 2022 | 15:47
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