COP27: What is 'loss and damage' compensation, and who should pay?

The financing of compensation due to developing countries for the damage they suffer as a result of climate change ("losses and damages") will finally come into the agenda of the COP27 Climate Summit, after being one of the issues for which the poor countries and the Egyptian presidency of the event pressed the most.

In the first plenary meeting of the event, which began this Sunday in the Egyptian city of Sharm el Sheikh, all parties agreed to include this issue as one of the points to be resolved, the first time that this has occurred since the adoption of the convention. United Nations climate change and the start of the climate conferences.

Thus, the leaders and technicians who will meet from today until next November 18 will address how the rich countries, historically responsible for the vast majority of carbon emissions, will pay for the damage suffered by less developed countries as a result. which have hardly contributed to the emission of greenhouse gases.

The Egyptian president of the COP27, Sameh Shukri, indicated in this regard that this decision was made after almost a year of work and two days of continuous "informal consultations" so that the parties unanimously agreed to open this discussion.

The meeting in which nearly 200 countries participate represents a crucial point in the mitigation of global warming. Opening the summit, United Nations Secretary-General António Guterres warned that the planet is irreversibly headed for climate disaster. 

"As COP27 gets underway, our planet is sending a distress signal. The state of the global climate is a chronicle of climate chaos," Guterres warned Sunday at the start of the international climate conference.

What is "loss and damage"?

In U.N. climate talks, the phrase "Loss and Damage" refers to costs already being incurred from climate-fuelled weather extremes or impacts, like rising sea levels.

Climate funding so far has focused on cutting carbon dioxide emissions in an effort to curb climate change, while about a third of it has gone toward projects to help communities adapt to future impacts.

Loss and damage funding would be different, in compensating costs that countries can't avoid or "adapt" to.

But there is no agreement yet over what should count as "loss and damage" in climate disasters - which can include damaged infrastructure and property, as well as harder-to-value natural ecosystems or cultural assets like burial grounds.

Who pays?

These questions are extremely controversial. Vulnerable countries and activists have argued that the rich countries that caused most of the climate change with their historic emissions should now pay. The United States and the European Union have resisted the argument, fearing spiralling responsibilities.

If countries agree to launch a fund, they would have to look at details such as where the money should come from, how much rich countries should pay, and which countries or disasters qualify for compensation.

The EU and the United States blocked a proposal at last year's UN climate talks to establish a fund, agreeing instead to a "dialogue" with no clear end goal. Over the last month, they have signaled a greater openness to discuss compensation at COP27, but remain wary of creating a fund.

Only a few governments have made small, token funding commitments for loss and damage: Denmark and Scotland, plus the Belgian region of Wallonia.

Some existing funds from development banks and the UN help states facing loss and damage, although they are not officially earmarked for that purpose.