Europe, Canada Willing to Back Climate Damage Fund—but Only If China Helps Pay

The proposal seeks to break a deadlock at the COP27 talks over payments for what is known as loss and damage, when extreme weather that scientists link to global warming causes destruction that is sudden or potentially irreversible. The issue has emerged as the major sticking point in the final days of the summit, which is scheduled to end Friday but is likely to stretch into the weekend.

A delegate for China, the world’s largest emitter, said his country could only contribute to such a fund on a voluntary basis. Developed countries were trying to shift responsibility for making loss-and-damage payments, because they don’t want to come up with the money, the delegate said.

A Saudi delegate said the EU proposal aimed to more or less redefine what it means to be a developing nation.

Developing countries have pushed for the creation of a new fund to provide finance for damage that scientists say is growing as global temperatures rise. The U.S., Canada, Europe and other wealthy nations say a new fund isn’t strictly necessary, and that money can flow from the institutions that already exist to finance the developing world’s response to climate change.

Frans Timmermans, the EU climate envoy, said Friday the new fund could be established in as little as a year. In exchange, the EU is seeking new efforts from countries to cut greenhouse-gas emissions, including a commitment to hit peak global emissions before 2025.

“The European Union has made huge steps forward,” Mr. Timmermans said, “and in any negotiation if you make steps forward, and the other side doesn’t budge, it ends.”

The EU proposal would, for the first time, divide developing countries into different categories under the U.N. climate talks and put some of them on the hook for providing funds. Doing so has been a red line for China and other major developing economies since the U.N. climate treaty of 1992 established a clear divide: The U.S., European nations, Japan and a few other economies were considered the developed world, while most other countries were considered developing.

Canadian Environment Minister Steven Guilbeault said in an interview that the EU proposal went in the right direction by focusing funding on the most vulnerable countries, while excluding higher-income ones like China, Saudi Arabia and Qatar as potential recipients of loss-and-damage funding.

Developing nations say wealthy countries should be on the hook for funding because they bear responsibility for the bulk of historical emissions that have been pumped into the atmosphere.

Minutes after Mr. Timmermans outlined the proposal on Thursday evening, a group representing the largest developing economies said wealthy nations were trying to escape their obligation to provide finance under the climate treaty.

“They are really creating the scenario to shift the burden to developing countries,” said Diego Pacheco, chair of the Like Minded Developing Countries group, which includes China, India and Pakistan.

Developed nations say the divide no longer makes sense given China’s rapid economic growth and industrialization over the past three decades. Moreover, oil-rich countries such as Saudi Arabia and the United Arab Emirates fall under the U.N.’s developing definition, angering the U.S. and European nations that are called upon to provide climate finance.

China shouldn’t be expected to contribute the same amount of money on a per capita basis as countries like Canada, Mr. Guilbeault said. As the world’s largest emitter, however, China is on pace to soon surpass the historical emissions of some Western economies, he said.

“We believe a country like China or Qatar should be part of the donor base, not to the exclusion of a country like Canada obviously,” Mr. Guilbeault said.

Saudi delegates said money for loss and damage should come solely from developed countries. Delegates from the U.A.E. said Gulf states and China shouldn’t be on the hook, because they are developing economies.

Rich countries in 2020 channeled $83 billion to developing nations to deploy renewable energy and adapt to climate change, according to the Organization for Economic Cooperation and Development. That fell short of a pledge in the Paris climate accord of 2015 to provide $100 billion annually by 2020. Developing nations say funds should come on top of the climate finance they already receive.

Small island nations such as Barbados and the Maldives that are particularly vulnerable to rising sea levels have led the push for the fund. Pakistan, which this year chairs the Group of 77, the biggest negotiating coalition of developing countries, has taken up the cause after suffering catastrophic flooding that scientists say was likely caused in part by climate change.

—Summer Said and Chao Deng contributed to this article.

Write to Matthew Dalton at [email protected] and Stacy Meichtry at [email protected]