he twenty-seventh annual Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change (UNFCCC) concluded last week with a historic agreement to create a new loss and damage fund (LDF). While cherishing this achievement, many delegates were disappointed by the inadequate progress on two counts. First, while the world is visibly lagging in achieving Paris Agreement’s target to limit the average global temperature, the COP27 outcome had nothing new to offer to reduce greenhouse gas emissions. Second, COP27 failed to convince fossil fuel exporters, including the US, to phase out all fossil fuels (coal, oil, and gas) for a sustainable and equitable clean energy transition.

A lot remains also unanswered around the LDF, such as:

Will the rich countries fulfil their climate financing promises? When we say rich countries, does it mean the rich Western democracies alone or does it include China, Singapore, and petroleum-exporting Middle Eastern states? Will the LDF work within the remit of the Paris Agreement where the provision of such fund was included only on the explicit basis that it did not provide a basis for any liability or compensation? If yes, how will the Fund determine who should contribute to it and how much? Will the contributions be entirely new pledges or relabelled pledges and loans? In the past “development assistance” has been relabelled as “funds for adaptation” and “loans for power projects” as “climate financing”? Who will be the potential beneficiaries of the LDF when the COP27 decision says that the fund will assist developing countries that are “particularly vulnerable to the adverse effects of climate change”? Finally, what is the definition of climate change-induced “losses and damage”?

The standard answer to most of these questions is: work in progress. However, this does not mean that the COP’s glass should be declared totally empty.

To refine our parameters to measure the success and failure of multilateral negotiations like the COP, it may be helpful to go back to the basics of the UNFCCC.

Thirty years have passed since Rio Earth Summit, where a broad agenda and a new blueprint for international action on environmental and development issues for the Twenty-First Century, Agenda 21, were agreed upon. This was when the countries joined an international treaty, the UNFCCC, for international cooperation to combat climate change. It was decided to limit average global temperature increases and resulting climate change and cope with its impacts through international cooperation.

In 1995, during the first COP in Berlin, countries resolved to strengthen the global response to climate change. Two years later, they adopted the Kyoto Protocol (KP), which legally bound developed country parties to emission reduction targets. The protocol was based on the principle of common but differentiated responsibilities: it acknowledged that individual countries have different capabilities in combating climate change owing to economic development. Therefore, it placed the obligation to reduce current emissions on developed countries because they are historically responsible for the current levels of greenhouse gases in the atmosphere. The US never ratified the protocol. The 36 developed countries that fully participated in the first commitment period (2008-2012) complied with the protocol. However, many announced their intention not to be part of its second phase. After complex negotiations, the current climate change regime, Paris Agreement, was signed in 2015 (COP21).

The Paris Agreement seeks to accelerate and intensify the actions and investments needed for a sustainable low-carbon future. Its central aim is to strengthen the global response to the threat of climate change by limiting the global temperature rise to between 1.5 and 2 degree Celsius above pre-industrial levels, this century. The agreement also aims to strengthen the ability of countries to deal with the impacts of climate change.

Under the agreement, each country must determine, plan and regularly report on its contributions (nationally determined contributions). No mechanism forces a country to set specific emission targets, but each target should go beyond previous targets (ratchet mechanism). In contrast to the 1997 Kyoto Protocol, the distinction between developed and developing countries is blurred, so the latter must also submit plans for emission reductions.

The US ratified the Paris Agreement (left in 2020 but re-joined in 2021) owing to its legally non-binding reduction targets. The developing countries ratified it as they saw a window for climate financing and ability-strengthening to cope with the negative impacts of climate change. Regarding the payments of loss and damage, as mentioned earlier, the Paris Agreement calls for “averting, minimising and addressing loss and damage” but specifies that it cannot be used as a basis for liability.

The UNFCCC process should have been more effective and responsive to limit global warming and resulting climate change. However, one must appreciate that the UNFCCC got the top five largest emitters (the US, which did not ratify KP; China and India, which were not obliged to reduce their emission under KP; and the EU and Russia, which were not willing to accept any legally binding emission reduction targets after the first commitment period of Kyoto) to subscribe to an emission reduction plan through Paris Agreement.

Likewise, remaining engaged in the UNFCCC process over nearly three decades, this year, developing countries, especially the G77 and China under the leadership of Pakistan, were able to get their demand for “loss and damage fund” accepted. On top of it, COP27 also sent a strong signal to the global financial system to “define a new vision” with “channels and instruments that are fit for the purpose of adequately addressing the global climate emergency.”

There have been hints since COP26 that the tide might be turning though at a very slow pace. Last year, Scotland promised $2.4 million for loss and damage fund; it pledged an additional $5.7 million this year. Denmark has pledged $13 million for this purpose. Germany put a more substantial $175 million into an insurance-based “global shield” to help some countries recover from climate-related disasters.

A proposal to set up a new Global Climate Mitigation Trust at the IMF by issuing $500 billion worth of special drawing rights (SDRs), a kind of quasi-currency, is under discussion. Issuing new SDRs may be difficult; hence, some countries suggest that existing SDRs may be redirected for this purpose. During the Covid pandemic, rich countries pledged $100 billion of SDRs to a Resilience and Sustainability Trust. The UN secretary-general has strongly endorsed debt suspension and debt for nature swaps in the event of a climate-related disaster for developing countries (including Pakistan). John Kerry, America’s climate envoy, has announced a plan to encourage firms from the rich world with green aspirations to pay to shut polluting power plants in poor countries. In return, the firms would receive credits allowing them to declare themselves “carbon neutral”.

Pacts between a group of Western countries and individual developing ones aim to speed the transition away from coal (Just Energy Transition Partnerships). The first such deal was struck with South Africa last year. The second, with Indonesia, was announced last week.

All this was possible because of developing countries’ continuous engagement in the multilateral process. COPs were historically focused on two units, tonnes of CO₂ emission and degrees of temperature. Through their collective efforts, the developing countries have added a third unit in COP’s discussions, i.e., (billions of) dollars. Developing countries need to remain united to get these dollar pledges from the developed world materialised. Together they can; but for that to happen they need to keep engaged in the COP processes.

The writer heads the Sustainable Development Policy Institute and was part of the South Asian civil society delegation at COP27. He tweets @abidsuleri