Negotiations regarding the establishment of a global climate reparations fund have hit a roadblock as member nations reject a proposal by the US and EU to host the fund within the World Bank. These nations, which include the G77 countries plus China, have threatened to abandon negotiations for next month’s COP28 climate summit if the US does not reconsider its stance.
According to sources familiar with the discussions, the G77 nations and the US are deadlocked on the issue of who will run the fund. The fund is meant to provide compensation for loss and damage experienced by nations particularly vulnerable to climate change. The G77 nations argue that the World Bank’s structure is not suitable for hosting the fund, as it may complicate its ability to receive philanthropic donations or raise money on capital markets. Moreover, the focus of the World Bank on revenue-generating transactions, such as loans, is another point of contention. Developing nations, burdened with existing debt, are seeking grants rather than new financial obligations.
Luis Pedroso Cuesta, the Cuban chair of the G77+, stated that while the bloc initially desired an independent fund, they were willing to compromise on hosting it within an international body such as a UN organization or another multilateral development bank. However, the World Bank is viewed as ill-suited due to its lack of a “climate culture” and slow decision-making process. The US itself acknowledged this when it called on the bank to finance more clean energy projects recently.
Critics from the G77+ countries argue that the US is using the World Bank as a distraction from its own failure to fulfill its climate finance promises. They claim that US climate czar John Kerry and others emphasize the limitations of public funds and push for alternative measures. Moroccan think tank director Iskander Erzini Vernoit referred to this approach as an attempt to shift the blame.
Christina Chan, a senior advisor to Kerry, dismissed these criticisms as irresponsible and denied that the US was being obstructionist. However, the parties involved remain at odds over financing, with the G77+ demanding that developed nations, particularly the US, contribute to the fund. As of now, the US has not pledged anything to the fund, instead relying on China to make financial contributions.
At the COP27 climate summit last year, 200 countries agreed to establish a loss and damage fund to assist developing nations in recovering from the impacts of climate change. The US, traditionally hesitant to endorse such proposals, consented on the condition that compensation would not imply legal liability.
In conclusion, negotiations for a global climate reparations fund have hit a standstill as member nations reject the proposal to host it within the World Bank. Concerns regarding the World Bank’s structure and the focus on revenue-generating transactions have led the G77 nations and China to seek alternative hosting options within UN organizations or multilateral development banks. The US is facing criticism for potentially using the World Bank as a distraction from its own climate finance promises. The parties involved remain divided over financing, with the G77+ demanding contributions from developed nations, while the US has yet to make any pledges and is relying on China for financial support.