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An important outcome of the UN climate summit in Egypt is in jeopardy as the US leads a push for the World Bank to run a new fund to help poorer countries suffering from climate change, leading to a threat from an opposing group of nations to walk out of negotiations.
Representatives from the G77 nations plus China, including a large coalition of developing countries, were considering abandoning the “loss and damage” fund discussions under way in Aswan in Egypt, according to people familiar with the talks.
The agreement to create a loss and damage fund to aid “particularly vulnerable” nations was celebrated by African and other developing world leaders at last year’s UN COP27 climate summit in Sharm el-Sheikh.
Since then, countries have tried to hammer out how it would operate and where the money would come from before the COP28 in the United Arab Emirates in about six weeks.
The failure to reach an agreement would be a blow for the upcoming summit.
Pedro Luis Pedroso Cuesta, the Cuban chair of the G77 plus China group, said the ongoing talks this week were deadlocked over critical differences, including the question of money and the governance arrangements of the fund.
The G77 rejected proposals from the US and EU for the fund to be hosted by the World Bank, after “extensive” discussions with the lender this week.
The opposing nations had initially wanted an independent fund, but Pedroso Cuesta said the group was now open to it being hosted elsewhere, such as in a UN organisation or another multilateral development bank.
However, he said the US was unwilling to negotiate on where the fund was based. “We have been confronted with an elephant in the room, and that elephant is the US,” he said. “We have been faced with a very closed position that it is [the World Bank] or nothing.”
Christina Chan, a senior adviser to US climate envoy John Kerry, said it was “inaccurate” and “irresponsible” to suggest that the US was being “obstructionist”.
“We have been working diligently at every turn to address concerns, problem-solve, and find landing zones,” said Chan, adding that the US had been “clear and consistent” about the need to deliver on the COP27 mandate for a loss and damage fund.
Pedroso Cuesta argued that the World Bank, which provides loans and grants to governments of poorer nations, does not have a “climate culture” and often took too long to make decisions, meaning it could struggle to respond quickly to climate crises such as the severe flooding in Pakistan last year.
G77 members also said they were concerned that if the fund had to operate under the World Bank’s legal structure, it may struggle to accept wider sources of cash, such as from philanthropy, or raise money or leverage in capital markets.
But the World Bank said “helping countries in the fight against climate change is at the heart of the World Bank’s development work”.
The bank was “committed to working with countries once they agree on how to structure the loss and damage fund”, it added.
A big unresolved issue is who finances the fund. The G77 have argued that developed countries should take the lead, but the US is keen that countries such as China and Saudi Arabia should also make significant contributions.
With only a day left for talks between the transitional committee mandated with designing the loss and damage fund, Pedroso Cuesta said it was urgent that developed countries listen to the concerns of developing countries.
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