The discussions on financing for the most vulnerable nations affected by the climate crisis have recommenced, focusing on the topic of “loss and damage.”

This weekend, government officials will gather in a final effort to resolve significant disagreements between wealthy and impoverished nations regarding the distribution of funds to assist those harmed by climate-related disasters.

Discussions about financial support for “loss and damage” began in March, but unfortunately became contentious and unproductive two weeks ago. “Loss and damage” pertains to providing aid and assistance to nations and communities affected by severe weather conditions.

Leaders from various nations are currently gathered in Abu Dhabi for a two-day conference, concluding on Saturday, in an effort to address remaining issues before the upcoming UN Cop28 climate summit in the United Arab Emirates.

Reaching a compromise this weekend is seen as crucial in advancing the issue of loss and damage at Cop28. Activists are concerned that without a widespread agreement prior to the summit, the discussions at Cop may become mired in complexity.

Harjeet Singh, the leader of worldwide political approach at Climate Action Network International, expressed that this gathering is a crucial juncture that will ultimately determine the outcome of the recently established fund for loss and damage. It is imperative that we build trust, put the fund into action, and offer the necessary aid to those who are most in need. Failure is not an option as the well-being and livelihoods of millions of people are on the line.

However, there is still a divide between developed nations, who prefer that financial contributions be optional and come from major emerging economies like China and Gulf petrostates, as well as established donors like the US and Europe, and underdeveloped countries who are worried about the management of the fund and their ability to access much-needed rescue funds.

Last year, at Cop27 in Egypt, all governments around the world reached a consensus that a fund for loss and damage should be established. This was a significant milestone that developing countries had been advocating for over ten years. Despite having the smallest carbon footprint, poor countries are disproportionately affected by extreme weather events due to their geographical location, inadequate infrastructure, and limited resources.

The severe floods in Pakistan and the severe drought in the horn of Africa, which occurred about a year ago, were caused and worsened by the climate crisis. This highlights the potential for loss and damage funds to aid those in dire need during such extreme weather events. As global temperatures continue to rise, these types of disasters are expected to occur more frequently, requiring hundreds of billions of dollars annually for repair.

The main points of disagreement revolve around the fund’s governance, funding sources, and eligibility criteria for receiving funds.

Certain wealthy nations, such as the United States, have advocated for the placement of the fund under the management of the World Bank. Their reasoning is that the World Bank already has an established framework in place to efficiently collect and distribute funds. They argue that creating a brand new fund would be a lengthier, more complicated, and more expensive process.

However, many advocates oppose this belief, as they believe that wealthy nations are partial to the World Bank because it allows them to have more influence as major contributors. They highlight the World Bank’s expenses, citing one fund that was charged 24% of its funds as a “hosting fee”, which covers the bank’s administrative costs, including its staff pension funds.

The process of obtaining funds from the World Bank is time-consuming and challenging. A majority of the funding is given as loans rather than grants. Additionally, there are many who hold resentment towards the Bank for not prioritizing climate finance, resulting in the removal of David Malpass, who was appointed by former President Trump, earlier this year.

Brandon Wu, the head of policy and campaigns for ActionAid, expressed his discontent with the stances taken by wealthy nations. He stated that these positions are completely unacceptable for a fund that is intended to aid developing countries and cater to the needs of those most susceptible. Instead of negotiating in good faith to create a fund that would be the most efficient way to assist vulnerable individuals, developed countries are solely considering their own self-interests.

According to The Guardian, the US does not consider having the World Bank as the host of the fund a non-negotiable demand. The UN and other parties believe that the issue of where to locate the fund will be resolved. A representative from a developing country, who is closely involved in the discussions, stated that this is not the primary concern.

The issue of determining who will have access to the fund may soon be resolved, as countries have reached a consensus that those most at risk in developing nations should receive priority. Certain governments argue that the fund should be available to all countries classified as developing in 1992, at the time when the United Nations Framework Convention on Climate Change (the primary treaty leading to the 2015 Paris climate agreement) was ratified.

It is possible that countries like Saudi Arabia or UAE, which are hosting this year’s Cop, could still qualify even though they have a high per capita income and carbon footprint. However, it is probable that the term “most vulnerable” would primarily refer to the least developed nations.

The primary conflict is expected to revolve around the methods of financing for losses and damages. Advocates argue that wealthy nations should be held accountable for their role in producing emissions, placing the burden of funding primarily on the US. However, this poses a challenge for the White House as the Republican-led US Congress is likely to resist any efforts to increase climate-related financial aid.

The United States and other wealthy nations are interested in expanding the ways in which they receive funding, possibly by selling carbon offsets and receiving contributions from private companies. Some groups of developing countries have proposed funding methods, such as a frequent flyer fee for affluent consumers in both rich and poor nations, or a tax on shipping, which is a major contributor to emissions. Former UK prime minister Gordon Brown has suggested implementing a windfall tax on profits from fossil fuels.

As many of these sources as possible are likely to be needed, in some form, as the sums required are likely to reach hundreds of billions of dollars. But the crucial tension is over the status of countries such as China, India, South Korea and other large emerging economies, and petrostates such as Saudi Arabia, Qatar, Russia and the host country UAE. These countries were all classed as developing in 1992 and therefore had no requirement to provide funds to poorer countries.

However, all of them are now considered significant contributors to emissions. The amount of emissions produced by China, India, and Russia have reached levels that are comparable to the total emissions of European nations. Additionally, these countries have greatly profited from the sale of fossil fuels. Their economies are much larger than those of the vulnerable countries that will receive compensation from the loss and damage fund.

According to Amina Mohammed, the deputy secretary general of the UN, we are entering a new era where funding for various issues, not just climate change, needs to come from a wider range of sources. This may cause tension between those who believe there should be a focus on historical responsibilities and those who think it’s time to move forward and diversify funding sources.

It will be a difficult task to address this fundamental conflict, as activists have stated their opposition to any efforts to differentiate between the stance of major economies like China and that of smaller, more vulnerable nations. Lien Vandamme, a lead activist at the Centre for International Environmental Law, emphasized that China and the G77 coalition of developing countries will remain united and demand that wealthy countries such as the US, UK, and EU provide financial support. These countries are still refusing to acknowledge their obligation to compensate for the harm and devastation caused by their lack of action on climate change.

It is unacceptable and a significant shift in the way wealthy countries handle these negotiations is necessary for the fifth meeting to be successful, unlike the fourth. Neglecting to follow through will not make the affected communities disappear and they deserve a resolution.