SHARM EL-SHEIKH, Egypt—Delegates agreed in a late-night negotiating blitz to hold a formal discussion on compensation for irreparable climate damages, marking a first for the annual U.N. climate summit following decades in which rich nations blocked the topic from being tabled.

The highly contested issue hinges on getting wealthy countries—who have contributed most of the emissions warming the planet—to provide money to poorer ones that most often bear the consequences in the form of extreme storms, heat, drought and rising seas. By placing it on the agenda Sunday, negotiators agreed to discuss the topic over the next two weeks of climate talks.

The increasing severity of climate impacts has elevated the call for some form of reparations. But the developed world has long resisted such discussions, igniting fears that continued intransigence could derail the talks before they even began (Climatewire, Nov. 4).

“The fact that it has been adopted as an agenda item demonstrates progress and parties taking a mature, constructive attitude towards this,” said Simon Stiell, executive secretary of the U.N. Framework Convention on Climate Change. “What I would encourage—and what I would hope—is the parties continue in that spirit of finding common areas to agree on.”

Finalizing the agenda is a regular procedural affair. But compensation for unavoidable climate harm—what’s known in U.N. parlance as loss and damage—emerged as a potential flashpoint following intersessional talks in June. Developing countries frustrated by a lack of attention to the issue began pushing for it to be part of the formal agenda, rather than a side dialogue with no defined outcome.

That led to months of consultations between different negotiating groups and climate officials. Germany’s special envoy for climate action, Jennifer Morgan, and Chile’s Environment Minister Maisa Rojas were tapped to facilitate.

Meanwhile, the increasingly perilous impacts of climate change played out through deadly heat waves in Europe and India, monster flooding in Pakistan and Nigeria and record-breaking drought in the Western United States.

The United States and Europe signaled a greater willingness to discuss loss and damage finance in recent weeks, but whether they would find common ground with climate-vulnerable countries remained an open question until the late hours of Saturday night. Negotiators ultimately agreed to an agenda item on “matters relating to funding arrangements” responding to loss and damage, including a focus on “addressing” the problem.

Sameh Shoukry, Egypt’s foreign minister and the head of this year’s climate talks, said in a Sunday press conference that the Egypt presidency was “delighted” to have adopted an agenda item on “the most important issue” of loss and damage. “This does open the door for a more in-depth, more transparent consultation and negotiation process,” he added.

The island nations among the most vulnerable to climate impacts were more blunt in their response.

“This agenda item on loss and damage funding reflects the floor of what is acceptable; it is our bare minimum,” said Conrod Hunte, deputy chair of the Alliance of Small Island States, a 39-country negotiating bloc. “Our negotiations at COP 27 must be constructive and lead to a substantive outcome. Simply tinkering with the existing financial mechanisms will not cut it.”

The United States and European Union argue that current processes to get funding to vulnerable countries, such as disaster risk financing, early warning systems and humanitarian assistance, could be amended or reformed to to deliver money to repair or compensate for loss and damage. The Alliance of Small Island States disagrees. It wants a new pot of money that is separate from other forms of finance and doesn’t come with trade-offs or double-counting.

The next two weeks of the climate summit will determine the shape of the discussions for loss and damage. But a footnote on the agenda notes that the outcomes will be based on “cooperation and facilitation” and does not involve liability or compensation—a red line for the United States and Europe. It also sets 2024 as a deadline for a decision.

“This is about building trust between parties,” Stiell said. “The real test will be the quality of the discussion that takes place over the next two weeks, and judgments will be based on the quality of the outcomes.”

Countries are likely to push for clear markers of progress or timelines, and developed countries will be expected to show they’re serious about moving things forward, observers say. They may also touch on who should be contributing money and how. One outcome negotiators won’t settle on this year, however, is the actual dollars and cents countries will be expected to pony up.

“It’s not about how much money there is in the piggy bank, it’s whether there is a piggy bank how is the piggy bank shaped,” said David Waskow, director of the World Resource Institute’s international climate initiative.

It’s also not the only issue on the table.

This year’s talks will have to overcome a raft of other tensions, including stalled efforts to curb emissions in the face of an energy crisis, geopolitical wrangling between some of the world’s largest emitters and rising inequities that have punctuated the need for wealthy countries to meet their climate finance promises.

Other proposed agenda items didn’t make the cut. For example, this year’s summit does not have an formal agenda item focused on a commitment from developed countries to double finance for adaptation, which helps countries harden their defenses to climate impacts.

Waskow said adaptation will need far more investment than it has gotten to date. If countries aren’t able to adapt, losses and damages will grow even bigger, he said.

Hunte, from the small island states, put it this way: “We want to live in our homes, on our sovereign islands, with our traditions and way of life,” he said. “We are not here negotiating with each other, we are here negotiating against the climate.”

Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2022. E&E News provides essential news for energy and environment professionals.