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The opening day of COP28 was marked by a pivotal discussion surrounding equitable compensation and aid for developing nations grappling with climate crises. Around 196 parties adopted the decision to operationalize the Loss and Damage fund, approving the draft text adopted by the transitional committee in Abu Dhabi earlier this month. 

It’s a move widely seen as a win for developing countries.

After five meetings over the past year, a transitional committee crafted the arrangements for the fund’s establishment. The decision was hailed as “historic” by Cop28 President Sultan Al Jaber, who said: “This sends a positive signal of momentum to the world and our work here in Dubai.”

Several countries swiftly pledged initial contributions to the fund’s nascent stage, totaling over $420 million, within an hour of the decision. Germany and the UAE committed $100 million each, setting a strong precedent for others. The UK pledged $50.5 million, while the US and Japan contributed $17.5 million and $10 million, respectively.

EU member states, including Germany, are anticipated to collectively contribute at least $245 million, demonstrating their unwavering commitment to addressing climate justice.

The Loss and Damage Fund is designed to garner contributions “from a wide variety of sources,” encompassing grants and low-interest loans from both public and private sectors and exploring “innovative sources.”

The World Bank is slated to host the fund for four years initially. All developing countries deemed “particularly vulnerable” to the impacts of climate change will be eligible for financial assistance from the mechanism. However, the definition of vulnerability, one of the most contentious issues, remains undefined in the text.

Ana Mulio Alvarez, a loss and damage expert at E3G, hailed the agreement as an “early win” for COP28 hosts, setting a positive and collaborative tone for the conference.

The text added that the fund will address the needs of developing countries that are particularly vulnerable to the adverse effects of climate change in responding to economic and non-economic loss and damage associated with this, including extreme weather events and slow onset events.

When asked why the US, among top emitters, contributed less than others and how the fund can be filled, UNFCCC executive secretary Simon Steill said that more pledges are expected soon, especially at the leaders’ summit on December 1 and 2.