A breakthrough looked possible in the deadlocked global climate talks on Friday as the European Union made a dramatic intervention to agree to key developing world demands on financial help for poor countries.

In the early hours of Friday at the Cop27 UN climate summit in Egypt, the European Commission vice-president Frans Timmermans launched a proposal on behalf of the EU that would see it agree to establishing a loss and damage fund.

Rich countries had been holding out agains this key demand, arguing it would take time to establish whether such a fund was needed, and how it would operate.

Timmermans said on Friday morning the EU had listened to the G77 group of developing countries, for whom the establishment of a fund at this summit is a core demand.

Loss and damage refers to the ravages of extreme weather on the physical and social infrastructure of poor countries, and the finance needed for rescue and reconstruction after climate-related disasters.

Timmermans said: “We were reluctant about a fund, it was not our idea to have a fund. My reluctance was because I know from experience it takes time before a fund can be established, and more time before it is filled, whereas we have existing instruments. I really believe we could move faster with existing instruments [for climate finance]. But since they [the G77] are so attached to a fund, we have agreed.”

Timmermans added that “clear conditions” would be attached to any fund. It would be geared towards supporting the most vulnerable, with a broad financial donor base contributing to the fund.

The fund would not operate in isolation, but as part of a mosaic of solutions that includes reform of multilateral development banks, for example.

In parallel, the EU wants more ambition on cutting emissions, with stronger provisions on updated national plans for emissions cuts in line with the 1.5-degree target in the Paris Agreement and peaking global emissions by 2025. “This would have to be a package deal,” Timmermans said.

Developing countries are mulling the proposal.

The EU’s move throws the spotlight on the US, which has also objected to a fund.

It also places much greater pressure on China, which has up to now avoided any obligation to provide climate finance to the poorest countries, despite being the world’s biggest emitter and second biggest cumulative emitter, and the world’s second-biggest economy.

Under the 1992 UN Framework Convention on Climate Change, under which the conference of the parties takes place, countries are strictly delineated into developed and developing, and China is still classed as developing under the treaty.

Timmermans said: “[The fund] donor base should be under the Paris Agreement and take account of the economic situations of countries in 2022 not 1992, as in the G77 proposal.”

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