Congress created the National Flood Insurance Program in 1968 as a way for the federal government to bear a risk that private companies wouldn’t. Since then, Uncle Sam has backed the vast majority of flood insurance policies in the United States. 

Yet it is impossible to buy or renew such plans directly with the Federal Emergency Management Agency, or FEMA, which administers the program. Instead, the government relies upon a network of private companies to sell and service its policies — and hands them nearly one-third of the premiums the program brings in. Lately, that’s come to almost $1 billion a year.

“It is certainly something that should be examined,” said Stephen Ellis, president of the watchdog organization Taxpayers for Common Sense. “It would be one thing if it were a very high performing program. Certainly that’s not been the case.” 

The government’s flood insurance program is plagued by low-participation rates and is deep in debt. How its run has often drawn scrutiny, and earlier this year, a bipartisan group of lawmakers proposed legislation that would, among other things, cap the compensation paid to private brokers, who do not take on any risk. There also have been calls for FEMA to sell policies directly to consumers. Proponents of such changes say they would make it easier, and potentially cheaper, for property owners to obtain coverage, while saving taxpayers money.

“Flood insurance is a government service,” said Rob Moore, director of the Water & Climate Team at the Natural Resources Defense Council. “People should be able to buy it directly from FEMA. No question.”

FEMA and insurance companies say it isn’t quite that straightforward.

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The National Flood Insurance Act of 1968 established the National Flood Insurance Program, or NFIP, to fill a gap as the private sector retreated from the market. Five years later, Congress mandated that homeowners in high-risk areas who have a federally backed mortgage buy adequate coverage. In 1979, President Jimmy Carter assigned FEMA the role of overseeing the NFIP. But insurance uptake remained relatively low.

In 1983, FEMA enlisted private insurance agents in the effort to sell more policies. The government agreed to reimburse the cost of writing policies and processing claims. The hope was that allowing homeowners to use the same agents that sold other types of insurance would boost participation.

As dozens of companies joined the so-called Write You Own, or WYO, program, flood insurance enrollment indeed grew. But the number of policies peaked in 2009, at 5.7 million, and has been declining since.

“Even with private insurance engaged, and advertising, it still sits right around 5 million policies,” Ellis said. (As of 2022, the figure is 4.7 million.) That’s a fraction of the roughly 100 million eligible properties.

Between 2017 and 2022, the NFIP paid brokers $5.82 billion in commission and expense reimbursements. That’s nearly 29 percent of all premiums brought in by the program, which is saddled with debt and loses billions of dollars annually. Reducing that cut by even a percentage point could save millions. But the Government Accountability Office, or GAO, has on at least two occasions critiqued FEMA’s approach to compensating brokers.

“FEMA sets rates for paying WYOs for their services without knowing how much of its payments actually cover expenses and how much goes toward profit,” the nonpartisan agency noted in a 2009 report. Three years later, Congress directed FEMA to reevaluate its compensation formula. But a 2016 GAO report found that hadn’t yet happened and recommended that FEMA “improve the transparency and accountability over the compensation paid to WYO companies and set appropriate compensation rates.”

The GAO still lists that recommendation as “unresolved,” and it remains unclear how much FEMA is over- or underpaying brokers. While the GAO found that some were not being reimbursed for all of their expenses, a 2019 FEMA rulemaking proposal noted that the 30.8 percent compensation rate that the agency pays them is well above the 25.3 percent in actual expenses they reported to an industry trade group. The difference is presumably profit, which could amount to many millions of dollars.

FEMA told Grist it has completed the congressionally mandated analysis of broker compensation, but declined to share details because it’s under internal review.

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What is known is that in fiscal year 2023, FEMA agreed to pay WYOs 29.7 percent of premiums. That is higher than the 20 percent cap that the Affordable Care Act generally places on the administrative, overhead, and marketing costs of health insurance sold through the government marketplace. It is also proportionally more than the 14 percent in expense payments that the Department of Agriculture has been giving companies to sell and service crop insurance for the last five years (the companies also get additional compensation as profit because, unlike WYOs, they take on crop insurance risk).

Roy Wright, who led the NFIP from 2015 to 2018, says such comparisons aren’t analogous because those programs are much larger. That allows for significantly lower overhead, he said. Still, he sees room for improvement.

“The operating costs have been the subject of a fair amount of debate,” said Wright, who is now the president of the Insurance Institute for Business & Home Safety. “I always think we should pay attention to how dollars are spent.”

One attempt to rein in costs came in June, when a bipartisan team of lawmakers introduced an NFIP reauthorization act that would, among other things, cap the compensation paid to private brokers at 22.46 percent. That would have saved the NFIP hundreds of millions of dollars last year alone.

“The NFIP has one million less policyholders than it did over a decade ago, but at the same time flooding, and subsequently premiums, has only increased,” said Senator Bob Menendez*, the New Jersey Democrat who is among the four lawmakers who sponsored the bill. “High administrative costs are an unnecessary burden to current policyholders and a barrier to those who want to enter. It’s time Congress rebalances the WYO compensation structure to provide premium relief and mitigation grants to grow the NFIP and reduce its risk profile.”

So far, little has happened with the bill.

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Looking beyond the matter of how much FEMA is paying brokers, some would like to see the agency interacting with consumers directly. That, they say, could cut costs while almost certainly improving access and transparency.

“Every intermediary adds one more step in the chain of telephone,” said Moore. “If more people bought directly from FEMA, there are some tangible benefits to the flood insurance programs.”

FEMA does run a program called NFIP Direct, which allows policyholders to make payments and file claims. It is somewhat similar to how the program ran before WYOs, except that today consumers must still buy a policy through a broker, who earns a 15 percent commision. According to one Democratic Senate aide, NFIP Direct’s overall expenses are about 22.46 percent, or the number proposed in the legislation. 

“This is an example of where the government is more efficient than the private market,” the aide said.

Still, NFIP Direct only comprises about 1 in 10 policies. That’s at least in part because agents have minimal incentives to sell them, said Joe Rossi, a broker who chairs the Flood Insurance Producers National Committee. Agents generally find it easier — or are required — to work with private insurers they already have relationships with. Doing so also can bring more in commissions.

“The WYOs are not restricted in how much they give to their agents,” Rossi said. “There are agencies that give 20 percent or more.”

The industry argues that agent expertise is critical to helping consumers navigate a complex subject fraught with questions like, say, whether getting an elevation certificate might reduce premiums.

“The agent is the NFIP whisperer, if you will,” said Lauren Pachman, director of regulatory affairs for the National Association of Professional Insurance Agents. She added that any cuts in government payments to insurance companies would almost certainly impact agents’ commissions, which would make it more difficult to attract and retain them. The number of Write Your Owns has already been dropping, she noted. “Carriers don’t make a ton of money on the flood program.”

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Less private sector involvement would require NFIP Direct to take on more of the burden — an outcome that worries her. “I guess it’s hard for me to imagine the NFIP operating like a well-run insurance company,” she said. “I worry that the federal government would be biting off more than it can chew.”

Nonetheless, FEMA says it wants to try to move closer to customers and is developing a “direct to consumer” online flood insurance quoting tool that it aims to have running by April 2025. In its initial request for information, which Grist obtained, the agency called a digital means of selling and servicing policies “imperative” and said, “Flood insurance remains behind the times, leading to potential customer frustration and the inability to protect one’s home or business.” 

The hope is that fixing those issues will lead more people to sign up. 

“If we’re serious about closing the insurance gap, we have to get more in tune about meeting our customers where they are,” said David Maurstad, senior executive of the National Flood Insurance Program. “What this would do is lead people through the process, at the end of which, if they decide they want to buy a policy, then we connect them with an agent who works on securing their policy.”

Maurstad did not say whether the new system would save the program money, but noted that bypassing private brokers would at the least be a logistical challenge, because insurance is regulated at the state level. The alternative would require FEMA to figure out how to have in-house agents registered in every state. 

“My sense is that that would not be as effective as the co-system that already exists,” he said. “It was decided a number of years ago, and it still makes sense today, to leverage the private sector and their capabilities to administer the program on behalf of the federal government.” 

Wright agrees that most people would probably benefit from professional guidance when buying flood insurance, but supports FEMA making more information easily and readily available to consumers. FEMA already has the technology needed to, say, allow someone to enter an address and get answers to most of their questions, he said: “They should find a way to turn it on.”

Whether NFIP can save money by moving more of the flood insurance process in-house is an open question, said Wright. But to the extent that there are savings, he said they should be passed on to the policy holders. 

“If the cost of the insurance has gone down,” he said, “the consumers should benefit.”

*This story has been updated to include a comment from Senator Bob Menendez.

This story was originally published by Grist with the headline The billion-dollar industry between you and FEMA’s flood insurance on Dec 12, 2023.

A federal air pollution rule successfully cut smog-forming emissions in 10 states by 18 percent this past summer, according to data collected by the U.S. Environmental Protection Agency. During peak ozone season, which spanned May to September, states including Illinois, New York, Ohio, and Pennsylvania reduced nitrogen oxide emissions coming from coal-fired power plants under the agency’s recent “Good Neighbor” rule. Nitrogen oxide emissions can travel hundreds of miles downwind into neighboring states and form ozone, the main ingredient in smog. 

“This early data shows that the Good Neighbor plan is a workable and effective rule,” said Joseph Goffman, principal deputy assistant administrator of EPA’s Office of Air and Radiation, in a press release.

But the agency’s rule, which was finalized back in March, originally targeted a much broader group of 23 states. Twelve of the remaining states, including Alabama, Kentucky, Minnesota, Texas, and Utah, have yet to implement the rule due to ongoing legal challenges against the EPA’s regulation. (The thirteenth, California, is required to reduce pollution only from heavy industry, not power plants, and not until 2026.) State officials, fossil fuel industry groups, and utilities in those states have filed petitions to halt the rule, claiming the costs of compliance are too high and the standards unreasonable. Public health experts say these court actions are delaying much-needed relief for communities suffering the brunt of ozone’s impacts on human health. 

“It’s quite frustrating that so many states have chosen to litigate — to not be a good neighbor,” said Paul Billings, senior vice president for public policy at the American Lung Association. 

The Good Neighbor rule requires power plants and heavy industry to install and use pollution-control equipment to reduce their emissions of nitrogen oxide, which reacts with other molecules in the atmosphere to form ozone. Billings said that in many cases, power plants already have these controls installed but choose to not operate them to cut costs. 

Ozone is one of the most widespread air pollutants in the United States and reaches peak levels during the summer, when high temperatures and ample sunlight create ideal conditions for its formation. Exposure to ozone can cause coughing, wheezing, and shortness of breath in healthy adults and exacerbate chronic respiratory illnesses. Some of its effects, like a higher risk of asthma attacks, can raise the likelihood of premature death.

In 2015, the EPA issued an updated ozone air quality standard, which sets maximum levels of ozone pollution across the nation. Under a provision of the federal Clean Air Act, which was passed in 1970, every state was required to submit a plan within three years of that update detailing how it would reduce the amount of ozone-forming air pollutants blowing downwind into nearby states. Two states, Pennsylvania and Virginia, failed to submit plans. In February, the EPA formally rejected another 21 states’ plans for failing to take sufficient action. The next month, the agency released its own plan — the Good Neighbor rule — setting cross-state ozone emissions standards that these states would be required to meet.

Since February, several states have challenged the EPA’s rejection of their original plans in federal courts across the country, effectively hitting pause on the federal Good Neighbor rule in those states, said Zachary Fabish, senior attorney at Sierra Club. That’s despite high levels of ozone pollution in those states, such as Texas and Utah. 

Fossil fuel industry groups, utilities, and states have also filed legal challenges against the Good Neighbor rule itself at the U.S. Court of Appeals for the District of Columbia Circuit. Petitioners in these cases are asking for a complete halt on the air pollution plan nationwide, including in states that are already implementing the federal rule. Filing groups include oil and gas companies Kinder Morgan and TransCanada Pipelines Limited; the electric utility PacifiCorp; trade associations like the American Chemistry Council, Interstate Natural Gas Association, and National Mining Association; and states including Indiana, Ohio, Utah, and West Virginia. 

Indiana, Ohio, West Virginia, and several industry groups have gone as far as filing emergency applications asking the Supreme Court to block enforcement of the rule while the court challenges play out. Fabish noted that while it’s unclear when or how the Supreme Court will act, the Good Neighbor plan has strong legal footing and is “entirely consistent” with previous federal ozone regulations. Fabish and the Sierra Club, along with other environmental groups, have submitted briefs before federal courts arguing on behalf of the Good Neighbor rule in these cases. 

“We’re all suffering from worse air quality than we should,” he said, adding that the EPA’s recent findings prove the tangible public health benefits that the 12 noncompliant states are missing out on. Ozone’s health impacts disproportionately hurt communities living close to power plants and industrial facilities, which are more likely to be communities of color and low-income communities. The air pollution also has an outsize impact on outdoor workers, children, and people living with chronic illnesses. Moreover, as climate change fuels hotter temperatures, the period of peak ozone levels during the summer will likely grow longer. 

“The reality is, while these court battles are ongoing, people are suffering,” Fabish said.

This story was originally published by Grist with the headline An EPA rule dramatically reduced smog pollution — in states that haven’t sued to stop it on Dec 12, 2023.

The United Nations climate summit in Dubai promises no shortage of drama in its final days — in part because negotiations over whether or not to phase out global fossil fuel use appear to have collapsed. One major goal of this year’s conference, known as COP28, is a “global stocktake” documenting the world’s climate progress and next steps on climate action. But as of Monday, any reference to ending oil and gas use had disappeared from the draft text, leading to widespread anger among climate advocates. Former U.S. Vice President Al Gore declared that the conference was “on the verge of complete failure.”

But the well-publicized debate over fossil fuels threatens to overshadow another major question dogging negotiations as the clock runs out: whether or not world leaders can agree on how to adapt their countries’ infrastructure to withstand global warming. As climate-driven disasters continue to make headlines around the world, the fate of millions in especially vulnerable regions such as Africa and Southeast Asia hinges on this question. 

Though hundreds of international negotiators have spent the past fortnight tangling over a convoluted document that outlines how countries will adapt to climate change, they haven’t yet reached consensus on who exactly will pay for the phenomenally expensive undertaking — or even how to define successful climate adaptation in the first place. As the end of the conference approaches, stakeholders who spoke to Grist described the most recent draft text of the so-called global goal on adaptation as “watered-down,” “vague,” and “confusing.” 

The latest text is “much weakened,” said Pratishtha Singh, a policy analyst at the Canadian chapter of the Climate Action Network, an international advocacy organization. “It’s far from enough in terms of what’s needed by developing countries.” 

The “global goal on adaptation” is a sweeping framework that is supposed to guide how the world prepares for floods, fires, droughts, and other climate disasters. It’s also one of the last and biggest puzzle pieces in the implementation of the landmark Paris Agreement. The 2015 accord had three main pillars: mitigating future climate change by reducing carbon emissions, adapting to future climate disasters, and redressing the loss and damage that can’t be prevented. In the years since it was signed, countries have set goals for cutting carbon emissions and, much more recently, committed hundreds of millions of dollars to a loss-and-damage fund, but they haven’t yet agreed on a framework for climate adaptation.

This year’s COP is the final deadline for putting that framework together, but talks have moved at a snail’s pace in Dubai as negotiators clash over key issues. Despite holding at least eight technical discussions on the adaptation goal earlier this year, negotiators failed to agree on a draft document by the end of the conference’s first week, a sign of dismal progress. A parallel discussion about how vulnerable countries should design their national adaptation plans also broke down, and negotiators have punted that debate to a meeting in Bonn, Germany, next summer.

The reasons for the logjam are multiple. For one, the geopolitics of adaptation finance are highly contentious. In the past, rich countries in Europe and North America have promised to support adaptation in more vulnerable countries, but they have overwhelmingly failed to meet their previous commitments — and even those commitments were hundreds of billions of dollars short of what experts agree is needed. Negotiators from Africa and Southeast Asia entered the adaptation talks at COP28 seeking an acknowledgment that wealthy nations need to do more, plus a mechanism for monitoring international aid, which they say will help ensure that rich countries don’t renege on their funding commitments. Rich countries, however, sought to restrict the final agreement to a discussion of how to develop and implement adaptation policy.

“The main issue is the financial part,” said Idy Niang, a Senegalese negotiator who represents a bloc of the world’s least economically developed countries, during the first week of COP28. “We are not satisfied with the proposal coming from developed countries.”

The most recent draft text includes a lengthy discussion of adaptation finance, including a call for rich countries to pay more and a vague nod to their past failures, but it doesn’t include any clear commitment from wealthy nations. Nor does it outline any mechanism for tracking and monitoring adaptation aid. 

An earlier version included a provision that called for rich countries to provide at least $400 billion in adaptation finance per year by 2030, which would have represented a more than tenfold increase from recent years. But this line disappeared in later talks, as did any reference to equity principles underscoring developed countries’ responsibility to provide adaptation funding. Emilie Beauchamp, a climate policy expert at the International Institute for Sustainable Development, a Canada-based environmental think tank, said such an agreement was a nonstarter for many nations.

“It’s not possible,” she told Grist. “This is an absolute red line for the developed countries.” She called the outcome on finance “quite disappointing.”

A second sticking point in the talks is the question of how to define successful adaptation. Outlining clear targets for adaptation is highly technical and challenging. Unlike goals for mitigating climate change, which can be pegged to the amount of greenhouse gases in the atmosphere or global temperature increase, adaptation responses vary depending on local conditions. There’s no universal yardstick that countries can use to compare their progress. Adaptation efforts on a small island, for instance, look very different compared to a large urban city. 

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“Climate finance is messy, but the global goal on adaptation is even messier,” said Katherine Browne, a researcher at the Stockholm Environmental Institute who studies adaptation. “The problems with finance are political, but the problems with the goal are technical, because they’re trying to find a way to measure something that basically everyone agrees can’t be measured.”

The final framework needs to lay out a system for gauging progress on disaster resilience, but the term “adaptation” is so broad that negotiators have struggled to reach consensus on what categories of adaptation to include, or about how to measure the value of any given infrastructure project. The most recent text contains seven targets to meet by 2030, including a group of core themes for adaptation projects. These include food and water security, disaster readiness, universal healthcare, and land conservation. 

But these broad targets lack specificity and include language like “substantially” reducing poverty, “increasing” infrastructure resilience, and “reducing climate impacts on ecosystems.”

“The language is vague,” said Sandeep Chamling Rai, an adaptation expert with the nonprofit World Wildlife Fund. “Everything is there, but nothing is there.”

Given the unquantifiability inherent in the language, negotiators at COP28 are struggling to come up with a system allowing them to measure progress toward these goals. The best they’ve been able to do is punt the question to future COPs: Negotiators agreed to create a two-year working group that will sift through hundreds of potential adaptation “indicators” and try to create a global standard. These indicators might include the fatality rate for climate disasters, the percent of a population with access to clean water, or the number of acres of forested land in a country. 

The fact that adaptation has stalled out even as other issues move forward is a grim sign for vulnerable countries, said Beauchamp of the International Institute for Sustainable Development.

“If you look at the broader COP … you have the loss-and-damage issue, which is zooming,” she said. “Adaptation, there’s nothing. It’s basically saying that the world does not care about the lives and ecosystems of people who are on the front lines of the climate crisis.”

This is ironic, because the question of whether or not rich nations should help less fortunate countries with climate adaptation has never been that contentious on its own, compared to the jostling over emissions reductions and funding for loss and damage. Unlike the latter, which amounts to paying what are essentially climate reparations, adaptation finance is often seen as a natural extension of the sustainable development framework that guides many forms of international aid.

Negotiators have set up several adaptation funds at previous COPs. Some of them, like the “Least Developed Countries Fund” and the “Special Climate Change Fund,” have been around for more than 20 years. A group of developed countries including Canada and Norway agreed to replenish these bank accounts last week with a new contribution of $174 million.

The problem is that the total amount of money in all these funds isn’t even close to what poorer countries need, and spending has plateaued in recent years. Global adaptation needs are outpacing adaptation finance by as much as $366 billion per year, according to the latest U.N. data, and the need is only growing as the world continues to warm. 

At the same time, rich countries such as the United States have failed to follow through on their prior pledges to fund adaptation: A recent report from the Organization for Economic Cooperation and Development, or OECD, found that international adaptation finance declined by around 15 percent between 2020 and 2021 — a time when it was supposed to be skyrocketing. Even global institutions like the U.N.’s Green Climate Fund only give out a few million dollars at a time for resilience projects. That’s enough to restore a small mangrove forest in Guinea-Bissau or build a wastewater treatment plant in Barbados, but not to armor a city against sea-level rise or help a country’s farming sector prepare for droughts. 

Another reason for the lag in funding is that the private sector has little incentive to invest in adaptation projects. Many banks and investors have backed solar farms and carbon capture projects across the developing world, because these initiatives promise future financial returns when people buy electricity or trade carbon credits. The same can’t be said for sea walls, desalination plants, and coastal conservation areas, which is why adaptation makes up only a quarter of all international climate finance.

While the most recent draft text obliquely nods to the need for scaled-up private finance, climate advocates who spoke to Grist called this a red herring. Singh, of the Climate Action Network, said such language is “wild and unacceptable,” given both private funding’s insufficiency compared to government-scale financing and the potential for private ventures to saddle developing countries with burdensome debt.

The United States, meanwhile, is championing the private sector as an adaptation savior. U.S. climate envoy John Kerry unveiled a report last week arguing that adaptation is profitable for the private sector, because companies can make money by protecting their supply chains against disasters, for instance, or by investing in government adaptation projects. 

“I think a ton of the incentives already exist, and I think the private sector is just awakening to those in a really significant way,” said Nathanial Matthews, the CEO of the Global Resilience Partnership, the coalition of governments and nonprofits that produced the report. He pointed to investors who issued loans to help build a flood-proof highway tunnel in Kuala Lumpur, Malaysia, and made money back through toll revenues.

But vulnerable countries can’t close the adaptation gap without significant public funding from wealthy nations, and that funding has yet to materialize.The next big test will arrive at next year’s COP29, where countries are hoping to ink a major new international funding agreement that will funnel hundreds of billions of dollars to adaptation. 

“We’re debating all these things about adaptation, but there’s absolutely no obligation for countries to implement it and to take it on,” said Beauchamp. “This framework would give a clear signal that the world actually cares about adaptation, but at the moment, we’re putting that signal in the bin.”

This story was originally published by Grist with the headline As UN talks collapse, the world has no plan to adapt to climate change on Dec 11, 2023.

On the very first day of COP28, the United Nations climate conference underway in Dubai, United Arab Emirates, nearly 200 countries adopted an unprecedented agreement: They set up an international fund to aid developing countries addressing the loss and damage caused by climate change. Within a few minutes of the announcement, the so-called loss-and-damage fund had received pledges of $100 million each from the governments of the United Arab Emirates, or UAE, and Germany. 

“We have delivered history today — the first time a decision has been adopted on day one of any COP,” said Sultan Al-Jaber, the COP28 president overseeing the conference as well as the head of the UAE’s national oil company. “The COP28 presidency is committed to delivering outcomes for the climate-vulnerable.”

Germany’s large pledge to the fund was unsurprising, given its wealth and historical responsibility for the climate crisis as an early industrializing nation. Under the United Nations Framework Convention on Climate Change, or UNFCCC, wealthier and larger polluters have a duty to support still-industrializing countries bearing the brunt of climate change. This principle — called “common but differentiated responsibilities” — has often been a major point of contention in U.N. climate negotiations, with lower-income countries charging that wealthy nations are not providing their fair share of finance.   

The UAE’s contribution to the loss-and-damage fund, however, could mark a dramatic shift in how this principle is understood going forward, according to COP observers who spoke to Grist. That’s because the UAE is a newly wealthy country, and one whose emissions only began rising substantially in the 1990s. Under the United Nations classification, it is still a developing country.

“The UAE pledge is significant,” said Joe Thwaites, a climate finance expert at the nonprofit National Resources Defense Council. “You’re starting to see countries say, ‘You know what? We are taking on the responsibilities of a developed country.’” Alex Scott, who leads climate diplomacy for the climate think tank E3G, echoed those comments. The UAE providing money goes to “the heart of the loss-and-damage fund agreement,” which states that “all countries that have the means to do so are invited to contribute to the fund,” she said. 

The timing of the joint pledges from Germany and the UAE — one developed and one developing country — was deliberate. At a press conference a week later, German economic and development state secretary Jochen Flasbarth told reporters that “it was important for us, together with the UAE, that we make a visible statement by having a nontraditional donor, so that the old world of the industrialized nations and the then-developing countries are no longer in the same position.” This “old world” is one in which developed countries are expected to contribute, and all developing countries as defined by the United Nations are solely fund recipients. “We won’t fall back into this old world,” he said.

This bifurcated categorization of countries in the context of climate negotiations originated in 1992, when the UNFCCC treaty was adopted. The framework demarcated countries into two main categories: Annex I and non-Annex I. The former included wealthy industrialized nations such as the United States, Australia, and countries in the European Union, while the latter included countries that fell into the low- and middle-income designations at the time. But the rigid classification provided no room to recognize countries’ economic growth over the next three decades. As South Korea, Singapore, Qatar, and others have prospered, both their emissions and their ability to help poorer countries have risen in tandem.

As a result, industrialized nations like the United States and those in the European Union have urged newly wealthy countries to provide funding to climate-vulnerable countries — even though the U.S. and EU are still responsible for the lion’s share of historical emissions. Such calls have generated tension, with some developing countries interpreting the ask as a way for wealthy nations to abdicate their financial responsibilities to the rest of the world and pit developing countries against each other. Looming over these discussions is the fact that wealthy nations blew past a 2020 deadline to provide $100 billion in climate finance to developing countries. The broken promise eroded trust between developed and developing countries. 

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Nevertheless, the UAE’s pledge has been welcomed by at least some other developing countries.

“It’s a good thing,” said Senegalese negotiator Idy Niang, who advocates on behalf of a bloc of the least-developed nations. “Those who can [contribute] should.” 

The 2015 Paris Agreement belatedly recognized that countries might graduate from non-Annex I to Annex I. The agreement references “developed country parties” and “developing country parties,” but it doesn’t define which countries belong in each category. “It’s never explicitly spelled out anywhere,” said Thwaites. 

Though its contribution was in some ways the most significant, the UAE isn’t the first developing country to contribute to a United Nations climate fund. At least 10 other countries, including South Korea, Mongolia, Mexico, Colombia, Peru, and Qatar, have contributed to the Green Climate Fund and the Adaptation Fund, which were set up to provide support to developing countries. Most of these contributions amounted to a few million dollars apiece. South Korea, however, which has one of the largest economies in the world, provided $100 million in 2014 and followed up with $200 million in 2019 and $300 million earlier this year. 

“South Korea doesn’t get enough credit for that, because they’ve been quietly increasing over the years,” said Thwaites. “They do it without fanfare, and they do it without making a big deal about it.” 

It’s unclear if South Korea will pledge to the loss-and-damage fund. A South Korean negotiator told Grist that he hadn’t heard from senior officials in the government about how much the country would pledge. 

Niang, the Senegalese negotiator, said that while contributions from wealthy developing countries are welcome, the responsibility to provide funding as underscored in the UNFCCC still lies with the developed countries who have emitted the most carbon over their histories. “We need to reaffirm in the decision text that the historical responsibility and the common but differentiated responsibility is there,” he said. “We need to go back to the convention. The convention does not recognize that Korea or UAE are responsible.”

Still, the UAE pledge has become the most prominent example of a wealthy developing nation providing climate aid. It’s also the first Gulf state to provide substantial funding; while Qatar pledged to the adaptation fund in 2021, its $500,000 contribution was largely symbolic. Thwaites said that the UAE pledge will put pressure on Saudi Arabia to step up. 

“They have typically been the big holdouts here, but when their neighbor and peer and quite close ally is willing to step up with not just a small token amount but the joint second-biggest pledge to this new fund, that’s really significant,” said Thwaites. “The Saudis are going to be feeling the pressure.” (Saudi officials did not respond to Grist’s questions, and UAE officials declined to comment about the pledge.)

One big question is whether any pressure will be felt by China, which is by far the largest national emitter of carbon dioxide in the world at present. Wealthy countries have long been pressuring China to contribute to international climate aid. In the 1990s, when the United Nations classification was established, China was much, much poorer and its emissions were low. But its rapid economic growth, unprecedented in world history, took off around that time; as a result, its emissions surpassed those of the U.S. by the mid-2000s. The country has provided some climate aid outside of United Nations funds and also contributed nearly $130 million to the Green Environment Facility, which has a broader mandate than just tackling climate change. But it hasn’t met calls for more substantial funding, and last year Chinese climate envoy Xie Zhenhua said it wouldn’t contribute to the loss-and-damage fund.

“China does want to position itself as a supporter of Global South nations,” said Alex Wang, a law professor at the University of California, Los Angeles, where he studies Chinese environmental governance. “Right now there is a sort of geopolitical competition among the West and in China to win the favor of Global South countries.”

The commitments to the loss-and-damage fund over the last week came as a relief to many. Negotiators and climate advocates feared that they would spend precious time and energy at COP28 debating details of the fund’s operations and that wealthy countries wouldn’t pledge money. The World Bank, which is expected to host the fund for the first four years, had announced that it needed $200 million to just set up the fund. The Germany and UAE pledges alone ensured the fund would have the capital it needed to get started. So far, roughly $725 million in pledges — including those of the German and Emirati governments — have poured in.

“It was very important that loss-and-damage finance is not a bargaining chip,” Jennifer Morgan, Germany’s climate envoy, told Grist. “There is a saying in German: ‘A heavy stone has fallen from your heart.’ It describes well what negotiators said they felt. Many are relieved. Now there is more space to discuss other issues.”

Editor’s note: The Natural Resources Defense Council is an advertiser with Grist. Advertisers have no role in Grist’s editorial decisions.

This story was originally published by Grist with the headline How two $100 million pledges shook an ‘old world’ order at COP28 on Dec 11, 2023.