After lengthy and heated negotiations, diplomats have largely agreed on a draft framework for a new UN fund to help nations recover from the “loss and damage” caused by climate change.
Last year’s COP27 summit in Egypt marked a victory for developing nations when they secured agreement on this fund – an idea many had been advancing for decades.
A transitional committee composed of members from developed and developing countries was tasked with discussing everything from who would pay into this fund to where it would be located, ahead of a final decision due to be taken at COP28 in Dubai next month.
Meetings overran this year as members clashed over long-standing grievances. Developing countries did not want to see the fund based at the US-dominated World Bank and wanted to ensure it was accessible for as much of the global south as possible.
Developed countries wanted to see funds coming from sources besides their public coffers, including those of the wealthiest developing nations, such as China and Saudi Arabia.
In the end, the final committee meeting held last weekend in Abu Dhabi settled on a draft proposal that would see the new fund housed at the World Bank for at least four years.
Neither developed countries nor anyone else would be obliged to pay into the fund.
This proposal will now form the basis of a final decision by leaders at COP28.
While the committee’s recommendations were adopted by consensus, a last-minute objection from the US provides an early indication that those talks at the UN’s upcoming climate summit may not progress smoothly.
- What is ‘loss and damage’ and what was agreed at COP27?
- What progress has been made in setting up a loss-and-damage fund since COP27?
- Why are countries divided over the new fund?
- How much money is needed to deal with loss and damage?
- What options are being considered to raise money for loss and damage?
- How could countries claim money from the loss-and-damage fund?
What is ‘loss and damage’ and what was agreed at COP27?
“Loss and damage” is a term used to describe how climate change is already causing serious and, in many cases, irreversible impacts around the world – particularly in vulnerable communities.
For example, more intense and frequent extreme weather events are causing the loss of human life and damages to properties and cropland.
The issue is recognised in Article 8 of the Paris Agreement, which says parties “recognise the importance of averting, minimising and addressing loss and damage associated with the adverse effects of climate change”. However, the Paris text did not commit countries – developed or otherwise – to providing funds for loss and damage.
At UN climate talks, the term is often used by nations and organisations to argue for developed, high-emitting nations to be held responsible for losses incurred in poorer regions, which are the least responsible for climate change. (Because of this, the term “loss and damage” is sometimes described as meaning “climate reparations”.)
At the COP27 climate summit, all countries agreed to set up a fund to pay for loss and damage. This came after a 30-year fight for such a fund led by small island states and developing countries.
After much back and forth between developed countries and the G77 and China – a major group of developing countries representing six out of every seven people in the world – a text was produced close to the end of the summit that “decided” to establish a new loss-and-damage fund.
This same text said that a “transitional committee” should be established, dedicated to coming up with a plan for how the fund would work in practice.
It added that a decision “related to the new funding arrangements” should be adopted “no later than at COP28”.
It was also decided that the committee should be composed of 24 members, including 14 members from developing countries and 10 from developed nations.
What progress has been made in setting up a loss-and-damage fund since COP27?
The transitional committee held four scheduled meetings and two workshops in Egypt, Germany, Thailand and the Dominican Republic during March-October 2023.
After the failure of the fourth meeting to reach consensus, it also held an emergency fifth meeting in Abu Dhabi from 3-4 November 2023.
The committee’s task was to come up with a series of recommendations for the loss-and-damage fund that could then be approved by leaders at COP28.
This included establishing which financial sources would feed into the fund, what kind of activities it could support and how it would work alongside existing funds. The recommendations also covered where the fund would be located and how it would be structured and governed.
Over the course of these meetings, nations and civil society groups submitted proposals for the fund. These ideas were assessed by the committee and, ultimately, fed into a series of documents that were subject to further scrutiny and debate.
As talks entered extra time in Abu Dhabi, the committee co-chairs presented members with what one of them, Outi Honkatukia of Finland, called a “take it or leave it package”. This attempted to distil all the competing views into a viable set of recommendations that could form the basis of a COP28 decision.
After passing up opportunities to object earlier on, US committee member Christina Chan raised a last-minute concern about language “urg[ing]” developed countries to support the fund.
Throughout the talks, the US had consistently pushed back against any language that compelled developed countries to pay into the fund. (While “urge” is towards the stronger end of the lexicon of UN legal drafting, it does not, in fact, imply compulsion.)
Chan asked for this text to be bracketed, indicating it had not been resolved.
The co-chairs reasoned that all members had objections to the final text for various reasons, but the committee had already reached consensus and it was too late to reopen negotiations. “Once we start bracketing, that doesn’t stop,” Honkatukia told the meeting.
Given this, Chan said the US did not view the final decision as reaching consensus. Teresa Anderson, global lead on climate justice at ActionAid International, tells Carbon Brief that the US’s “forceful objections to the transitional committee’s recommendations suggest that this text might not sail smoothly through COP28”.
Why are countries divided over the new fund?
Tensions ran high throughout the five transitional committee meetings as long-standing arguments between representatives from developed and developing nations were revisited.
Developing country committee members reportedly threatened to walk out, accusing a small group of nations – particularly the US – of pushing them into a “Faustian bargain”, involving many compromises, in order to make progress on the loss-and-damage fund.
Below are some of the key areas that sparked divisions within the committee.
Who would receive money from the fund?
At COP27, nations agreed to create the fund to assist “developing nations, especially those that are particularly vulnerable” to climate change. However, the interpretation of “particularly vulnerable” remained a point of contention.
EU committee members, for example, suggested that the fund should only serve least developed countries (LDCs), small-island states and “other particularly vulnerable countries based on specific eligibility criteria”.
Members of the G77 and China resisted what they perceived as efforts to narrow the focus of the fund. In a statement released towards the end of the fourth meeting, Cuban G77 chair Pedro Pedroso Cuesta said:
“We must ensure that the administrative arrangements of the fund do not impede direct access to all developing countries particularly vulnerable to climate change.”
Sherry Rehman, former climate minister of Pakistan and G77 chair at COP27, told a press conference that the fund should be “more inclusive” – citing flood-struck Pakistan and Libya as middle-income nations that might not be able to access it, should more limited criteria be adopted.
The final text agreed by the committee does not specify which countries would be eligible to receive funds. Instead, it says the fund’s board would develop a “resource allocation system”, based on the available evidence and with a minimum percentage allocated to LDCs and small islands.
Who would contribute to the fund?
Currently, only a small group of “Annex II” countries, which were deemed “developed” when the original UN climate treaty was agreed in 1992, are obliged to provide climate finance.
These parties have consistently failed to meet their existing climate-finance pledges to developing countries.
However, neither the 1992 climate convention nor the Paris Agreement say who should give money to pay for climate change loss and damage.
The US and European nations have stressed the need to share the burden with wealthier emerging economies – specifically singling out China and Gulf states, such as Saudi Arabia. UK climate minister Graham Stuart told a UN ministerial meeting in September:
“It will simply not be possible to deliver what is needed if we stay trapped in outdated categories from decades ago and we must break out of this to get a positive outcome at COP28.”
Developed countries also say that scaling up the fund sufficiently would mean opening it up to contributions from non-government sources, including the private sector and humanitarian groups. (See: What options are being considered to raise money for loss and damage?)
Developing countries are not entirely opposed to drawing finance from this “mosaic” of funding sources. However, as one joint submission by committee members from developing countries states, they want to keep the focus primarily on grant-based finance from developed countries.
Referencing climate finance more broadly, the Saudi Arabian government voiced its concerns in a statement delivered at the pre-COP event in Abu Dhabi and seen by Carbon Brief. The statement said Saudi Arabia expected “those who have clear obligations to own up to them and not attempt to pass on the baton to other countries or entities outside the process”.
Brazilian diplomat Matheus Bastos, representing the G77 and China, called for language reflecting the “principles and provisions” of the UNFCCC and the Paris Agreement.
He said the function of this would be to make it clear, as those treaties do, that developed countries are obliged to provide climate finance. In the view of the G77, this extended to the “full costs incurred” in developing countries, including not only mitigation and adaptation but also loss and damage, Bastos added. The US said it would not accept this text.
Ultimately, the final recommendations would not oblige developed countries to pay into the fund. They also mention a “wide variety of sources of funding”.
Developed countries are asked to “take the lead” in providing start-up finance for the fund, rather than loss-and-damage relief.
In addition, the recommended text “urge[s]” developed countries to “continue to provide support”, while other countries would be subject to a weaker exhortation “enourag[ing]” them to do the same “on a voluntary basis”. (This is the element that the US raised its last-minute objection to as the meeting came to a close.)
Where would the fund be located?
One major issue blocking progress was the location of the loss-and-damage fund.
The US and the EU wanted to see the fund hosted by the US-based World Bank, a proposal that G77 and China members strongly opposed.
They argued that World Bank finance is based not on grants but on loans, which are not desirable for debt-burdened countries in the global south. They also said the bank is not set up to allow fast, direct access of the kind required when dealing with climate disasters.
In addition, they said it would not be accountable to all parties, due to the dominance of the US – its largest shareholder – and other major donors in decision-making.
Diann Black-Layne, a committee member representing the Alliance of Small Island States (AOSIS) said the World Bank would charge a hosting fee of 17%, which she described as “highway robbery…pure gangster behaviour”:
“[That] means that the biggest beneficiary of this fund will be the World Bank. The 10,000 employees of the World Bank will get more money from this fund than the 63 million people of the population of AOSIS countries.”
(This sum, which others have placed at 24%, refers to administration costs taken from the fund’s secretariat and is, therefore, not a portion of the total money flowing into the fund. According to the Loss and Damage Collaboration, it would amount to 1-2% of total funds.)
A coalition of nearly 70 US NGOs wrote an open letter to the US negotiating team stating that “the world does not need yet another channel for international finance that is donor-driven and unaccountable to communities in the global south”.
The World Bank issued a statement pushing back against such criticism and emphasising that it could be flexible in how it allowed countries to access loss-and-damage funds.
(This dispute recalls arguments at the 2009 COP15 climate talks in Copenhagen. There, the so-called “Danish text” – which was never adopted – would have “hand[ed] effective control of climate change finance to the World Bank”, the Guardian reported at the time.)
Developing countries argued instead for a new, independent entity operating under the financial mechanism of the UN climate convention itself.
This would be similar to the Green Climate Fund (GCF), which is overseen by a 24-person board that includes an equal number of developed and developing country representatives.
After this dispute prevented consensus at the fourth committee meeting, developing countries came to the final meeting stating that they would accept the World Bank as the host on an “interim” basis. Committee members stressed that they were making a “huge concession” in doing so.
Some developed country members also said they wanted to see a clear pathway to move the fund out of the bank within two years.
In the end, the committee agreed to a text that would establish the World Bank as an interim host of the fund for four years. It included conditions such as allowing communities to access small grants and providing access to countries that are not World Bank members.
Laura Schäfer, a senior advisor in climate risk management at Germanwatch, tells Carbon Brief that while these elements are promising, they should also be “basic conditions” for a loss-and-damage fund.
She says there remain concerns that the World Bank will end up being the fund’s permanent home, an issue that has faced other funds that were meant to be housed there temporarily:
“There is no exit strategy defined in the text, so this basically means if the World Bank performs well and fulfils all the conditions set, it will be the host even after four years.”
One of the key demands of developing countries was that, wherever the loss-and-damage fund ended up being based, it would have the status of a standalone entity under the UNFCCC. However, civil-society groups said the final language on this in the text was unclear.
The GCF, seen by some as a model for the new fund, is clearly designated as an “operating entity” under the UN climate convention’s financial mechanism. By contrast, the proposed text for the World Bank-based loss-and-damage fund describes it only as being “entrusted with the operation of the financial mechanism”.
This “somewhat murky” language is expected to face legal scrutiny in the weeks ahead of COP28.
Other issues
In an earlier draft text released at the fourth meeting, developing-country committee members disputed a line stating that the fund “does not involve liability or compensation”.
This has long been a fundamental issue for the US, in particular, because it does not want to be held legally accountable for its high historical emissions.
US committee member Chan told other members it was “absolutely unacceptable” that this was viewed as “a point of contention”:
“This was a key piece of the understanding that led to the agreement for this agenda item at Sharm el-Sheikh.”
She said that if this text was removed, “we don’t see a pathway to an outcome” on the fund overall. This language remained in the final recommendations.
Civil society groups also raised concerns about the removal of language committing to human-rights protections from the final recommendations.
How much money is needed to deal with loss and damage?
Developing-country transitional committee members made a submission in September calling for “at least” $100bn a year in loss-and-damage funding by 2030.
They cited a UN-commissioned report by the Independent High-Level Expert Group on Climate Finance, which says “recent events suggest [costs] could be as high as $150-300bn by 2030 to cope with immediate impacts and for subsequent reconstruction”.
The expert report also emphasises the uncertainty of these figures, adding that climate models “likely underestimate” loss-and-damage costs in developing countries.
Indeed, the expert group’s figures are towards the lower end of existing estimates. Their report cites other studies as placing the costs of “residual damages” from climate hazards far higher – as much as £290-580bn annually in developing countries by 2030.
With this in mind, developing country representatives emphasised that a £100bn goal “is not meant as a ceiling, but rather as a minimum commitment.”
By contrast, US and EU submissions did not back any specific targets.
A draft of the final outcome, released at the fourth meeting in October, included a section titled “scale”, with the developing countries’ proposal in square brackets, meaning it had not yet been agreed by all parties.
However, US committee member Chan said that she would not accept such a figure in the document. “This is not part of our mandate, it’s not part of what is in the Sharm decision,” she said.
Ultimately, any reference to the scale of funding was scrubbed from the final recommendations.
What options are being considered to raise money for loss and damage?
One of the transitional committee’s goals was to “take into account the landscape of institutions and solutions relevant to responding to loss and damage”.
As part of the deal that emerged from COP27, countries commissioned the UNFCCC secretariat to review existing loss-and-damage funding and identify “gaps existing within the landscape”.
The secretariat released a synthesis report summarising its findings in May 2023, which has fed into the decisions made by the committee.
It identifies a variety of existing sources that are relevant for tackling loss and damage, including adaptation funds and insurance facilities.
Meanwhile, scientists and civil society groups have proposed alternative sources for loss-and-damage funds, such as taxes or levies on fossil fuels and global shipping.
One paper suggests allocating hundreds of billions of dollars in “climate reparations” charges to fossil-fuel majors such as, for example, Saudi Aramco and ExxonMobil.
Earlier versions of the transitional committee’s recommendations reflected a variety of potential sources, again in square brackets. These included private entities, NGOs and “special drawing rights (SDRs), levies, voluntary carbon market or international pricing mechanisms”.
However, the question of funding sources is contentious as, broadly speaking, developing countries have tried to keep the emphasis on grant-based finance from developed countries.
Developed countries, meanwhile, say that “innovative” new sources must be explored to raise money on a sufficient scale.
Speaking at the fourth committee meeting for the G77 and China, Brazilian diplomat Bastos told fellow committee members that they had “repeatedly asked for deletion” of language around raising money for the fund from the voluntary carbon market and other pricing mechanisms.
The final recommendation text does not include much detail on types of funding, but mentions a “wide variety of sources”, as well as saying it will be open to public, private and “innovative” contributions. It also specifies that it should be open to receiving funds from philanthropic foundations.
It says the fund’s board will prepare a strategy to “mobilise new, additional, predictable and adequate financial resources from all sources of funding”.
How could countries claim money from the loss-and-damage fund?
As with many aspects of the fund, the question of how countries could actually claim money after experiencing loss and damage is still far from being answered.
Traditionally, countries access UN climate funds by filing lengthy project proposals in a process that typically takes several years.
For the loss-and-damage fund, some countries are instead calling for a “trigger-based mechanism” to allow them to claim funds immediately in the wake of extreme weather events, explains Zoha Shawoo, a scientist working on loss and damage at the Stockholm Environment Institute (SEI). She tells Carbon Brief:
“Something like that could work if there is an immediate recovery and relief window. But we know that developed countries have been saying that that is largely covered by humanitarian aid, so maybe the fund should focus more on medium- and long-term recovery.”
There are also still question marks around what sort of losses and damages countries would be able to claim for.
Loss and damage can be caused by immediate climate impacts, such as more intense and frequent extreme weather events, as well as impacts that gradually worsen over time, such as sea level rise and the retreat of glaciers.
The study of how climate change is affecting the likelihood and severity of extreme weather events is known as “attribution” science.
Attribution is playing an increasingly important role in proving liability in climate court cases. For example, a recent landmark court case won by young climate activists in Montana relied heavily on attribution science.
This has prompted some to question whether attribution could play a role in helping countries to make claims from the loss-and-damage fund.
However, Shawoo notes it may not be preferable for developed or developing countries to use attribution science in deciding who should access loss-and-damage funding:
“First, developed countries may not be comfortable with being held liable for particular losses. But then I think it could potentially also be a burden on developing countries to have to prove that a certain event is due to climate change. So I don’t think either side would want that.”
There still could be a role for attribution science in helping to provide evidence for the claims of developing countries however, she adds:
“Rapid attribution studies could provide additional evidence that developing countries could use to back up their claims and access funding. Not a formal requirement, but just something to give them additional leverage.”
So far, there has been little cross-talk between attribution scientists and those involved in the UN process for operationalising the loss-and-damage fund, Dr Izidine Pinto, a scientist from the World Weather Attribution initiative, tells Carbon Brief:
“Right now we’re separate because no one knows how the loss-and-damage fund is going to work.”
He adds that attribution may only be able to play a limited role in determining how much money countries should be able to claim from the loss-and-damage fund:
“Attribution studies are just one side of the coin. Attribution is saying that the amount of rainfall or heat was made more likely by climate change. But vulnerability is the other side of the coin, because the same amount of rainfall can destroy a house in region A but not B. So it’s very tricky to just focus on attribution without looking at vulnerability and exposure.”
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Q&A: The fight over the ‘loss-and-damage fund’ for climate change
In 2026, the dangers of fossil fuel dependence have been laid bare like never before. The illegal invasion of Iran has brought pain and destruction to millions across the Middle East and triggered a global energy crisis impacting us all. Communities in the Pacific have been hit especially hard by rising fuel prices, and Australians have seen their cost-of-living woes deepen.
Such moments of crisis and upheaval can lead to positive transformation. But only when leaders act with courage and foresight.
There is no clearer statement of a government’s plans and priorities for the nation than its budget — how it plans to raise money, and what services, communities, and industries it will invest in.
As we count down the days to the 2026-27 Federal Budget, will the Albanese Government deliver a budget for our times? One that starts breaking the shackles of fossil fuels, accelerates the shift to clean energy, protects nature, and sees us work together with other countries towards a safer future for all? Or one that doubles down on coal and gas, locks in more climate chaos, and keeps us beholden to the whims of tyrants and billionaires.
Here’s what we think the moment demands, and what we’ll be looking out for when Treasurer Jim Chalmers steps up to the dispatch box on 12 May.
1. Stop fuelling the fire
2. Make big polluters pay
3. Support everyone to be part of the solution
4. Build the industries of the future
5. Build community resilience
6. Be a better neighbour
7. Protect nature
1. Stop fuelling the fire
In mid-April, Pacific governments and civil society met to redouble their efforts towards a Fossil Fuel Free Pacific. Moving beyond coal, oil and gas is fundamental to limiting warming to 1.5°C — a survival line for vulnerable communities and ecosystems. And as our Head of Pacific, Shiva Gounden, explained, it is “also a path of liberation that frees us from expensive, extractive and polluting fossil fuel imports and uplifts our communities”.
Pacific countries are at the forefront of growing global momentum towards a just transition away from fossil fuels, and it is way past time for Australia to get with the program. It is no longer a question of whether fossil fuel extraction will end, but whether that end will be appropriately managed and see communities supported through the transition, or whether it will be chaotic and disruptive.
So will this budget support the transition away from fossil fuels, or will it continue to prop up coal and gas?
When it comes to sensible moves the government can make right now, one stands out as a genuine low hanging fruit. Mining companies get a full rebate of the excise (or tax) that the rest of us pay on diesel fuel. This lowers their operating costs and acts as a large, ongoing subsidy on fossil fuel production — to the tune of $11 billion a year!
Greenpeace has long called for coal and gas companies to be removed from this outdated scheme, and for the billions in savings to be used to support the clean energy transition and to assist communities with adapting to the impacts of climate change. Will we see the government finally make this long overdue change, or will it once again cave to the fossil fuel lobby?
2. Make big polluters pay
While our communities continue to suffer the escalating costs of climate-fuelled disasters, our Government continues to support a massive expansion of Australia’s export gas industry. Gas is a dangerous fossil fuel, with every tonne of Australian gas adding to the global heating that endangers us all.
Moreover, companies like Santos and Woodside pay very little tax for the privilege of digging up and selling Australians’ natural endowment of fossil gas. Remarkably, the Government currently raises more tax from beer than from the Petroleum Resource Rent Tax (PRRT) — the main tax on gas profits.
Momentum has been building to replace or supplement the PRRT with a 25% tax on gas exports. This could raise up to $17 billion a year — funds that, like savings from removing the diesel tax rebate for coal and gas companies, could be spent on supporting the clean energy transition and assisting communities with adapting to worsening fires, floods, heatwaves and other impacts of climate change.
As politicians arrive in Canberra for budget week, they will be confronted by billboards calling for a fair tax on gas exports. The push now has the support of dozens of organisations and a growing number of politicians. Let’s hope the Treasurer seizes this rare window for reform.
3. Support everyone to be part of the solution
As the price of petrol and diesel rises, electric vehicles (EVs) are helping people cut fuel use and save money. However, while EV sales have jumped since the invasion of Iran sent fuel prices rising, they still only make up a fraction of total new car sales. This budget should help more Australians switch to electric vehicles and, even more importantly, enable more Australians to get around by bike, on foot, and on public transport. This means maintaining the EV discount, investing in public and active transport, and removing tax breaks for fuel-hungry utes and vans.
Millions of Australians already enjoy the cost-saving benefits of rooftop solar, batteries, and getting off gas. This budget should enable more households, and in particular those on lower incomes, to access these benefits. This means maintaining the Cheaper Home Batteries Program, and building on the Household Energy Upgrades Fund.
4. Build the industries of the future
If we’re to transition away from fossil fuels, we need to be building the clean industries of the future.
No state is more pivotal to Australia’s energy and industrial transformation than Western Australia. The state has unrivaled potential for renewable energy development and for replacing fossil fuel exports with clean exports like green iron. Such industries offer Western Australia the promise of a vibrant economic future, and for Australia to play an outsized positive role in the world’s efforts to reduce emissions.
However, realising this potential will require focussed support from the Federal Government. Among other measures, Greenpeace has recommended establishing the Australasian Green Iron Corporation as a joint venture between the Australian and Western Australian governments, a key trading partner, a major iron ore miner and steel makers. This would unite these central players around the complex task of building a large-scale green iron industry, and unleash Western Australia’s potential as a green industrial powerhouse.
5. Build community resilience
Believe it or not, our Government continues to spend far more on subsidising fossil fuel production — and on clearing up after climate-fuelled disasters — than it does on helping communities and industries reduce disaster costs through practical, proven methods for building their resilience.
Last year, the Government estimated that the cost of recovery from disasters like the devastating 2022 east coast floods on 2019-20 fires will rise to $13.5 billion. For contrast, the Government’s Disaster Ready Fund – the main national source of funding for disaster resilience – invests just $200 million a year in grants to support disaster preparedness and resilience building. This is despite the Government’s own National Emergency Management Agency (NEMA) estimating that for every dollar spent on disaster risk reduction, there is a $9.60 return on investment.
By redirecting funds currently spent on subsidising fossil fuel production, the Government can both stop incentivising climate destruction in the first place, and ensure that Australian communities and industries are better protected from worsening climate extremes.
No communities have more to lose from climate damage, or carry more knowledge of practical solutions, than Aboriginal and Torres Strait Islander peoples. The budget should include a dedicated First Nations climate adaptation fund, ensuring First Nations communities can develop solutions on their own terms, and access the support they need with adapting to extreme heat, coastal erosion and other escalating challenges.
6. Be a better neighbour
The global response to climate change depends on the adequate flow of support from developed economies like Australia to lower income nations with shifting to clean energy, adapting to the impacts of climate change, and addressing loss and damage.
Such support is vital to building trust and cooperation, reducing global emissions, and supporting regional and global security by enabling countries to transition away from fossil fuels and build greater resilience.
Despite its central leadership role in this year’s global climate negotiations, our Government is yet to announce its contribution to international climate finance for 2025-2030. Greenpeace recommends a commitment of $11 billion for this five year period, which is aligned with the global goal under the Paris Agreement to triple international climate finance from current levels.
This new commitment should include additional funding to address loss and damage from climate change and a substantial contribution to the Pacific Resilience Facility, ensuring support is accessible to countries and communities that need it most. It should also see Australia get firmly behind the vision of a Fossil Fuel Free Pacific.
7. Protect nature
There is no safe planet without protection of the ecosystems and biodiversity that sustain us and regulate our climate.
Last year the Parliament passed important and long overdue reforms to our national environment laws to ensure better protection for our forests and other critical ecosystems. However, the Government will need to provide sufficient funding to ensure the effective implementation of these reforms.
Greenpeace has recommended $500 million over four years to establish the National Environment Agency — the body responsible for enforcing and monitoring the new laws — and a further $50 million to Environment Information Australia for providing critical information and tools.
Further resourcing will also be required to fulfil the crucial goal of fully protecting 30% of Australian land and seas by 2030. This should include $1 billion towards ending deforestation by enabling farmers and loggers to retool away from destructive practices, $2 billion a year for restoring degraded lands, $5 billion for purchasing and creating new protected areas, and $200 million for expanding domestic and international marine protected areas.
Conclusion
This is not the first time that conflict overseas has triggered an energy crisis, or that a budget has been preceded by a summer of extreme weather disasters, highlighting the urgent need to phase out fossil fuels. What’s different in 2026 is the availability of solutions. Renewable energy is now cheaper and more accessible than ever before. Global momentum is firmly behind the transition away from fossil fuels. The Albanese Government, with its overwhelming majority, has the chance to set our nation up for the future, or keep us stranded in the past. Let’s hope it makes some smart choices.
The 2026 budget test: Will Australia break free from fossil fuels?
Anne Jellema is Executive Director of 350.org.
The war on Iran and Lebanon is a deeply unjust and devastating conflict, killing civilians at home, destroying lives, and at the same time sending shockwaves through the global economy. We, at 350.org, have calculated, drawing on price forecasts from the International Monetary Fund (IMF) and Goldman Sachs, just how much that volatility is costing us.
Even under the IMF’s baseline scenario – a de facto “best case” scenario with a near-term end to the war and related supply chain disruptions – oil and gas price spikes are projected to cost households and businesses globally more than $600 billion by the end of the year. Under the IMF’s “adverse scenario”, with prolonged conflict and sustained price pressures, we estimate those additional costs could exceed $1 trillion, even after accounting for reduced demand.
Which is why we urgently need a power shift. Governments are under growing pressure to respond to rising fuel and food costs and deepening energy poverty. And it’s becoming clearer to both voters and elected officials that fossil dependence is not only expensive and risky, but unnecessary.
People who can are voting with their wallets: sales of solar panels and electric vehicles are increasing sharply in many countries. But the working people who have nothing to spare, ironically, are the ones stuck with using oil and gas that is either exorbitantly expensive or simply impossible to get.
Drain on households and economies
In India, street food vendors can’t get cooking gas and in the Philippines, fishermen can’t afford to take their boats to sea. A quarter of British people say that rising energy tariffs will leave them completely unable to pay their bills. This is the moment for a global push to bring abundant and affordable clean energy to all.
In April, we released Out of Pocket, our new research report on how fossil fuels are draining households and economies. We were surprised by the scale of what we found. For decades, governments have reassured people that energy price spikes are unfortunate but unavoidable – the result of distant conflicts, market forces or geopolitical shocks beyond anyone’s control. But the numbers tell a different story.
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Santa Marta: Ministers grapple with practicalities of fossil fuel phase-out
Around 60 governments that want to make progress on transitioning away from coal, oil and gas are meeting in Colombia to work out how they can do it an equitable way -
Why the transition beyond fossil fuels depends on cities and collective action
Cities will help identify concrete pathways for an equitable shift to clean energy at the Santa Marta conference, with C40 members aiming to halve their fossil fuel use by 2030
What we are living through today is not an energy crisis. It is a fossil fuel crisis. In just the first 50 days of the Middle East conflict, soaring oil and gas prices have siphoned an estimated $158 billion–$166 billion from households and businesses worldwide. That is money extracted directly from people’s pockets and transferred, almost instantly, into fossil fuel company balance sheets. And this figure only captures the immediate impact of price spikes, not the permanent economic drain of fossil dependence. Fossil fuels don’t just cost us once, they cost us over and over again.
First, through our bills. Every time there is a war, an embargo or a supply disruption, fossil fuel prices surge. For ordinary people, this means higher costs for energy, transport and food. Many Global South countries have little or no fiscal space to buffer the shock; instead, workers and families pay the price.
Second, through our taxes. Governments around the world continue to pour vast sums of public money into fossil fuel subsidies. These are often justified as a way to protect the most vulnerable at the petrol pump or in their homes. But in reality, the benefits are overwhelmingly captured by wealthier households and corporations. The poorest 20% receive just a fraction of this support, while public finances are drained.
Third, through climate impacts. New research across more than 24,000 global locations gives a granular account of the true costs of extreme heat, sea level rise and falling agricultural yields. Using this data to update IMF modelling of the social cost of carbon, we found that fossil fuel impacts on health and livelihoods amount to over $9 trillion a year. This is the biggest subsidy of all, because these massive and mounting costs are not charged to Big Oil – they are paid for by governments and households, with the poorest shouldering the lion’s share.
Massive transfer of wealth to fossil fuel industry
Adding up direct subsidies, tax breaks and the unpaid bill for climate damages, the total transfer of wealth from the public to the fossil fuel industry amounts to $12 trillion even in a “normal” year without a global oil shock. That’s more than 50% higher than the IMF has previously estimated, and equivalent to a staggering $23 million a minute.
The fossil fuel industry has become extraordinarily adept at profiting from instability. When conflict drives up prices, companies do not lose, they gain. In the current crisis, oil producers and commodity traders are on track to secure tens of billions of dollars in additional windfall profits, even as households face rising bills and governments struggle to manage the fallout.
Fossil fuel crisis offers chance to speed up energy transition, ministers say
This growing disconnect is impossible to ignore. Investors are advised to buy into fossil fuel firms precisely because of their ability to generate profits in times of crisis. Meanwhile, ordinary people are told to tighten their belts.
In 2026, unlike during the oil shocks of the 1970s, clean energy is no longer a distant alternative. Now, even more than when gas prices spiked due to Russia’s invasion of Ukraine in 2022, renewables are often the cheapest option available. Solar and wind can be deployed quickly, at scale, and without the volatility that defines fossil fuel markets.
How to transition from dirty to clean energy
The solutions are clear. Governments must implement permanent windfall taxes on fossil fuel companies to ensure that extraordinary profits generated during crises are redirected to support households. These revenues can be used to reduce energy bills, invest in public services, and accelerate the rollout of clean energy.
Second, we must shift subsidies away from fossil fuels and towards renewable solutions, particularly those that can be deployed quickly and equitably, such as rooftop and community solar. This is not just about cutting emissions. It is about building a more stable, fair and resilient energy system.
Finally, we need binding plans to phase out fossil fuels altogether, replacing them with homegrown renewable energy that can shield economies from future shocks. Because what the current crisis has made clear is this: as long as we remain dependent on fossil fuels, we remain vulnerable – to conflict, to price volatility and to the escalating impacts of climate change.
The true price of fossil fuels is no longer hidden. It is visible in rising bills, strained public finances and communities pushed to the brink. And it is being paid, every day, by ordinary people around the world.
It’s time for the great power shift.
Full details on the methodology used for this report are available here.
The Great Power Shift is a new campaign by 350.org global campaign to pressure governments to bring down energy bills for good by ending fossil fuel dependence and investing in clean, affordable energy for all
The post What fossil fuels really cost us in a world at war appeared first on Climate Home News.
Computer models that use artificial intelligence (AI) cannot forecast record-breaking weather as well as traditional climate models, according to a new study.
It is well established that AI climate models have surpassed traditional, physics-based climate models for some aspects of weather forecasting.
However, new research published in Science Advances finds that AI models still “underperform” in forecasting record-breaking extreme weather events.
The authors tested how well both AI and traditional weather models could simulate thousands of record-breaking hot, cold and windy events that were recorded in 2018 and 2020.
They find that AI models underestimate both the frequency and intensity of record-breaking events.
A study author tells Carbon Brief that the analysis is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
AI weather forecasts
Extreme weather events, such as floods, heatwaves and storms, drive hundreds of billions of dollars in damages every year through the destruction of cropland, impacts on infrastructure and the loss of human life.
Many governments have developed early warning systems to prepare the general public and mobilise disaster response teams for imminent extreme weather events. These systems have been shown to minimise damages and save lives.
For decades, scientists have used numerical weather prediction models to simulate the weather days, or weeks, in advance.
These models rely on a series of complex equations that reproduce processes in the atmosphere and ocean. The equations are rooted in fundamental laws of physics, based on decades of research by climate scientists. As a result, these models are referred to as “physics-based” models.
However, AI-based climate models are gaining popularity as an alternative for weather forecasting.
Instead of using physics, these models use a statistical approach. Scientists present AI models with a large batch of historical weather data, known as training data, which teaches the model to recognise patterns and make predictions.
To produce a new forecast, the AI model draws on this bank of knowledge and follows the patterns that it knows.
There are many advantages to AI weather forecasts. For example, they use less computing power than physics-based models, because they do not have to run thousands of mathematical equations.
Furthermore, many AI models have been found to perform better than traditional physics-based models at weather forecasts.
However, these models also have drawbacks.
Study author Prof Sebastian Engelke, a professor at the research institute for statistics and information science at the University of Geneva, tells Carbon Brief that AI models “depend strongly on the training data” and are “relatively constrained to the range of this dataset”.
In other words, AI models struggle to simulate brand new weather patterns, instead tending forecast events of a similar strength to those seen before. As a result, it is unclear whether AI models can simulate unprecedented, record-breaking extreme events that, by definition, have never been seen before.
Record-breaking extremes
Extreme weather events are becoming more intense and frequent as the climate warms. Record-shattering extremes – those that break existing records by large margins – are also becoming more regular.
For example, during a 2021 heatwave in north-western US and Canada, local temperature records were broken by up to 5C. According to one study, the heatwave would have been “impossible” without human-caused climate change.
The new study explores how accurately AI and physics-based models can forecast such record-breaking extremes.
First, the authors identified every heat, cold and wind event in 2018 and 2020 that broke a record previously set between 1979 and 2017. (They chose these years due to data availability.) The authors use ERA5 reanalysis data to identify these records.
This produced a large sample size of record-breaking events. For the year 2020, the authors identified around 160,000 heat, 33,000 cold and 53,000 wind records, spread across different seasons and world regions.
For their traditional, physics-based model, the authors selected the High RESolution forecast model from the Integrated Forecasting System of the European Centre for Medium-Range Weather Forecasts. This is “widely considered as the leading physics-based numerical weather prediction model”, according to the paper.
They also selected three “leading” AI weather models – the GraphCast model from Google Deepmind, Pangu-Weather developed by Huawei Cloud and the Fuxi model, developed by a team from Shanghai.
The authors then assessed how accurately each model could forecast the extremes observed in the year 2020.
Dr Zhongwei Zhang is the lead author on the study and a researcher at Karlsruhe Institute of Technology. He tells Carbon Brief that many AI weather forecast models were built for “general weather conditions”, as they use all historical weather data to train the models. Meanwhile, forecasting extremes is considered a “secondary task” by the models.
The authors explored a range of different “lead times” – in other words, how far into the future the model is forecasting. For example, a lead time of two days could mean the model uses the weather conditions at midnight on 1 January to simulate weather conditions at midnight on 3 January.
The plot below shows how accurately the models forecasted all extreme events (left) and heat extremes (right) under different lead times. This is measured using “root mean square error” – a metric of how accurate a model is, where a lower value indicates lower error and higher accuracy.
The chart on the left shows how two of the AI models (blue and green) performed better than the physics-based model (black) when forecasting all weather across the year 2020.
However, the chart on the right illustrates how the physics-based model (black) performed better than all three AI models (blue, red and green) when it came to forecasting heat extremes.
The authors note that the performance gap between AI and physics-based models is widest for lower lead times, indicating that AI models have greater difficulty making predictions in the near future.
They find similar results for cold and wind records.
In addition, the authors find that AI models generally “underpredict” temperature during heat records and “overpredict” during cold records.
The study finds that the larger the margin that the record is broken by, the less well the AI model predicts the intensity of the event.
‘Warning shot’
Study author Prof Erich Fischer is a climate scientist at ETH Zurich and a Carbon Brief contributing editor. He tells Carbon Brief that the result is “not unexpected”.
He adds that the analysis is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
The analysis, he continues, is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
AI models are likely to continue to improve, but scientists should “not yet” fully replace traditional forecasting models with AI ones, according to Fischer.
He explains that accurate forecasts are “most needed” in the runup to potential record-breaking extremes, because they are the trigger for early warning systems that help minimise damages caused by extreme weather.
Leonardo Olivetti is a PhD student at Uppsala University, who has published work on AI weather forecasting and was not involved in the study.
He tells Carbon Brief that “many other studies” have identified issues with using AI models for “extremes”, but this paper is novel for its specific focus on extremes.
Olivetti notes that AI models are already used alongside physics-based models at “some of the major weather forecasting centres around the world”. However, the study results suggest “caution against relying too heavily on these [AI] models”, he says.
Prof Martin Schultz, a professor in computational earth system science at the University of Cologne who was not involved in the study, tells Carbon Brief that the results of the analysis are “very interesting, but not too surprising”.
He adds that the study “justifies the continued use of classical numerical weather models in operational forecasts, in spite of their tremendous computational costs”.
Advances in forecasting
The field of AI weather forecasting is evolving rapidly.
Olivetti notes that the three AI models tested in the study are an “older generation” of AI models. In the last two years, newer “probabilistic” forecast models have emerged that “claim to better capture extremes”, he explains.
The three AI models used in the analysis are “deterministic”, meaning that they only simulate one possible future outcome.
In contrast, study author Engelke tells Carbon Brief that probabilistic models “create several possible future states of the weather” and are therefore more likely to capture record-breaking extremes.
Engelke says it is “important” to evaluate the newer generation of models for their ability to forecast weather extremes.
He adds that this paper has set out a “protocol” for testing the ability of AI models to predict unprecedented extreme events, which he hopes other researchers will go on to use.
The study says that another “promising direction” for future research is to develop models that combine aspects of traditional, physics-based weather forecasts with AI models.
Engelke says this approach would be “best of both worlds”, as it would combine the ability of physics-based models to simulate record-breaking weather with the computational efficiency of AI models.
Dr Kyle Hilburn, a research scientist at Colorado State University, notes that the study does not address extreme rainfall, which he says “presents challenges for both modelling and observing”. This, he says, is an “important” area for future research.
The post Traditional models still ‘outperform AI’ for extreme weather forecasts appeared first on Carbon Brief.
Traditional models still ‘outperform AI’ for extreme weather forecasts
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