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Activists participate in a protest at the COP27 UN Climate Summit on Nov. 18, in Sharm el-Sheikh, Egypt.Peter Dejong/The Associated Press

The COP27 negotiations in Egypt remained in deadlock late on Friday, the day the UN-sponsored climate conference was to finish, in spite of a late intervention by the European Union to help developing countries pay for the damages inflicted by catastrophic climate events with a so-called loss and damage fund. The talks have been extended until Saturday.

Delegates and environmental groups on Friday afternoon, local time, said that the summit faced collapse unless breakthroughs were made in the commitment to launch such a fund, and in the effort, also from developing countries, to ensure that any final agreement calls for the gradual elimination of all fossil fuels, not just coal.

“The success or failure of this COP27 depends on the equitable phase-out of all fossil fuels,” Catherine Abreu, founder of the environmental group Destination Zero and a member of Canada’s Net-Zero Advisory Body, said at a Friday news conference. “We must phase out of coal, fossil fuels and gas as it is the only way to keep the 1.5C goal alive.”

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The negotiations are now due to go through Saturday, and possibly Sunday, as COP27′s Egyptian presidency scrambles to avoid the embarrassment of a climate summit that makes little or no progress. Late on Thursday, UN Secretary-General Antonio Guterres, who had arrived in Sharm el-Sheik to try to push the negotiations forward, said a “breakdown between north and south” had created the deadlock.

Loss and damage refers to payments required for the reconstruction of climate-related disasters, such as the floods that inundated a third of Pakistan last summer, virtually destroying the economy. It is separate from climate-change mitigation and adaptation financing, which was launched in 2015 and is supposed to pay out US$100-billion a year to vulnerable countries, but has always come up short.

By early Friday morning, however, there was some hope that stalled negotiations on loss and damage could be overcome.

Frans Timmermans, vice-president of the European Commission, the executive arm of the EU, made some progress in breaking the logjam when he said the EU would agree to the launch of a loss and damage fund. It appeared he bowed to pressure from the G77, the broad coalition of developing countries, some of which have suffered extreme damages from climate- and weather-related events.

Canada has supported the idea of the fund; so far, the United States has not.

Late Friday, Reuters reported that a coalition of developed nations including the U.S. and the U.K. had issued a draft proposal on loss and damage funding. The proposal would establish “new and enhanced funding arrangements for assisting developing countries that are particularly vulnerable to the adverse effects of climate change in responding to loss and damage” and would create an expert group to tackle key questions about funding, according to Reuters.

The EU’s proposal is contingent on wealthy countries contributing to the fund, and wants to ensure that the payments would be directed at the most vulnerable countries only. The EU also wants China, the world’s biggest polluter, to pay into it, even though the World Trade Organization considers China a developing country.

“Developing countries feel betrayed that the US$100-billion funding has never been met,” said Julie Segal, senior manager of climate finance at Canada’s Environmental Defence. “To rebuild that trust, they need to create a loss and damage fund.”

A few countries, Germany, Ireland and New Zealand among them, have already made pledges to support the loss and damage concept. President Joe Biden did not mention loss and damage last week, when he made a speech at COP27 (Canadian Prime Minister Justin Trudeau did not come to the conference).

It is unlikely that the fund would be launched soon even if the EU’s proposals receives broad, last-minute support. What is more likely is that the final COP27 agreement statement would vow to launch the concept, with details such as funding mechanisms to be bumped into next year’s COP28 in Dubai.

In a parallel effort, the developing world and some wealthy countries are calling for the phase-out of all fossil fuels, not just the end of the use of coal, which was agreed to at last year’s COP26 in Glasgow. India, the EU and the United States have joined the call to end the use of “unabated” fossil fuel plants – those plants whose emissions cannot be neutralized by injecting them underground.

Canada has not been among the supporters to eventually end the burning of all fossil fuels, just coal. Environment Minister Steven Guilbeault has said resources development is a provincial, not federal, matter. Still, he did support the phase out of coal.

On Thursday, environmental groups and community leaders from Canada and Germany sent a letter to Mr. Guilbeault, which was critical of the proposals to build liquefied natural gas export facilities in Atlantic Canada. They said the projects would jeopardize Canada’s carbon-reduction commitments.