Climate activists demonstrate at the Sharm el-Sheikh International Convention Centre, in Egypt s Red Sea resort city of the same name, during the COP27 climate conference on November 17, 2022. AFP
With the two-week COP27 conference officially due to finish on Friday, negotiators in Egypt said the talks would likely go on overnight as they scramble to find a compromise over the contentious issue.
"We are out of time and we are out of money and we are out of patience," Ralph Regenvanu, minister of climate change for the Pacific island of Vanuatu, said at a news conference.
"We must establish at this COP27 a loss and damage finance facility."
Regenvanu said walking out of the talks "was discussed as an option" if developing nations come away empty handed.
Poorer countries least responsible for global emissions have pressed rich polluters to agree at COP27 on the creation of a "loss and damage" fund for nations devastated by climate impacts.
"I think it's going be quite a long and difficult journey to the end of this process. I'm not sure yet where these talks will land," said European Commission Vice President Frans Timmermans.
"If this COP fails we all lose and we have absolutely no time to lose," he told journalists.
A 130-nation group known as G77+China issued a proposal to create the fund at the COP27 and agree on the nitty-gritty details at the next UN talks in Dubai in 2023.
After dragging their feet over loss and damage, the United States and European Union somewhat softened their position by agreeing to discuss the issue at COP27.
Timmermans said the EU was open to the creation of a funding facility but that it should be among a "mosaic" of options that include existing financial instruments.
"We will do everything to find consensus," he said.
Timmermans took issue with the G77+China proposal as it limits the donor base for a fund to a list of two-dozen rich nations drawn up in 1992.
The top EU official has pointed out that some developing countries, notably China, would be left "off the hook" from contributing to the fund even though they have grown wealthier since 1992.
"I'm still hopeful that we can reach an agreement on this, but then I do ask of our partners to make sure that it's fair so that everybody who is in a position to contribute contributes," Timmermans said.
Pakistan's climate minister Sherry Rehman, whose country chairs the G77+China, said the group was still "seeking to find common ground even at this late hour".
Rehman suggested that concerns from rich countries about liability could be addressed.
"For countries worried or anxious about liabilities and judicial proceedings, I think we can work around all those anxieties," she said.
Rehman recalled that Pakistan was devastated by floods this year that cost the country $30 billion.
"Vulnerability should not become a death sentence," she said.
"We are the ground zero of climate change," she added. "We must convey a message of hope to all those people that have pinned their ambitions on this particular COP."
No 'landing zone'
The disagreement over loss and damage has overshadowed other priorities at COP27, including calls for rich nations to finally fulfil their pledge to provide $100 billion a year starting in 2020 to help the developing world green their economies and adapt to future impacts.
There have been calls for the final statement to include phrases on reducing all fossil fuels and recalling the aspirational goal of limiting warming to 1.5 degrees Celsius compared to preindustrial levels.
Observers at the talks said loss and damage could be make-or-break for COP27.
"This is the issue around which the entire (COP)27 package hinges," said Tom Evans, an expert on climate diplomacy at think tank E3G.
Laurence Tubiana, a main architect of the 2015 Paris Agreement as France's top negotiator, told AFP a "possible landing zone for a compromise is not yet in view."
"Things could really go off the rails at the end."