Thousands of people have been displaced by floods in Pakistan (Picture: EPA)

World leaders have agreed on a historic deal which will see wealthy countries help pay for the damages climate change has inflicted on developing nations.

The deal, struck at dawn at the COP27 summit in Egypt, is a huge win for poorer states who have long called for cash to help them with the changing environment.

Despite contributing little to global pollution levels, they have seen their homes decimated by ever-worsening floods, droughts, heat waves, famines and storms.

The deal is also considered in part to be reparations for nations hit by weather extremes and small island states that face an existential threat from rising seas.

‘Three long decades and we have finally delivered climate justice,’ said Seve Paeniu, the finance minister of Tuvalu. 

‘We have finally responded to the call of hundreds of millions of people across the world to help them address loss and damage.’

Pakistan’s environment minister, Sherry Rehman, said the establishment of the fund ‘is not about dispensing charity’.

‘It is clearly a down payment on the longer investment in our joint futures,’ she said, speaking for a coalition of the world’s poorest nations.

The COP27 deal is considered a major breakthrough to help mitigate the damage wrought by climate change on developing nations (Picture: Getty)

Antigua and Barbuda’s Molwyn Joseph, who chairs the organisation of small island states, described the agreement as a ‘win for our entire world’.

‘We have shown those who have felt neglected that we hear you, we see you, and we are giving you the respect and care you deserve,’ he said.

However, the marathon climate talks concluded on Sunday without further addressing the root cause of the issue – the burning of fossil fuels.

Early this morning, delegates approved the compensation fund but did not deal with the contentious issues of setting an overall temperature goal, cutting emissions or phasing out the use of fossil fuels.

Throughout the night, the European Union and other nations fought back against what they considered backsliding in the Egyptian presidency’s overarching cover agreement and threatened to scuttle the rest of the process.

The point of contention stemmed from the Egyptian government’s proposal to limit global warming to 2 degrees celsius, in line with the 2015 Paris agreement.

However, delegates were steadfast that the global temperature could not be allowed to increase beyond 1.5 degrees Celsius (2.7 degrees Fahrenheit).

Climate activists criticised the deal for failing to deal with fossil fuels (Picture: AP)

The world has already warmed 1.1 degrees (2 degrees Fahrenheit) since pre-industrial times.

After more negotiations the package was eventually revised again, removing most of the elements Europeans had objected to but added none of the ambitions they were hoping for.

The deal also failed to expand on last year’s call to phase down global use of ‘unabated coal’, even though India and other countries pushed to include oil and natural gas in language from Glasgow. 

That too was the subject of last-minute debate, especially upsetting Europeans.

‘What we have in front of us is not enough of a step forward for people and planet,’ a disappointed Frans Timmermans, executive vice president of the European Union, told his fellow negotiators.

‘It does not bring enough added efforts from major emitters to increase and accelerate their emissions cuts.

‘We have all fallen short in actions to avoid and minimise loss and damage,’ Mr Timmermans said. We should have done much more.’

Martin Kaiser, the head of Greenpeace Germany, described the agreement as a ‘small plaster on a huge, gaping wound’.

‘It’s a scandal that the Egyptian Cop presidency gave petrostates such as Saudi Arabia space to torpedo effective climate protection,’ he said.

Many climate campaigners are concerned that pushing for strong action to end fossil fuel use will be even harder at next year’s meeting, which will be hosted in Dubai, located in the oil-rich United Arab Emirates.

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The COP27 deal will see wealthy nations pay for the damage inflicted on small countries by climate change.