The UN climate summit has agreed to establish a historic fund to pay for climate-related damage in poorer countries after working beyond sunrise in Egypt on Sunday, but backed down on greater cuts to greenhouse gas emissions and an end to fossil fuel use.

Almost 200 countries at the summit achieved a breakthrough for a fund to cover the “loss and damage” that “particularly vulnerable” nations are suffering from climate change.

Negotiators agreed to set up a structure by the next summit in 2023, with contributors and recipients still to be determined.

African and other developing world leaders were jubilant about the plans to establish the fund, which Pakistan’s climate minister Sherry Rehman described as “an investment in climate justice”.

However, in the final hours of the talks, which ran overtime through Saturday night and into Sunday morning, countries could not agree on provisions that would accelerate emissions cuts. A push to include the phase-down of all fossil fuels in the final agreement also failed.

EU climate chief Frans Timmermans reflected the deep dissatisfaction felt by many countries with the outcome in a strident address to the closing UN session, saying the result was “not enough of a step forward for people and planet”.

“We should have done much more. Our citizens expect us to lead. That means far more rapidly reduced emissions,” he said. The EU had signed up to the deal “reluctantly” and was disappointed that it had to give up on its position “to allow the process to move forward”.

Addressing the role of the oil- and gas-producing countries, led by Saudi Arabia, in protecting the production of fossil fuels, New Zealand’s minister for climate change, James Shaw, said there were “still parties that are stuck in a state of denial or delusion about the state of the climate crisis”.

The EU had made a dramatic threat to walk out on Saturday if the global agreement was not enough to “keep 1.5 alive” — a phrase that became the mantra of last year’s COP26 talks. It refers to the 2015 Paris Agreement to keep global warming well below 2C, and ideally 1.5C, from pre-industrial times by cutting greenhouse gas emissions.

The drive by dozens of countries to include a commitment to phase down all fossil fuels was unsuccessful after staunch resistance from countries including Saudi Arabia and Russia.

Instead, the final agreement was altered at the last minute to include the need for “low-emission” energy — which would allow the continued production of fossil fuels when paired with carbon capture technology to trap emissions.

UK climate chief Alok Sharma, the president of COP26 in Glasgow, reflected the exasperation over the failure to improve the effort to cut emissions.

“It is very much on life support — 1.5c,” he said on Sunday morning. “We had to fight incredibly hard, relentlessly — it was like a battle — to make sure that we preserved what we got over the line in Glasgow. I’m incredibly disappointed that we weren’t able to go further.”

Germany’s foreign minister Annalena Baerbock said the conference had been “stonewalled by a number of large emitters and oil producers”.

“That this conference did not end in utter failure despite the stonewalling and organisational shortcomings is mostly due to a progressive alliance of states across continents,” she said.

Asked about the criticism, Egypt’s COP27 ambassador Wael Aboulmagd said “everyone should be expected to do better” but countries were constrained by financial ability.”

UN secretary-general António Guterres praised the set-up of a fund for climate damage but also voiced his discontent with failure on global warming targets.

“Our planet is still in the emergency room. We need to drastically reduce emissions now — and this is an issue this COP did not address,” he said. Some speakers in the closing session from developing nations, including Tuvalu, echoed his remarks in emotional final statements.

“A fund for loss and damage is essential — but it’s not an answer if the climate crisis washes a small island state off the map — or turns an entire African country to desert,” Gueterres added.