Rich and developing nations thrashing out a UN climate-rescue pact have moved closer on the make-or-break issue of compensation for damages caused by global warming, observers and negotiators said Thursday.

Payouts for "loss and damage," as it is called, would be over and above the annual $100 billion (90 billion euros) from 2020 already pledged to help developing nations reduce carbon emissions and adapt to a climate-altered future.

"I can see there has been a huge shift... especially on the part of developed countries," Amjad Abdulla of the Maldives, speaking for the Alliance of Small Island States (AOSIS), told AFP.

Poorer nations have flagged loss and damage as a redline issue.

"We came to Bonn concerned that loss and damage could stand between us and an agreement on climate change in Paris," said Julie-Anne Richards of the Climate Justice Programme, a defender of the climate rights of developing nations.

"But there has been real progress on the issue at this meeting," she told journalists.

Diplomats are meeting in the former West German capital to work on the draft text for a highly-anticipated universal pact on curbing greenhouse gas emissions.

- Shift in US position -

The 195 members of the UN climate forum have committed to inking the agreement at a November 30-December 11 UN conference in Paris.

The pact will seek to halt the march of global warming through greenhouse gas emission curbs, and to help poor nations cope with unavoidable impacts.

The overarching goal is to limit average global warming to two degrees Celsius (3.6 degrees Fahrenheit) over pre-Industrial Revolution levels.

Negotiations on loss and damage have provoked some of the most fiery clashes so far.

Wealthy countries "don't want open-ended compensation liability... that's for sure," commented Abdulla whose nation, along with other AOSIS members, risk the prospect of having to abandon their homelands in the face of rising sea levels caused by climate change.

Progress at the technical meeting in Bonn has largely come in the form of a shift in position by the United States, backed by the European Union, negotiators and analysts say.

In a closed-door meeting earlier in the week, two participants reported that a US delegate told fellow negotiators that "loss and damage" could be part of the Paris package -- a sharp change from previous meetings.

The US and EU also agreed in principle to keep in place the so-called Warsaw Mechanism -- the only existing instrument for "loss and damage" -- beyond 2020, when the new agreement will enter into force.

The mechanism was adopted at a climate conference in Poland in 2013, and developing nations had feared it would simply be allowed to expire.

- Differences remain -

The US did not respond to requests to provide details on the new loss and damage proposal.

A spokesperson of the European Commission, answering by email, said the Commission "understands that it is very important for developing countries to recognise the issue of loss and damage in the Paris outcome, as well as to provide the assurance of durability and permanence."

Negotiators and observers hailed the advance, but cautioned that many fundamental differences remain.

The final Paris climate deal will likely consist of two parts -- a "legal instrument" outlining core principles, and an annex document of "decisions" that would not carry the same legal weight.

Developing countries want loss and damage to be enshrined in the main agreement, an idea strongly opposed by most developed nations.

There are also a raft of questions on the practicalities.

Identifying loss and damage to low-lying islands from warming-induced sea-level rise would be relatively straight forward, for example, compared to determining the cause of droughts, floods or cyclones -- even if scientists agree these are likely to be enhanced by climate change.

"This is a very complicated issue. We don't know how to implement it," said Mexico's lead climate negotiator Roberto Dondisch.

Besides the progress on "loss and damage", diplomats are complaining that work on the text of the new deal has not proceeded fast enough.

"Our main concern is that we are not producing a text," Gurdial Singh Nijar, a Malaysian negotiator and spokesman for the Like-Minded Developing Nations bloc, which includes China, India, and many African, South American, Middle Eastern and Asian countries.