Waiting for the loss and damage fund

Article 8 of the Paris Agreement, 2015 enshrines the importance of averting, minimizing and addressing loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events, and the role of sustainable development in reducing the risk of loss and damage.

Consecutive landmark studies – AR5 (5th Assessment Report) and AR6 (6th Assessment Report) – by the Intergovernmental Panel on Climate Change (IPCC) made clear references to highlight that human-induced climate change is adversely affecting weather, causing climate extremes in every region across the globe. These reports record scientific consensus that ‘loss and damage’ caused by human-induced climate change has not been prevented by global efforts to mitigate and adapt to climate change.

Major climate and weather events in developing countries in 2022 caused a loss of more than $123 billion. In the first half of 2023, the overall economic losses from natural catastrophes amounted to $120 billion, almost double the 10-year average. This does not take into account smaller events that may have been devastating for a local community, slow onset impacts, or non-economic loss and damage. The costs of both economic and non-economic losses and damages are escalating; economic losses and damages alone are already substantial and have been estimated at between $447 billion and $894 billion per year by 2030.

The frequency of disasters and escalation in losses and damages due to extreme events has risen, and the debates on reparations through a dedicated Loss and Damage Fund (L&DF) have gained momentum. The historical trajectory of the demand for a dedicated fund for loss and damage caused by climate change is quite long.

The discussion on L&DF started off when the United Nations Framework Convention on Climate Change (UNFCCC) was developed in 1991. The AOSIS proposed the creation of an international insurance pool to “compensate the most vulnerable small island and low-lying coastal developing countries for loss and damage arising from sea level rise”. In that proposal, the amount to be contributed by each country to this pool would be determined by their relative contribution to global emissions and their relative share of global gross national product.

The question of loss and damage came up in the shape of a formal demand, however, during the 13th annual session of the Conference of Parties (COP13) in 2007 within ‘The Bali Action Plan’, which clearly called for “Disaster reduction strategies and means to address loss and damage associated with climate change impacts in developing countries that are particularly vulnerable to the adverse effects of climate change”.

From that point onwards, the discussion of climate liability and compensation became a central part of the annual COP agendas. COP16 in Cancun, Mexico in 2012 – where parties finalized the Cancun Agreement – also included a demand for loss and damage fund. Loss and damage was granted an agenda of its own with the establishment of the Work Programme on Loss and Damage that aimed at enhancing understanding of loss and damage in developing countries. Parties agreed to set up a transitional committee tasked with L&DF design and a standing committee to assist the COP with respect to financial mechanisms. Parties also recognized the commitment by developed countries to provide $30 billion of fast-start finance in 2010-2012, and to jointly mobilize $100 billion per year by 2020.

The Doha Climate Change Conference (COP18) 2012 culminated with the adoption of the ‘Doha Climate Gateway’. The outcome also included an agreement to consider an institutional mechanism to address loss and damage in developing countries that are particularly vulnerable to the adverse effects of climate change.

Later, at COP19 in Warsaw, Poland, countries came up with the establishment of the Warsaw International Mechanism (WIM) for Loss and Damage. The WIM acknowledged that “loss and damage associated with the adverse effects of climate change include, and in some cases involves more than, that which can be reduced by adaptation”. Its mandate includes “finance, technology and capacity-building, to address loss and damage associated with the adverse effects of climate change”. However, the WIM fell far short of liability or compensation for loss and damage provisions.

In order to catalyze the technical assistance of relevant organizations, bodies, networks and experts (OBNE), the Santiago Network for Loss and Damage (SNLD) was established at COP25 in Madrid. It was aligned with the WIM, for the implementation of relevant approaches for averting, minimising and addressing loss and damage. The SNLD was also operationalized at COP27.

At COP26 in Glasgow, the developing countries led by AOSIS and G77 & China introduced a proposal for the ‘Glasgow Loss and Damage Facility’ to be established to provide finance to vulnerable developing countries. This proposal was blocked by developed countries, and as a compromise, the Glasgow Dialogue was established with Scotland making a bilateral contribution of finance to address loss and damage announced by the Scottish First Minister Nicola Sturgeon.

One of the major outcomes of COP26 was the agreement to set New Collective Quantified Goals (NCQG) which is another global climate finance goal under the UNFCCC that will supersede the $100 billion climate finance goal from 2025 onward. An ad-hoc work programme on the NCQG was set up to determine the scope and substance with loss and damage included as sub goal and to be approved by 2024 at COP28.

Building on the Glasgow developments, a major breakthrough was made at Sharm El Sheik in Egypt, marking a significant turning point. After three decades of pushing for compensation for ‘Loss and Damage’ caused by climate change, COP27 adopted the proposal of a ‘Loss and Damage Fund’. A transitional committee (TC) was established to make recommendations on how to operationalize the new funding arrangements at COP28. The TC held three consecutive meetings during 2023 and discussed issues raised around the fund, funding arrangements, sources of funding, scope of the fund, ensuring country ownership, access, delivery modalities and triggers, and privileges, immunities and all that was found relevant. The fourth and final meeting (TC4) is scheduled to take place from October 17 to October 20 in Aswan, Egypt.

Meanwhile, the synthesis report on the technical dialogue of the first ‘Global Stocktake’ (GST) also calls for averting, minimizing and addressing loss and damage. It signifies the urgent action across climate and development policies to manage risks comprehensively and provide support to impacted communities. The GST is a two-year-long exercise to assess progress towards meeting the goals of the Paris Agreement. It is expected to show major gaps to meeting Paris Agreement goals. It is also expected to point out major shortcomings responsible for not meeting Paris Agreement goals and identify key areas of action to strengthen global climate action.

The vulnerable developing nations have their eyes fixed on the UAE COP28. It’s going to be a big test for world leaders – politicians, UN, scientists, activists and long-time proponents of the fund. The Loss and Damage Fund is an important first step and an opportunity for climate justice to take hold. The future of the ‘Loss and Damage Fund’ is in the hands of present leaders, and much depends on how successfully they reach an agreement to operationalize the fund – as early as the climate crisis demands.

In developing countries, it is necessary for governments to develop their ‘National Mechanisms of Loss and Damage’ in order to improve integration, collaboration, and communication between government departments. There is an urgent need to gather targeted data, over longer time scales, to develop policies and plans to avoid and reduce loss and damage ex-ante and address loss and damage ex-post.

The writer is a climate governance expert who works for global

development organizations in the fields of research, advisory, policy analysis, and legislative reforms. He tweets/posts @razashafqat