Loss And Damage Fund Of COP-27 – Analysis
Developing countries were strongly aligned and very clear that the establishment of a Loss and Damage Finance facility, or fund (LDF), was their number one asks from COP-27. The expectation was that the fund or facility would be set up so that it will deliver new and additional finance, not just reallocate money out of other pots that are already too small. And that it should be established as part of the Financial Mechanism of the UNFCCC, which also serves the Paris Agreement, to ensure that it operated within the equity principles of the Convention. This progress was made as a result of the consistency and persistence of developing countries, which did not allow themselves to be divided in the face of several developed countries’ proposals to promise funding for only the most vulnerable countries (seeking to peel off SIDS and LDCs from the developing country block), and also in the face of pushback from developed countries, in particular the US.
COP-27 will be remembered for the victory of the small and developing countries, which resulted in the establishment of the Loss and Damage Fund (LDF). Developing economies such as India, Brazil, and South Africa have driven this demand. Vulnerable-20, a group of 58 countries (V-20 group) most affected by the climate crisis, mobilized effectively in this regard. With a total population of 1.5 billion, this group contributes only 5 percent of total carbon emissions. This is why the group was adamant about reaching a final decision on the issue of loss and damage by developed countries.
Creating a specific fund for loss and damage marked an important point of progress, with the issue added to the official agenda and adopted for the first time at COP-27. Governments took the ground-breaking decision to establish new funding arrangements, as well as a dedicated fund, to assist developing countries in responding to loss and damage. Governments also agreed to establish a ‘transitional committee’ to make recommendations on how to operationalize both the new funding arrangements and the fund at COP28 next year.
A 24-member Transitional Committee with 14 members from developing and 10 members from developed countries was created to work out the details of the modalities to operationalised the LDF, and identify where funds will come from – they need to be at scale and on a polluter pays basis, so from rich, historically high polluting countries. Developing countries will have the majority of seats (14), with two each for SIDS and LDCs. The decision guides The Committee to look at “potential sources of funding … including innovative sources” – which should include a tax on the fossil fuel industry, a frequent flyer levy or similar. These sources of funding have had great support in the lead up to COP-27 – from the head of the UN, Antonio Guterres, through Barbados Prime Minister Mia Mottley, and civil society have been calling for these Polluter Pays sources for years. That said, there must also be a floor of public finance which links to the discussion on the new collective quantified goal on climate finance (NCQG). The Transitional Committee will also need to think about how funds will flow for both slow onset climatic processes like sea level rise and extreme weather events like storms and droughts.
The Transitional Committee will report to next year’s COP and CMA, and countries would establish the operational modalities for the new LDF. The decision also includes two workshops and a synthesis report on existing funding arrangements relevant to addressing loss and damage in 2023 and a call for submissions by 15 February 2023 with views on the second Glasgow Dialogue to take place during the UNFCCC intersessional in Bonn in June 2023.
In the decision UN agencies, intergovernmental organizations and financial institutions are invited to provide input on how they might enhance access and/or the speed, scope and scale of availability of finance for addressing loss and damage. The activities and considerations of the decision will be taken into account at the second and third Glasgow Dialogues to take place in June of 2023 and June of 2024. The Chair of the SBI was also requested to provide a summary report of each Glasgow Dialogue within four weeks. This is significant as the decision that established the Glasgow Dialogue did not mandate a report of its discussions and outcome.
The decision gives momentum to the Bridgetown Initiative kicked off by Barbados Prime Minister Mottley and her climate finance envoy Avinash Persaud in asking international financial institutions to consider at the 2023 Spring Meetings of the World Bank and IMF the potential for such institutions to contribute to funding arrangements to respond to loss and damage; and inviting the UN Secretary General to convene a meeting of international financial institutions and other relevant entities to identify the most effective ways to provide funding to respond to needs related to addressing loss and damage. Separately Emmanuel Macron had already announced he would convene a finance summit in Paris in June 2023 to follow through on the Bridgetown proposals on how to fund mitigation, adaptation and loss and damage. The United Nations Climate Change Conference COP-27 closed .with a breakthrough agreement to provide “loss and damage” funding for vulnerable countries hit hard by climate disasters. “This outcome moves us forward,” said Simon Stiell, UN Climate Change Executive Secretary. “We have determined a way forward on a decades-long conversation on funding for loss and damage – deliberating over how we address the impacts on communities whose lives and livelihoods have been ruined by the very worst impacts of climate change.”
The cover decision, known as the Sharm el-Sheikh Implementation Plan, highlights that a global transformation to a low-carbon economy is expected to require investments of at least USD 4-6 trillion a year. Delivering such funding will require a swift and comprehensive transformation of the financial system and its structures and processes, engaging governments, central banks, commercial banks, institutional investors and other financial actors. It is in addition to existing climate finance meant to help countries adapt to climate change and transition to clean energy.
Parties also agreed on the institutional arrangements to operationalize the Santiago Network for Loss and Damage, to catalyze technical assistance to developing countries that are particularly vulnerable to the adverse effects of climate change.
LOSS AND DAMAGE MEANS:
Loss and damage is not a new ask. But it’s been a contentious issue for years, as rich countries like the United States fear that agreeing to a loss and damage fund could open them up to legal liability, and potential future lawsuits.
It is the idea that rich countries, which emitted the most planet-warming gases, should pay poorer countries who are now suffering from climate disasters they did not create. Developing countries and small island states have been pressing for these kinds of funds since 1991, when the Pacific island Vanuatu first proposed a plan for high-emitting countries to funnel money toward those impacted by sea level rise. It took more than a decade for the proposal to gain momentum, even as much of Vanuatu and other small island Pacific nations are slowly disappearing. Climate activists in developing nations, pointing to Pakistan’s cascading disasters as the clearest evidence, stressed: “why a dedicated loss and damage fund is needed. It’s the responsibility of the developed world to support that effort. Commitments have been made but they’re not being delivered.”
In Fiji, climate activist Lavetanalagi Seru’s home Island, it has cost an average of $1 million to relocate communities because of sea level rise. Moving away from ancestral lands is not an easy decision, but climate change is having irreversible impacts on the islands, said Seru, the regional policy coordinator with the Pacific Islands Climate Action Network.
“Climate change is threatening the very social fabrics of our Pacific communities,” Seru said. “This is why these funds are required. This is a matter of justice for many of the small island developing states and countries such as those in the Pacific.”
NEED FOR CLIMATE FINANCE
COP-27 had a focus on Loss and Damage like never before. Given the drumbeat of climate impacts coming into COP – one third of Pakistan flooded, devastating drought and famine in Kenya, heat waves and drought across Europe and southern China, Hurricanes in Cuba and the US, glaciers disappearing and sea level rise and coastal erosion forcing Pacific Islanders to relocate. At what has been billed as an “Implementation COP” in Africa, a continent grappling with loss and damage, went into overtime with so many issues unresolved, UN Secretary General Antonio Guterres pleaded with delegates:
We need action. No one can deny the scale of loss and damage we see around the globe. The world is burning and drowning before our eyes. I urge all parties to show that they see it – and get it. The world is watching and has a simple message: stand and deliver. Deliver the kind of meaningful climate action that people and the planet so desperately need.
A major reason this type of fund is contentious is that wealthy nations are concerned that paying for such a fund could be seen as admission of liability, which may trigger legal battles. Developed nations like the US have pushed back on it in the past and are still tiptoeing around the issue. Understandably, the rich developed nations are “dragging their feet.” But it’s “very important for them to empathize and take responsibility.”
Developing countries were more aligned than ever before – in pre-meetings and throughout COP all 134 countries in the G77 and China spoke with one voice to demand climate justice. And civil society provided the flank with protests around the world and in the COP venue itself. And, finally, grudgingly, developed countries, with leadership from the European Union, agreed to establish a Loss and Damage fund.
There has also been confusion about its definition – whether loss and damage is a form of liability, compensation or even reparations. ‘Reparations’ is not a word or a term that has been used in this context,” US Climate Envoy John Kerry added: “We have always said that it is imperative for the developed world to help the developing world to deal with the impacts of climate.” And US officials still have questions – whether it would come through an existing financial source like the Green Climate Fund, or an entirely new source.
Speaking at a New York Times event on Sept. 20, Kerry suggested the U.S. would not be prepared to compensate countries for the loss and damage they’ve suffered as a result of the climate emergency. You tell me the government in the world that has trillions of dollars — because that’s what it costs,” Kerry said. He added that he refused to feel “guilty” for the climate crisis.
“There’s plenty of time to be arguing, pointing fingers, doing whatever,” Kerry said. “But the money we need right now needs to go to adaptation, it needs to go to building resilience, it needs to go to the technology that is going to save the planet.”
But others say the money is there. It’s more a matter of priorities. “Look at the annual defense budget of the developed countries. We can mobilize the money. “It’s not a question of money being there. It’s a question of political will.”
Whilst this was a massive breakthrough for climate justice, other elements of the Sharm-el-Sheikh outcome were more mixed. Disappointingly there was pushback against a definitive call to phase out all fossil fuels – blocked by Russia, Saudi Arabia and Iran. While countries keep referring to 1.5 0C, they fail to take the necessary action to stay below this limit to prevent future harms from happening. As long as countries keep fueling the loss and damage crisis by expanding oil, gas and coal, real justice will not prevail. Importantly, the new Loss and Damage Fund needs to be filled, and the US and other developed countries did not agree to include loss and damage as a target within the new collective quantified goal for climate finance (NCQG), which will need to be corrected at future meetings.
Scotland is the first country to set aside $7.9 million for climate compensation. Germany has promised 170 million, Ireland 10 million, Australia 50 million, Belgium 2.5 million, and Denmark 12 million dollars.
Surprising is the ignorance of countries with the highest per capita carbon emissions in the world, such as America, Russia (the world’s second-largest per capita carbon emitter), United Kingdom and the European Union. They initially opposed the LDF and since its establishment, they have been completely silent on climate finance. It raises questions on whether this fund will have to depend only on voluntary donors and when and how it will be spent.
China’s response in Sharm el-Sheikh was also surprising. China, which ranks third in the world for per-capita carbon emissions, is looking for funding for climate change. The response of China was resented by European nations. A similar situation was seen in case countries like Venezuela and Arab nations that profit greatly from oil and are the biggest oil producing countries but were considering climate compensation as bailout money.
Thus, creating a compensation fund for climate loss and damage can provide small and developing countries with temporary relief. But, in order to find a lasting solution to the climate crisis, the world fraternity would have to focus on mitigating the effects of natural disasters rather than resolving their causes.
LOSS AND DAMAGE CONTROVERSY
The loss and damage theory measures “loss” as the harm that climate change has done to infrastructure, including buildings, ports, and roads. On the other hand, the term “damage” has been used to describe the decrease in productivity brought out by climate change such as unexpected temperature increases, shortened workdays, declining agricultural productivity, and a decline in tourism. Additionally, it is thought that climate finance is distinct from the loss and damage budget (Loss and Damage Fund) established to compensate for disasters (Climate Fund).
It’s not unusual to ask for loss and damage. Vanuatu in the Pacific Ocean first suggested a plan for high-emitting nations to direct money toward those affected by sea level rise in 1991. Developing nations and small island states have been pressing for these kinds of funds. This type of fund is controversial for rich nations because they worry that contributing to it might be interpreted as an admission of liability, which could lead to legal disputes. There has also been a misunderstanding regarding its definition, specifically whether loss and damage constitute a form of responsibility, payment or damages.
In a way, this concept represents the compensation that small, developing and emerging economies are asking for in order to recover from the adverse effects of climate change. During the 2019 Madrid Climate Summit, a technical assessment programme for climate compensation was also developed. Currently, the United Nations and some development banks assist countries affected by climate change. According to a report, $ 580 billion will be needed by 2030 to adopt the loss and damage formula.
UNITY NEED OF THE HOUR
At COP-27, international heads of many states spoke. It may not be surprising if John Kerry wins the next Nobel Prize for the environment given the way US President Biden appeared to be praising the climate ambassador John Kerry, who used climate change as a diplomatic tool.
On the other hand, the unusual manner in which British Prime Minister Sunak left the conference confused dozens of audience members during the COP-27 event. Prime Minister of Barbados Mia Motley will likely be remembered as COP-27’s most influential leader. She criticized rich nations for the greenhouse gas emissions produced by them and also raised questions about why it is up to poor nations to collect the garbage now that has been created by them. She spoke extensively during her speech about the need to update the outdated global financial system to better reflect current conditions, such as making it simpler for nations affected by the climate to access capital. The Prime Minister urged nations to accept responsibility because, without it, nothing would change in the world.
Santiago Network for Loss and Damage
Applause filled the room as negotiators agreed the mechanisms to operationalize the Santiago Network. The vision of the Santiago Network is to catalyze the technical assistance of relevant organizations, bodies, networks and experts, for the implementation of relevant approaches for averting, minimize and addressing L&D at the local, national and regional level, in developing countries that are particularly vulnerable to the adverse effects of climate change (Decision 2/CMA.2, para 43). The establishment of an Advisory Board to govern the Santiago Network was a key demand of the G77 and China. Women and Gender, Youth, and Indigenous Peoples constituencies will be represented on the Advisory Board, which will be open to observers. Participation of representatives of groups most affected by loss and damage will increase chances of delivering real and rights-based solutions. However, the omission of Environmental NGOs (ENGOs) is worrying, especially as they would bring additional and important expertise on a wide range of topics ranging from environmental integrity to human rights integration in climate action, contributing to the collective effort to catalyze technical assistance for the poorest and most vulnerable and address the gaps in the existing system. Importantly, the decision states that technical assistance should be in line with human rights, by referring to the relevant preambular paragraph of the Paris Agreement.
An additional concern and critical issue is that with little finance committed so far for operation or delivery of technical assistance, the Santiago Network risks being cash strapped and unable to operate effectively unless more contributor countries step up. It is also essential that the Santiago Network is connected to the LDF. Only then will the technical assistance delivered by the network lead to long term and reliable grant based finance flowing to communities to address loss and damage in response to the latest climate disaster.
INDIA’S STRATEGY IN COP27
While the rich countries were busy twisting the final agreement to their advantage at COP-27 in Egypt, India took a bold step by presenting its Long-Term Low Emission Development Strategy at the United Nations Framework Convention on Climate Change (UNFCCC). In the midst of its ambitious development goals, India has demonstrated to the world its achievements and future commitments in the field of climate justice. India presented its significant newly launched initiatives in renewable energy, e-mobility, ethanol blended fuels, and green hydrogen as an alternative energy source.
India’s approach is founded on four key considerations that serve as the foundation of its long-term low-carbon development strategy:
Despite having 17 percent of the world’s population, India has contributed little to global warming, with its historical contribution to cumulative global GHG emissions being negligible.
India’s development requires a significant amount of energy.
India is committed to and is actively pursuing low-carbon development strategies in accordance with national circumstances.
India needs to strengthen its climate resilience.
Furthermore, India stated at COP-27 that it will promote future sustainable, climate and resilient development through its Smart Cities initiative. The country will meet its NDC commitment (Nationally Determined Contribution) of 2.5 to 3 billion tonnes of additional carbon sequestration by forest tree cover by 2030. India had updated its NDC even before the Egypt Climate Conference held.
Due to the voluntary nature of NDCs, this will serve as a mirror to those countries that have forgotten their promise made in the Paris Agreement. The LiFE (Life for Environment) mission has been started by India some time ago in this series.
India called LDF deal as “historic” to address loss and damage due to climate change-induced disasters, saying “the world has waited far too long for this. At the same time, making an intervention in the closing plenary session of COP-27, Union Environment Minister Bhupender Yadav said the world should not burden farmers with mitigation (reducing emissions of greenhouse gases) responsibilities. On the establishment of a four-year work programme on climate action in agriculture and food security, Yadav said agriculture, the mainstay of livelihood of millions of small farmers, would be hard hit from climate change. “We should not burden them with mitigation responsibilities. Indeed, India has kept mitigation in agriculture out of its NDCs (national plans to achieve Paris Agreement goals of limiting warming to 1.5 degree Celsius),” he said. But the outcome on other crucial issues such as India’s call for phasing down all fossil fuels reflected little India has also demonstrated by fulfilling its commitments that any effort to save the earth will only be realized through an eco-friendly lifestyle. Rich countries that promised to solve the climate crisis were exposed during the Russia-Ukraine war when they turned energy into a weapon.
The main failure of the Egypt Climate Conference was the lack of specific progress in increasing economic cooperation for climate change solutions. The COP-27 agreement also states that in order to achieve the goal of zero carbon emissions by 2030, a $ 4 trillion investment in renewable energy projects will be required.
The question is, if developed countries refuse to provide $100 billion per year to developing countries to help them transition to a climate-friendly economy, how serious will they be about providing technology and expertise for green initiatives? However, by presenting a long-term low-emission development strategy, India has made the economic superpowers aware of their responsibilities, while also sending a message to developing countries that blaming rich countries will not help save the environment, and that everyone must take appropriate action.
