Importance of loss and damage funds (GS Paper 3, Environment)
Context:
- As the climate crisis intensifies, two terms are in sharp focus, adaptation and ‘loss and damage’ (L&D).
- They encompass the real losses that extend beyond monetary value and cut to the core of human rights and well-being. L&D includes economic losses, human casualties, and the degradation of ecosystems and cultural heritage.
Details:
- Adaptation is the proactive response to climate change, the art of survival by which communities and countries make deliberate choices to prepare for and cope with climate-related challenges.
- In contrast, L&D represents the irreversible consequences of climate change: impacts that can’t be avoided or mitigated through adaptation efforts.
What is the Loss and Damage fund?
- The call for affluent nations to acknowledge their accountability for historic pollution is more than 30 years old. Historic pollution has elevated the world’s average surface temperature by more than 1 degree Celsius and is currently inflicting damage worldwide, but especially in the poorest nations.
- At the 19th Conference of the Parties (COP 19) to the United Nations Framework Convention on Climate Change (UNFCCC) in Warsaw, Poland, in 2013, representatives of member countries formally agreed to establish the L&D fund.
- It was being created to provide financial and technical assistance to economically developing nations that were incurring L&D due to climate change.
- At COP 25, the Santiago Network for L&D was set up, but countries didn’t commit any funds. Subsequently, at COP 26, the Glasgow Dialogue on finance for L&D was established to continue discussions over the next three years on the fund.
- Finally, at COP 27 in November 2022, after intense negotiations, representatives of the UNFCCC’s member states agreed to set up the L&D fund and a Transitional Committee (TC) to figure out how the new funding mechanisms under the fund would operate. The TC was also to prepare recommendations that countries would consider, deliberate on, and potentially adopt by COP 28.
- But so far, four meetings of the TC have concluded with no clear recommendations. And herein lies an important problem.
What has caused the impasse at the TC meetings?
- The fourth meeting of the TC, or TC4, concluded on October 20, 2023, with no clear consensus on operationalising the L&D fund.
- The principal bones of contention had to do with hosting the fund at the World Bank, the foundational principle of common but differentiated responsibilities (CBDR), climate reparations, and the eligibility of all developing nations for the funds. The differences on these counts deepened the rift between developed and developing nations at the TC4 meeting.
- An impromptu fifth meeting of the TC,that is TC5, in Abu Dhabi concluded recently and a set of recommendations have been drafted and forwarded to COP 28. TC5 was not on the original agenda, a sign of how contested the L&D fund continues to be.
- At the TC5 meeting, developing nations conceded to the fund being hosted by the World Bank Financial Intermediary Fund for an interim period of four years, serviced by a new dedicated and independent secretariat.
- While the World Bank is yet to confirm that it is willing, it is important to note that it charges an exorbitant overhead fee.
- Moreover, the developed nations, particularly the U.S., have remained non-committal about being primary donors to the fund and have rejected references to the CBDR, equity, and liability in the draft. The result is that their support is voluntary.
- Further, there is currently no indication of the size of the fund because such a statement was quashed under pressure from the U.K. and Australia. The current draft simply urges and invites developed nations to provide money.
What are the implications of this outcome?
- The TC5 outcome highlights a profound lack of trust between affluent and emerging economies regarding their historical responsibilities, creating a substantial divide between wealthy and impoverished nations, particularly concerning climate reparations.
- The unwillingness of wealthy nations to fulfil intended commitments undermines faith in global climate negotiations and hampers the cooperative spirit necessary to address climate change.
- It represents a missed chance to take concrete steps to combat the escalating consequences of climate change on vulnerable communities and signifies a breakdown in diplomatic efforts, leading to doubts about nations’ ability to collaborate effectively.
- The discontent among developing nations stems from the perception that their concerns and needs are not adequately addressed by the international community, making the path to climate action and indeed other global issues, even more complicated.
Dimensions:
- Beyond the immediate diplomatic and trust-related repercussions, the watering down of the L&D fund has wide-reaching implications. It threatens climate justice and exacerbates the suffering of vulnerable communities in developing nations.
- The watering down can also increase the number of humanitarian crises, including via food shortage, people displacement, and conflict, and force communities to cope independently with a worsening climate and its consequences.
- The absence of support has economic consequences for both developing and developed nations; financial crises and economic downturns in one region can have extensive repercussions due to the interconnectedness of the global economy.
- Without adequate L&D funds, there will also be limited capacity to address environmental degradation and the loss of vital ecosystems, which will further worsen environmental crises, causing irreversible harm to the earth.
- Finally, climate-change-induced instability can have security implications as well, as conflicts and tensions emerge in vulnerable nations and threaten to spill across borders.
How will L&D funds ensure climate justice?
- The adaptation and L&D are not mutually exclusive concepts. They exist on a continuum of climate resilience, and both have a place in our collective efforts to combat climate change.
- A successful response to climate change requires us to balance the proactive measures of adaptation with the moral and financial responsibility of addressing the losses and damages that are an inescapable part of a climate-altered world.
- The L&D fund was conceived as a critical component of global climate action, recognising that some of the consequences of climate change are irreversible and beyond the capacity of vulnerable nations to handle.
- So to achieve climate justice, rich countries must meet their obligations to reduce emissions and deliver finance in line with what is fair, and thus uphold the principles of equity, justice, and solidarity in the face of a changing climate.
