Explained: Why COP27's 'Loss And Damage' Fund Is Significant
The 'loss and damage' fund seeks to provide financial support to poorer countries facing climate change-induced weather calamities.
Following days of intense negotiations, nearly 200 countries agreed on the creation of a new global 'loss and damage' fund for vulnerable countries facing devastation from extreme weather events triggered by climate change. The creation of the new fund was considered a silver lining at the conclusion of the annual 2022 United Nations Climate Change Conference (COP27), even though little progress was made on the other big agenda of cutting carbon emissions that contribute the most to climate change.
While the decision to create this new fund was celebrated, much of the spadework in creating an institutional framework, including a potentially contentious aspect of determining who will be eligible for the fund, will be done in 2023.
This fund will be separate from the financial assistance that richer nations are obliged to pay poorer countries for the adoption of greener technologies across industrial sectors. BOOM explains what this fund is, why it was sought and what lies ahead.
What is the new 'loss and damage' fund?
Countries facing climate change-induced extreme weather events, especially smaller island nations, have been pitching for a mechanism for the past two decades — either through risk insurance or direct funds — to help them recover from climate disasters such as cyclones and floods. It was argued that poorer countries were suffering the impacts of climate change-induced disasters largely due to emissions from richer countries, and thus they were owed some form of financial support.
The campaign to seek the creation of such a fund came to fruition during the COP27 in Sharm El-sheikh, Egypt held earlier in November. This fund will be known as the 'loss and damage' fund and help countries recover from economic losses because of natural disasters.
While adopting this decision, the UN noted that there was a need to acknowledge that as extreme weather events increase, adequate funds were required to meet the losses faced during such events. To address this funding gap, it was decided to create the loss and damage fund
How will this fund operate?
The nuanced modalities such as where the money for the fund will come from and which countries will benefit from it have not yet been decided yet. A 'transitional committee' will prepare a basic framework on how this fund should be operationalised and that will be discussed during COP28 in the United Arab Emirates in 2023. The committee is scheduled to have its first meeting by March 2023.
The UN also decided that multilateral institutions, non-governmental organizations and private sources should be considered as sources of funding to deal with the losses caused by climate change-induced disasters.
Who campaigned for this new fund?
The Alliance of Small Island Nations (AOSIS), a grouping of 39 small island and low-lying coastal developing countries that has been in existence since 1990 has been the original flagbearer of this idea. Before the birth of AOSIS, 14 island states had gathered in Male in 1989 to discuss the threats of sea level rise at the Small States Conference. It was noted during the conference that the world should consider ways to protect small states that are vulnerable to sea level rise.
The need for some kind of mechanism for loss and damage was first mooted during the Doha climate summit in 2012. However, it was hotly debated for the first time only during the main negotiations at the Glasgow summit in 2021.
At this year's summit in Egypt, the G77 grouping of developing countries (which includes India) plus China formally proposed the creation of a new loss and damage fund.
"The loss and damage funding issue came into the spotlight because developed countries were not fulfilling their obligations towards mitigation. As a phenomenon, the issue was first discussed during the summit in Doha, in 2012, but a formal proposal was made only in Glasgow, last year," said Sanjay Vashist, Director, Climate Action Network, South Asia.
Mitigation refers to the reduction of greenhouse gas emissions through cutting the use of fossil fuels, and adopting green energy technology and energy efficiency.
What have been the recent instances of devastation attributed to climate change?
In September this year, India's neighbour, Pakistan, faced a calamity of unprecedented proportions as a third of its geographical area was under water after record rainfall. As per reports, the country faced damages to the tune of $30bn and nearly 1,700 people were killed. Incidentally, Nabeel Munir, a veteran diplomat from Pakistan, was the chief negotiator of the G77 plus China grouping of countries at the climate summit and played a key role in presenting the case for a new loss and damage fund.
Earlier, in June, the 'Climate Vulnerable Economies Loss Report' stated that between 2009 and 2019, climate change had eliminated one-fifth of the wealth of 55 poor nations across Africa, Middle-East, Asia-Pacific, Latin America and the Caribbean. In aggregate dollar terms, this amounted to a loss of approximately US$ 525 billion. These 55 countries have a population of 1.5 billion people.
Campaigners have also argued in the past that the money spent on recovering from climate disasters takes away the potential to spend on developmental and welfare projects, thus pushing poorer nations into more poverty.
Would India be eligible for support from the loss and damage funds?
The UN's official text on the adoption and creation of a loss and damage fund stressed that countries which are particularly vulnerable to the adverse effects of climate change need predictable assistance in combating economic and non-economic losses. This, experts have pointed out, is a loophole as it leaves the text open to interpretation.
India would certainly qualify as a country vulnerable to the impacts of climate, said Sanjay Vashist. "If we consider the criteria of countries that are most vulnerable to the impacts of climate change then India certainly qualifies as one. The reports of the Intergovernmental Panel on Climate Change have talked of south Asia as one of the regions that is most vulnerable to climate change and its impacts. However, in the future, India's position as an emerging economy and as a member of G20 grouping will be a point of discussion while considering whether we need loss and damage funds," Vashist said.
During the climate summit, the Prime Minister of Antigua and Barbuda Gastone Browne said that India and China, too, must pay to help countries recover from climate change-induced disasters.
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