Among the most significant decisions to come out of the COP27 climate summit in Egypt last year was an agreement to establish a fund to help low-income countries pay for the growing damages caused by climate change. Negotiators have worked for the past year to thrash out key details of this “loss and damage” fund, with battle lines forming over who will pay into it and who will have access to it.
The tense discussions ran overtime, but on 4 November, countries reached a consensus proposal on how to tackle the essential open questions about the fund. It was “high drama”, says Preety Bhandari at environmental non-profit organisation the World Resources Institute.
If this fragile agreement holds, countries could smoothly adopt a loss and damage fund at the COP28 summit in the United Arab Emirates, which begins on 30 November. But with so many compromises in place, there is a chance that consensus could crumble. That could complicate debates on the many other urgent issues at the summit, from an agreement to triple renewable energy capacity by 2030 to a decision on what to do about fossil fuels.
What is ‘loss and damage’?
The UN doesn’t have a formal definition of loss and damage, but it broadly refers to economic or other losses caused by climate change that go beyond a country’s ability to adapt. This could include sudden damage caused by extreme weather linked to climate change, or longer-term consequences of sea level rise, for instance.
Debates around the issue stretch back to the first climate talks at the UN more than 30 years ago. They have largely focused on establishing a way for high-income countries to support low-income nations that are most vulnerable to climate change impacts, despite having contributed the least to the problem through greenhouse gas emissions.
What are the big questions on loss and damage at COP28?
Countries at COP28 are likely to adopt the consensus proposal reached by negotiators earlier this month, but any country could choose to reopen the issue. If that were to happen, negotiations on loss and damage, as well as other issues, could unravel, says Bhandari.
The current consensus relies on compromises on several issues that have divided “developed” and “developing” countries. These terms are used by the UN based on long-established conventions, but in many cases the designations don’t reflect countries’ levels of income. The points of debate over loss and damage include where the fund will be hosted, which countries are expected to contribute to the fund and which countries will be able to access it.
Crucially, for high historical emitters such as the US and the UK, contributions to the proposed fund wouldn’t be mandatory or linked to historical emissions. The proposed text merely “urges” developed countries to contribute and “invites” others to contribute. That “makes it very tenuous what kind of funding will flow in or not”, says Bhandari.
However, the proposal does open the possibility that relatively wealthy countries like China or Saudi Arabia might contribute to the fund, despite officially being classified as developing countries. “It’s very important for the historical polluters to try to bring the other current polluters to the table,” says David Nicholson at Mercy Corps, a humanitarian aid group.
Despite efforts by some developed countries to limit access to the fund to only the most vulnerable countries, the proposal also leaves access to the fund open to all developing countries. Another key compromise is the agreement to initially host the fund at the World Bank, despite concerns from developing countries that locating the fund in the donor-controlled bank would make it harder for them to access funding.
That wariness comes in part from past broken promises. At a UN climate summit in 2009, high-income nations pledged to supply $100 billion a year by 2020 to help low-income countries adapt to climate change and decarbonise, but they failed to do this on schedule and the target may have only just been met last year.
How much money is needed for loss and damage?
Friederike Roder at humanitarian advocacy group Global Citizen says she expects to see small pledges to contribute to the fund being made at COP28, including from the European Union, its member states and the US. But the sources and scale of loss and damage funding will remain a giant question mark. “These are not the big amounts that are going to shift anything,” she says.
How much is ultimately needed is also unclear. The consensus proposal doesn’t specify how much funding is required for loss and damage, but during negotiations, developing countries proposed a target of providing $100 billion each year by 2030.
Even that is below some estimates of the true scale of loss and damage driven by climate change, which is likely to increase in the future. An assessment by the Vulnerable Twenty Group, a coalition of 68 climate-vulnerable countries, found their economies had lost $525 billion between 2000 and 2019 due to climate change, equivalent to a fifth of their GDP. In September, a study estimated that $143 billion a year in damages are already attributable to extreme weather driven by climate change.
The funds to address loss and damage would need to be provided in addition to the hundreds of billions of dollars required to help low-income countries adapt to climate change and reduce emissions, says Nicholson. “We need to be really clear that whatever is happening in loss and damage does not reduce the ambition for climate finance as a whole.”
“These are mind-boggling figures,” says Roder. “What’s important to note is it’s actually possible.” She points to the trillions of dollars of revenue generated by major fossil fuel companies, which researchers have linked to trillions of dollars in climate-related damages. “The money is in the system. We just need to rechannel it.”
What role will climate science play in the loss and damage debate?
The agreement at COP27 to establish a loss and damage fund was partly enabled by advances in climate science that have allowed researchers to link particular weather events to climate change. Despite improvements in this “attribution science”, it remains controversial to use such research to inform decisions on how to distribute loss and damage funding.
One issue is that many of the countries most vulnerable to climate change have limited weather data on which to base attribution studies, says Joyce Kimutai at the Kenya Meteorological Department. “The tools that enable you to produce evidence are not available in those regions,” she says. For instance, a study of extreme flooding in central Africa this year was unable to conclusively show a link with climate change because of a lack of rainfall data.
For that reason, Kimutai argues that access to loss and damage funds for vulnerable countries shouldn’t be contingent on demonstrating that climate change drove a given event – at least not until the science catches up. “For regions that are very vulnerable, they really need that funding now,” she says.