Loss and Damage Fund: Will justice be served?
Amlan Shome
ESG Integration | Value Chain Sustainability | Decarbonisation Pathway | Climate Risk Modeling | Transition Capital || Sales Strategy @ Climate-Tech Startups
In light of the escalating climate crisis, the 'Loss and Damage' (L&D) fund has been the centre of attention.?
But, what exactly is the Loss and Damage Fund?
The 'Loss and Damage' (L&D) fund is a financial mechanism designed to address the irreversible consequences of climate change that cannot be avoided or mitigated through adaptation efforts.?
The Loss and Damage Fund is to direct the flow capital towards poorer nations (Small Islands like Tonga, Fiji) that have made negligible contribution to GHG emissions but are more vulnerable to extreme climate events.
The fund is based on the “polluters pay principle“. It makes the polluter liable for paying the cost of remedial action and compensation for the victims of environmental damage caused by their actions. Thus, the rich and developed nations, which are majorly responsible for industrial emissions, must pay the poorer nations that have made negligible contribution to global warming.
Loss and Damage Fund was in sharp focus during the UNFCCC Conference of Parties (COP 28) held in the UAE. After tough negotiations at COP 27 in Egypt in 2022, it was agreed that the Loss and Damage Fund (LDF) must be provided to nations vulnerable to or impacted by climate change consequences.
COP28 has overseen the commitment of ~ $475mn to the loss and damage fund. The European Union has committed around $245million, UAE has pledged $100 million, Germany and the UK pledged $100 million and at least $51 million respectively. The US will contribute $17.5 million and Japan has committed $10million for the Loss and Damage Fund.
Working of the Loss and Damage Fund:
Example actions that can help minimise and address loss and damage at different geographical scales:
Genesis of the Loss and Damage Fund:
The movement of Loss and Damage Fund (LDF) is a three-decade old movement which was first initiated by the island nation of Vanuatu and the Alliance of Small Island States.
The progress made at various UNFCCC Conference of Parties (COP) are as follows:
What benefits does Loss and Damage Fund carry?
(1) Holistic coverage of losses due to climate change- Loss and Damage not only includes the economic losses but also factors the human casualties, and the degradation of ecosystems and even cultural heritage!
(2) Ensures Climate Justice- The fund ensures climate justice to the vulnerable communities of Small Island nations and least developing countries, who have paid the price without even polluting the environment.
(3) Shift of Direction of climate finance- Climate finance has till now focused mostly on mitigation and adaptation. Two-third of the finance has gone into climate change mitigation and one third has gone into adaptation.?
Challenges with operationalisation of the Loss and Damage Fund
(1) Hosting of the fund at the World Bank- The World Bank charges an exorbitant overhead fee for maintaining any fund with it. The developing countries want a dedicated funding mechanism and an independent secretariat.
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(2) Reluctance of Developed countries to contribute to the fund- The developed nations, particularly the U.S., have remained non-committal about being primary donors to the fund.
(3) Rejection of Common But Differentiated Responsibilities (CBDR) principle- The developed countries have rejected references to the CBDR, equity, and liability in the fund’s draft.
(4) No Commitment over the size of the Fund- There has been no consensus over the size and scale of the Loss and Damage fund required for the developing world.
(5) Assessment of Losses- It is difficult to ascertain how much of the damage is due to climate change and how much is due to governance failure. Ex- Estimation of loss due to Pakistan flood.
What Should be the Way forward?
Implications of 'no progress' over the Loss and Damage Fund!
(1) Threaten climate justice- The stalemate over the formation of fund threatens climate justice and amplifies the suffering of vulnerable communities in developing nations.?
(2) Increase humanitarian crises- The delay in implementation of the fund will increase humanitarian crises like food shortages, human displacement and conflict.
(3) Worsen the environmental crises- Without adequate L&D funds, there will also be limited capacity to address environmental degradation and the loss of vital ecosystems.?
(4) Internal conflicts- Conflicts and tensions emerge in vulnerable nations due to climate change, which can spill across borders. For Ex- Central American Caravan.
(5) Divide between the developed and developing- There is an increasing gap between wealthy and impoverished nations with regard to climate reparations.
Conclusion:
Climate impacts are already causing widespread disruptions and are only set to worsen, despite ambitious emissions reductions efforts. There is an urgent need for solutions addressing loss and damage, especially financial support. With the loss and damage fund now in motion, the international community must work diligently to finalize new funding arrangements and mobilize finance at scale.
The climate clock is ticking. Communities on the front lines of climate impacts are counting on this support.