Almost a year after it was mooted at the UNFCCC’s COP 27, countries have agreed on a draft declaration to set up a “Loss and Damage” fund, which will help the most vulnerable countries overcome climate-related damages. The language of the declaration is loaded with ambiguities that seem to have become par for the course for the UNFCCC process. If the negotiations in the run-up to the decision are any indication, the path ahead for the new fund is unlikely to be smooth. Developing countries opposed housing the fund at the World Bank and wanted a mechanism to ensure that the commitments to the Global South are honoured. Developed countries wanted China and Saudi Arabia to loosen their purse strings. In the end, the two worked out a facile compromise: The fund would be based at the World Bank for four years and neither the developing countries nor the developed ones would be obliged to contribute to it.
The demand for a Loss and Damage Fund is virtually as old as climate negotiations. However, mitigation and adaptation dominated COPs for nearly three decades. In the last 10 years, a feeling has grown amongst countries with the highest vulnerability to climate change, but with a minuscule GHG footprint, that their concerns were not being addressed. Last year, a report commissioned by 55 climate-vulnerable countries found they would have been 20 per cent wealthier had it not been for global warming. It reckoned that losses inflicted on them by shifts in temperature and rainfall over the past two decades amounted to over $500 billion. So far little money has been available for climate disasters apart from aid provided through the international humanitarian system — which, by all accounts, is insufficient. The Global Shield Against Climate Risks Initiative, also launched at COP27, adopts an insurance-based finance mechanism for loss and damage. But climate-vulnerable countries argue that with global warming-related disasters intensifying, insurance cannot be a lasting answer. They also fear that First World donors will re-label their humanitarian aid as loss and damage funding.
The Loss and Damage Fund was amongst the few substantive proposals at last year’s COP. The meet’s final agreement had nothing that could lead to greater action on emissions reductions or mobilising greater financial or technological resources. In about three weeks from now, when climate delegates assemble in Dubai for another COP, fine-tuning the Loss and Fund declaration will be on their agenda. The failure to make it potent will add to the growing number of questions being asked of the UNFCCC process.
