Climate Change Escalates, Loss And Damage Fund Lags Behind

Despite global commitments and diplomatic efforts, the operationalisation of the Loss and Damage Fund, a critical component of climate finance mechanisms, faces significant challenges, hindering its effectiveness in addressing the impacts of climate change. 

According to a report by The Energy and Resources Institute (Teri) titled, ‘Operationalisation of the Loss and Damage Fund: Challenges and Opportunities’, wealthy nations pledged USD 100 billion annually from 2020 in climate finance to poorer nations, but have fallen short, casting doubts on their commitment and capability to support climate initiatives. 

The creation of the fund raises questions about its implications on existing climate finance structures, including resource diversion and funding burdens. With COP28 to address various resolutions, including increased financial demands on developed nations, the projected loss and damage costs could range from USD 290 to 580 billion by 2030, with civil society organisations advocating for a floor of USD 400 billion annually.

“The new Loss and Damage Fund, though a significant step forward, does not diminish the urgent need for adaptation finance,” said Alvin Chandra, Head of UNEP’s Global Adaptation Network in the ‘Adaptation Gap Report’.

“As we saw in the latest Adaptation Gap Report, every dollar invested in adapting to coastal flooding could save USD 14 from loss and damage to the economy,” he added. 

Amid the relentless onslaught of climate change, women sugarcane workers in Beed find themselves at the forefront of its devastating impacts. Forced to leave their homes due to drought-induced crop failures, many women are compelled to undergo hysterectomies to secure employment in the exploitative sugarcane industry.

These hysterectomies, undertaken as a means of economic survival, come with severe health consequences, leaving women grappling with lasting pain and mental health issues. Despite the widespread outcry, the practice persists, highlighting the failure of existing climate finance mechanisms to address the root causes of vulnerability and provide meaningful support to affected communities.

"Women in vulnerable sectors like agriculture bear the weight of climate change impacts. They face increased health risks, economic insecurity and exacerbated inequalities. The Loss and Damage Fund promised at COP28 must prioritise gender-responsive solutions to support these women effectively which needs a fresh momentum," said Maya Patel, Women's Rights Advocate at Pehchan Humari.

This emergency fund intended to assist countries grappling with the adverse effects of climate change, falls short in meeting the specific needs of marginalised groups like the women of Beed. Disagreements over fund allocation, coupled with governance issues and funding shortages, contribute to its ineffectiveness in addressing the nuanced challenges faced by communities on the frontline of climate change.

 Climate change impacts are not gender-neutral. Women, particularly those in rural areas and informal sectors, face disproportionate risks and vulnerabilities. It's crucial that climate finance mechanisms, address these gender disparities and ensure that resources reach women on the frontlines of climate impacts, said Rajesh Kumar, Former Climate Justice Program Manager, Environmental Research Foundation, Pune.

"To achieve this it is crucial that the administrative infrastructure is strong and ensures the smooth distribution of resources by overcoming potential challenges stemming from disagreements over fund allocation, governance issues and funding shortages, which hinder its effectiveness in addressing the nuanced challenges faced by frontline communities dealing with climate change," Kumar added.

In addition to governance and diplomatic challenges, climate finance complexities, including standardised definitions, financial instruments and mobilisation of additional finance, pose significant obstacles. Fragmentation in the global finance landscape complicates access to funding, while resistance to fragmentation and bureaucracy hinders effective aid delivery. Scientific and technical challenges, such as defining loss and damage, understanding vulnerability and data collection, further impede progress.

Adelle Thomas, lead author of the IPCC’s 2022 report stated, “Loss and damage mean different things to different groups and there is no agreed-upon definition of loss and damage within the UN Framework Convention on Climate Change (UNFCCC). However, loss and damage can generally be understood as the negative impacts of climate change that occur despite, or in the absence of, mitigation and adaptation.”

Notably, loss and damage are often categorised as either economic or non-economic. Economic loss and damage are negative impacts that we can assign a monetary value to. These are things such as the costs of rebuilding infrastructure that has been damaged due to a flood, or the loss of revenue from crops that were destroyed due to drought. 

"Non-economic loss and damage are negative impacts where it is difficult or infeasible to assign a monetary value. These are things such as trauma from experiencing a tropical cyclone, loss of community due to displacement of people, or loss of biodiversity,” he added.

India's role in loss and damage initiatives is crucial, with the country demonstrating leadership through various initiatives and advocating for increased financial support and technological assistance from developed countries. Its strategic engagement in the UNFCCC process and its proactive approach at COP28 reinforce its position as a global leader in climate action. 

However, overcoming the challenges in operationalising the Loss and Damage fund requires collective action, political will and innovative solutions to ensure the equitable distribution of resources and effective support for vulnerable nations and communities. 

Climate Policy Initiative (CPI) India's Center for Sustainable Finance (CSF) has released its latest report titled 'Financing Adaptation in India,' emphasising the urgent need for increased investments in adaptation to mitigate the adverse effects of climate change in the country. 

India, with its diverse geographical and socio-economic landscape, faces significant vulnerability to climate change impacts. The report underscored the critical importance of adaptation investments, estimating the financial requirements of states across India and identifying funding gaps.

Malini Chakravarty, lead author of the report stressed the necessity of exploring innovative financing solutions to address the pressing issue. She highlighted the potential of a multi-faceted approach, including tax devolution principles shaped by the Finance Commission to direct resources to climate-vulnerable states and districts.

Dhruba Purkayastha, India Director, CPI India in the same report, emphasised the need for policy and institutional prioritisation of adaptation, particularly in vulnerable states. He urged for the mainstreaming of adaptation investments through budget allocations and leveraging public finance to attract commercial investments.