Post-COP28 Reality: Need To Bolster Loss, Damage Fund
Reflecting on the historic 2023 United Nations Climate Change Conference (COP28), leaves me in two minds. While it is satisfying to see global unity for a cause that truly demands collective action, there exists a gap between nations fighting to meet their climate goals. With increasing geopolitical risks, the COVID-19 pandemic, and the rising income inequalities individual priorities of nations have overtaken the collaboration required to achieve the global goals collectively.
Hence, the real test lies in closing this gap through the implementation of key decisions and assessing whether they go far enough.
The loss and damage fund: A drop in the ocean
A slight sliver on the brighter side was to see the long-awaited operationalization of the Loss and Damage Fund. A little history for some perspective. The Loss and Damage Fund first came into discussion, three decades ago in 1991, when a small island nation Vanuatu, suffering from rising sea levels, raised a simple question: Who should pay for the cost of environmental degradation? Since then, after 30 years of deliberations and a growing demand for compensating developing nations for their losses, the approval of the Loss and Damage fund at COP27 in Egypt was a key outcome. This fund aims to aid developing nations facing losses from extreme weather events. These comprise of non-economic factors including displacement, loss of culture, and loss of biodiversity. The definition is quite inclusive.
While the operationalization of the fund at COP28 is a pivotal moment, it comes along with challenges that need to be addressed.
The climate emergency is widely acknowledged to be contributed by various nations, including those classified as developed under the 1992 Rio Convention. The total voluntary pledge to the Loss and Damage Fund, including from countries with robust economies that account for half of the world’s GPD, of just over $700 million (£556 million) is grossly inadequate. According to the loss and damage fund collaboration, the least amount required to be mobilized to address the adverse climatic consequences is $400 billion annually. The contributions to the Loss and Damage Fund constitute less than 0.2 per cent of the economic and non-economic losses countries face from global warming. A drop in the ocean.
It also deviates from the UNFCCC principle of accountability and justice. The fund relies on the generosity and goodwill of the donors rather than on the accountability and justice of the polluters. Replenishment of the fund is another big question. It is not clear whether the committed amounts will be replenished to meet the growing demands of climate adaptation and mitigation needs.
I would go a step further and ensure that the source of funding is diversified to include carbon taxes, levies on fossil fuels, aviation and maritime transport, and debt relief, among others.
The way forward
The Loss and Damage fund must be distributed among the developing countries in a just manner. A key question here would be to define what makes a nation ‘developing’? If one goes by the 1992 UNFCCC definition, certain countries with very high per capita incomes would be eligible to receive these funds, at the cost of countries that are in genuine need of such incentives.
Another key factor which can unlock the potential of the Loss and Damage fund is the engagement of the private sector. We need to see the private sector, particularly financial institutions, innovate, take lead and help developing nations transition to low-carbon and resilient economies. The governments should facilitate access to finance and insurance products, enhancing the viability of climate-related investments. Financial instruments like green bonds, subsidies, sovereign guarantees, and blended finance can make climate financing more attractive for the private sector. The financial resources, coupled with innovation and technology of the private sector, will propel this transition.
The private sector must also be nudged to align its strategies with key climate commitments such as the Paris Agreement or the 2030 Agenda, as well as carbon pricing, standards, incentives, and disclosure requirements. Government intervention is needed here as well to create conditions and incentives that can mobilize and leverage private-sector resources for climate action. By developing regulatory frameworks, we can go a long way toward ensuring that resources such as the Loss and Damage fund can truly be our arsenal to battle climate change.
Finally, accessibility is paramount. The Loss and Damage fund's success and impact hinges on its ease of access. It is crucial to make the fund accessible without any bureaucracy or hurdles in ways that are ethical and transparent. To do this, the approach must be adaptive and participatory. Establishing a transparent governance structure with clear accountability mechanisms will ensure that the fund is used effectively as per its original objectives.
This effort would need to be at every level, be it global or local. This is a war worth fighting for and winning. In the words of the Secretary-General of the United Nations, António Guterres, “The climate emergency is a race we are losing, but it is a race we can win.” Let us come together to win this one.
The author is Co-founder, ReNew, Chairperson of Sustainability
