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The Loss And Damage Fund: COP28

The upcoming COP28 summit in Abu Dhabi, UAE, the most crucial climate conference since the Paris Agreement, is a critical platform for convening on the global goals for climate action and bringing life to past agreements including the Rio Summit and the United Nations Framework Convention on Climate Change (UNFCCC) among others. Adapting to the evolving effects of climate change and collectively recognising responsibilities for nations is the foremost agenda of the COP conferences, which in 2023 has been acknowledged as a ‘last-ditch attempt’ to bridge the vulnerability gap between the world’s richest and poorest countries.

A month before the conference, two-day talks with around 70 country-ministers were conducted for the “loss and damage fund” decided in 2022. The head of global political strategy at Climate Action Network International has stated, “The meeting is a make-or-break moment that will determine the success or failure of the new loss and damage fund. We must bridge the trust gap, operationalise the fund, and provide the necessary support to those who need it most. We cannot afford to fail as the lives and livelihoods of millions are at stake”.

The loss and damage fund

The loss and damage fund was hailed as a major achievement-output of COP27 in 2022 whereby countries with the smallest carbon footprint (also the world’s poorest countries) bear the brunt of climate change significantly more than the richest countries responsible for the largest contributions to climate change. This widening gap between the richest and poorest countries is aimed to be addressed by the fund such that monetary contributions by the world’s largest economies will support the poor nations who experience the adversities of climate change and suitably adapt and respond to its requirements.

For instance, the floods in Pakistan and the drought in the Horn of Africa were recent typical examples of cases where support such as the loss and damage fund would aid persons impacted by extreme weather conditions. The rising frequency of the negative consequences of the risks of climate change such as rising sea levels, heatwaves, desertification etc., across the world, largely concentrated in the smallest economies, emphasised the need for the fund at COP 27. Subsequently, the Transitional Committee was tasked with making the loss and damage fund operational by the commencement of COP28.

Operation and governance

Talks before COP28 were a necessity to decide how the fund should be governed, who contributes to the fund, and how to access the fund.

Considering the governance of the fund, countries including the US have argued for the World Bank to host the fund. However, this has been contested on the grounds of bias for richer nations at the World Bank. Additionally, the cost of overheads at the World Bank would involve 24% of the funds to be used as a ‘hosting fee’ and slower access to the fund would make relief aid difficult in contingency. The use of the fund can be misunderstood as loans instead of grants, defeating the purpose of financial aid for poorer countries.

Brandon Wu, the director of policy and campaigns at ActionAid stated, “These positions [by rich countries] are absolutely unacceptable for a fund that is meant to support developing countries and be responsive to the needs of vulnerable communities. Developed countries are negotiating with their own narrow interests in mind, rather than trying in good faith to design a fund that would be the most effective possible option for supporting vulnerable people”.

In terms of contributions to the fund, while there is recognition of a ‘historic responsibility' for the countries with the largest carbon footprint to pay, richer countries have argued for a broader source of funding including the proceeds from selling carbon offsets, private sector contributions etc. The position of the presently fastest growing economies such as Saudi Arabia, India, China, South Korea, Russia, Qatar, and the UAE, is precarious, as they were classified as developing countries in 1992 and were freed of the responsibility of funding poorer nations.

Further, in terms of the access, there is disagreement as to whether the fund should be open to all countries that were classed as developing countries in 1992 at the UNFCCC or only to the most vulnerable developing countries today.

Current status

Negotiations conducted in October and November 2023 failed. Egypt’s delegate Mohamed Nasr and German negotiator Jennifer Morgan said that while almost 80% of the text is agreed, the ‘real battles’ still need to be fought at COP28.

Addressing the root causes of climate change is crucial to ensure the effective utilisation of the fund. The current gaps in climate financing include a fall of over $17 billion in the $100 billion pledged to developing countries.  

While the emphasis is on the upcoming conference for charting the future of climate financing, amongst other goals, the procedural requirements are excessively behind schedule. The Centre for international environmental law has highlighted the insufficiency in reaching agreements and the disregard for affected communities; “It must explicitly recognize the importance of human rights obligations in the context of addressing loss and damage, and implement a human rights-based and gender-inclusive approach. The deletion of explicit references to human rights in the objectives and purpose of the Fund in the newest iteration of the text is highly concerning, especially given the number of decisions that will be left for the Board to take”.

At the crux, the willingness of countries to establish the fund is still under question. Sceptical suggestions and reluctant efforts have been evident in the negotiations leading up to the COP28 conference delaying the establishment of the fund and thereby climate financing in the present scenario.

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