- Loss and Damage (L&D) climate finance will be on the agenda at COP for discussion for the first time ever by the world’s nations, as the result of intense pressure applied by developing countries and NGOs just before the start of COP27 in Egypt.
- L&D refers to reparations potentially owed to poorer, more vulnerable developing nations for the climate harm caused by wealthy nations and their large-scale historical carbon emissions.
- The complexities of the mechanism for calculating losses by developing nations, and paying out of damages by wealthy nations, has never been worked out. The U.S. and other wealthy nations have a history of obstructing L&D negotiations.
- The concern among developing nations at COP27 is that even though L&D is being discussed, wealthy countries will reject the idea of direct no-strings-attached payments from wealthy countries to poorer nations, opting instead for loans, insurance and other less direct financial mechanisms.
In a potentially landmark moment, a discussion of damages by the world’s wealthiest countries (those historically producing the lion’s share of carbon emissions) to be paid to poorer nations (those most economically vulnerable to climate change), moved to center stage at COP27 early this week in the final hours before the summit began.
This marks the first time this finance instrument, known as Loss and Damage (L&D), will be discussed officially at a COP after decades of Global North policy obstruction. The last-minute addition to the COP27 agenda came after nearly 150 organizations called on the U.S government to commit to a Loss and Damage Finance discussion at this month’s summit.
Similar negotiations have been blocked by the U.S. and other wealthy nations at every international climate conference over the past year, but civil society groups think recent public scrutiny helped push the United States to finally end its resistance to talks on the topic.
Just last week, U.S. climate envoy John Kerry said that he believes the world’s wealthiest and largest emitters should help poorer countries in the face of climate destruction. “We have to find a way for more capital to flow into developing countries,” Kerry stated.
However, some organizations are concerned that, given the long history of U.S. resistance to L&D negotiations, this could merely be an attempt by the U.S. to greenwash its position and talk without making substantial change.
“There’s all these tactics that they’re using to try to insist to the public that they’re supporting loss and damage. But the devil is in the details,” Rachel Rose Jackson of NGO Corporate Accountability, told Mongabay. She thinks the U.S. wants “to be seen to be heeding the demands of the people. But [L&D] needs to be a deal for the people, not a deal for the private sector; and a deal that effectively applauds the U.S. as a climate champion, but [doesn’t let] them escape the historical responsibility while doing so.”
The United States is the largest historical greenhouse gas emitter, accounting for one fifth of humankind’s total releases (China now annually emits more greenhouse gases). Despite its high emissions, the U.S blocked L&D talks at COP26 in 2021, at the Intergovernmental Panel on Climate Change meeting in March 2022, and at the Bonn Intersessional Climate Talks in June of this year. The U.K, E.U and Australia followed suit.
At COP26 alone, the U.S obstructed L&D talks six times, including a concrete proposal brought forward by the G77, the largest Global South negotiating block of nations, says Corporate Accountability. COP conferences do not use a voting system, but instead rely on consensus, giving the fewer Global North countries leverage to avoid or reject agenda items.
Loss and Damage refers to money paid by the richest worst carbon polluting countries to help poorer nations on the frontline of the climate crisis recover from losses such as species extinction, and damages caused by catastrophic events linked to climate change, including floods, fires, droughts and excessive heat.
First raised as an issue by the United Nations Framework Convention on Climate Change (UNFCCC) in 1991, no developed nation pledged L&D funds for 30 years until COP26. Last year’s $2.3 million pledge by Scotland was the first ever, and was followed by Denmark’s promised $13.4 million. Austria also announced $50 million for climate loss and damage at COP27 this week at COP27, just hours after Scotland upped its 2021 commitment. Belgium and Germany have also committed to fund the L&D finance mechanism, though Germany proposes doing so via insurance rather than direct payments.
The funds promised are a mere drop in a planet-sized bucket as compared to the gargantuan losses faced by developing nations in the face of just this year’s climate disasters. “My country Pakistan has seen floods that have left 33 million lives in tatters and have caused Loss and Damage amounting to 10% of [national] GDP,” said G77 Chair and Pakistan Ambassador Munir Akram, speaking at COP27.
Estimated global losses from climate-driven catastrophes topped $270 billion in 2021, with floods growing at a significantly faster pace than global GDP, according to reinsurance giant Swiss Re. These figures are sure to swell as carbon emissions continue entering the atmosphere. “The most widely supported threshold for adequate loss and damage finance stands at around $1.3 trillion per year — a threshold announced last year at COP26 in Glasgow,” according to 350.org, a climate NGO.
Failure to deliver on climate finance is a recurring divisive theme at UN climate summits, and of increasing tension between have and have-not nations. After promising $100 billion by 2020 to the worst-impacted by climate change in 2008, the world’s richest nations failed to fulfil that pledge at last year’s COP26.
Instead, the world’s wealthiest countries are increasing spending on domestic climate policy apparently in a bid to secure their own security.
Civil society groups have expressed growing disappointment in what they deem to be a short-sighted nationalistic approach to a global issue — especially concerning the U.S, where Joseph Biden was elected president partially on his anti-racism and pro-climate change action pledges. NGOs argue that denying financial support to financially-strapped hard hit nations not only leaves the worst affected in grave danger, but also ignores the significance that massive climate disruption will have on a globalized world.
U.S. Loss and Damage policy “makes no sense whatsoever,” Brandon Wu of Action Aid, an NGO, told Mongabay. “This is a crisis that is global, that cares nothing about borders.”
As impacts of the climate crisis worsen, the cost of L&D will undoubtedly escalate, meaning that the longer richer countries reject responsibility for damage caused, the more the amount owed will climb. Because the Global North did not curb its carbon emissions decades ago, the world’s poorest continue shouldering a huge burden of the climate crisis today.
But despite gross inequalities in wealth and responsibility, the U.S. continues to suggest that already economically struggling developing nations take out large loans to recover after climate disasters. Kerry in his statement suggested that payments come not directly from the U.S. but be channelled through re-instituted International Monetary Fund (IMF) and World Bank financial mechanisms. The G77+China which represents 134 developing countries, are demanding a “facility” to send direct funds for losses, with no strings attached, to the Global South.
“When people lose their homes, crops and their income, or even their loved ones, they need money so that they can recover from those impacts,” Harjeet Singh of Climate Action Network told Mongabay. “Imagine if they are now offered loans, which means that they are going to be pushed further into poverty and trapped in a debt cycle.
“And with more disasters happening, developing countries will be diverting their scarce resources into relief, rehabilitation, and reconstruction, because they cannot just leave people on their own, which means they have to borrow more money, which means that the debt crisis that we are facing right now will intensify further,” Singh added.
Civil society groups warn that apparent consent by the U.S. to discuss L&D at COP27 could result in a U.S-promoted proposal for debt-based financing and private investment, rather than direct funnelling of cash from richer to poorer nations.
Wu said the NGO coalition would encourage the G77 to reject any such proposals and continue putting pressure on the U.S. and its Global North allies, but admitted it is more likely the wealthy nations will try to push through an undefined finance facility: “Creative ambiguity is the name of the game in international relations,” Wu stated.
Singh, however, sees the Global North’s reluctance to explicitly compensate poorer countries as a means to avoid admission of guilt for the climate crisis, which could open the U.S., Britain, the EU and other wealthy nations to international lawsuits for the role their high emissions played in causing L&D inflicted on developing nations. He argues litigation cases would multiply even faster if the U.S. does not appear to cooperate under the UN system.
He feels strongly that it is in the best interest of wealthy nations to engage constructively with L&D proposals at COP27, negotiating in good faith with developing nations. He also called for a windfall profit tax on record-breaking fossil fuel profits. By blocking these issues, the developed world “is basically denying help to people who are suffering.
“There’s a moral imperative, there’s a [global] human rights imperative, and there’s also an economic angle to [the climate crisis] that — as we said in the case of Covid — no one is safe until everyone is safe,” he concluded.
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