Loss and Damage Fund

Syllabus: GS 3 – Conservation, Environmental Pollution and Degradation, Environmental Impact Assessment, Disaster and Disaster Management.

Context: The commencement of the COP28 climate conference in Dubai saw the official initiation of a fund for loss and damage, aimed at assisting vulnerable nations in managing the consequences of climate change.

Source: The Hindu | Editorial dated 03- December 2023

What is a loss and damage fund?

• The establishment of the Loss and Damage Fund stands out as a key achievement at the United Nations Climate Conference.
• It signifies the realization of persistent efforts by climate-vulnerable developing countries over several decades.
• The Loss and Damage (L&D) fund serves as a financial mechanism specifically crafted to address the irreversible repercussions of climate change, which are unmanageable through adaptation measures.
• The fund acknowledges and strives to recompense the tangible losses experienced by communities, nations, and ecosystems due to the impacts of climate change.
• These losses go beyond mere monetary value, striking at the heart of human rights, well-being, and the sustainability of the environment.

Must read article for Prelims – Loss and Damage Fund

Historical Context

• For over 30 years, there’s been a persistent call for wealthy nations to acknowledge their role in historic pollution, which raised the global temperature by over 1 degree Celsius.
• This historical pollution is causing significant damage worldwide, particularly affecting the poorest nations.
• At COP 19 in 2013, held in Warsaw, Poland, the L&D fund was established to provide financial and technical aid to economically developing nations facing Loss and Damage due to climate change.
• Post COP 19, the Santiago Network for L&D was initiated during COP 25, but no financial commitments were made.
• The 2021 COP26 in Glasgow aimed to continue discussions over three years on the operationalization of the fund.
• After intense negotiations at COP 27, the L&D fund was established, and a Transitional Committee (TC) formed to figure out operational mechanisms.
• The TC’s task was to prepare recommendations for countries to consider by COP 28.
• The fourth TC4 meeting ended without a clear consensus on operationalizing the L&D fund, with key points of contention including the fund’s hosting, common but differentiated responsibilities (CBDR), climate reparations, and eligibility of all developing nations.
• Recommendations from TC5 have been drafted and sent to COP 28.

Major Challenges

• Developed nations, notably the US, show reluctance to commit as primary donors to the fund.
• The lack of clarity on the size of the L&D fund raises uncertainty.
• Attempts to specify the fund’s size were thwarted under pressure from the U.K. and Australia.
• The current draft encourages developed nations to contribute without a clear commitment or framework.
• Developing nations express discontent, perceiving inadequate addressal of their concerns.
• Dilution of the L&D fund poses a threat to climate justice and exacerbates the challenges faced by vulnerable communities in developing nations.
• Climate-change-induced instability brings security implications with emerging conflicts in vulnerable nations.
• These conflicts may extend beyond borders, creating global security challenges.
• Insufficient support for vulnerable communities heightens the risk of humanitarian crises, including food shortages, displacement, and conflicts.
• There is a lack of a formulated devolution plan, hindering the equitable transfer of Loss and Damage Funds among Small Islands and Developing countries.

Impact of Loss and Damage Fund Stalemate:

• The deadlock poses a threat to climate justice, intensifying the struggles of vulnerable communities in developing nations unfairly burdened by climate change impacts despite their minimal contributions to global emissions.
• Protracted delays in fund implementation worsen humanitarian crises, exacerbating challenges such as food shortages, displacement, and conflicts.
• Exacerbating Environmental Crisis:
• Climate-induced tensions in vulnerable nations, exemplified by the Central American Caravan, may escalate, potentially spilling across borders and contributing to internal conflicts.
• The impasse widens the gap between wealthy and impoverished nations, particularly in matters of climate reparations and acknowledging historical responsibilities for global warming.
• Diplomatic Breakdown on Climate Issues:
• The deadlock signifies the failure of the international community to collectively address critical global challenges, particularly the contentious issue of climate change.

Significance of the Loss and Damage Fund:

• Loss and damage encompass adverse consequences resulting from unavoidable climate change risks, including rising sea levels, prolonged heatwaves, desertification, acidification of the sea, and extreme events like bushfires, species extinction, and crop failures.
• G20 countries historically emit the majority of greenhouse gases, disproportionately affecting developing nations.
• Despite contributing minimally to climate change, African countries, for instance, face increased vulnerability, needing to spend up to five times more on climate adaptation than on healthcare.
• UNEP research highlights a shortfall in finance for adaptation, with international flows to developing countries five to ten times below estimated needs.
• Various innovative tools, such as windfall taxes on fossil fuel companies, debt for loss and damage swaps, and international taxes, are proposed to address the financial requirements for loss and damage.
• The Loss and Damage Fund aims to address gaps left by existing climate finance institutions, like the Green Climate Fund, which fell short by at least US$17 billion in 2020.
• The Transitional Committee is tasked with recommending the setup, operations, funding recipients, and contributors to the fund.
• To be effective, the fund must tackle the root cause of climate change by reducing emissions.
• Drastic emission reductions are crucial to prevent devastating effects on more countries, emphasizing the need for increased resources for mitigation, adaptation, and loss and damage to achieve Sustainable Development Goals.

Conclusion

In conclusion, ensuring the effectiveness of the Loss and Damage Fund (LDF) demands a sustained political commitment akin to the successful Green Climate Fund. Implementing a windfall tax on oil and gas companies’ profits provides a viable financial source for the LDF, offering a pragmatic solution. Additionally, exploring the establishment of an international insurance pool as an interim measure addresses the urgency until developed nations commit to grants. As the LDF remains a crucial element in global climate action, achieving climate justice necessitates rich countries delivering fair and just finance to Small Islands and Least Developing countries.

References:

The Hindu

UNEP

Practice Question: Discuss the implications of the impasse over the Loss and Damage Fund, highlighting the challenges it poses to climate justice and the exacerbation of humanitarian and environmental crises.