International Climate Agreement Establishes ‘Loss and Damage’ Fund, but Concerns Persist Over Funding for Vulnerable Nations
World governments have reached a significant agreement to establish a “loss and damage” fund aimed at providing financial support to vulnerable communities affected by climate change. While seen as a positive step, concerns remain regarding the adequacy of funding to meet the needs of these communities, as campaigners argue for more substantial commitments from wealthier nations.
The establishment of a “loss and damage” fund to supply funds for the world’s most vulnerable people affected by climate breakdown is a significant development in addressing the impacts of climate change. The “loss and damage” fund is intended to assist countries and communities that are disproportionately affected by the adverse effects of climate change and are unable to cope with these losses and damages on their own.
These funds are an important part of international efforts to address climate change and its impacts. They aim to ensure that countries and communities facing severe climate-related losses and damages receive the necessary assistance and support to adapt, recover, and rebuild. The specifics of how such funds are structured and financed can vary between different agreements and negotiations.
The fact that governments from richer and poorer countries came together to draw up a blueprint for a “loss and damage” fund after a meeting under UN guidance is a positive step in addressing the global climate crisis and its impacts on vulnerable populations. The details of the agreement, including the funding mechanisms and the scale of financial support, would be crucial in determining the fund’s effectiveness in helping those in need.
The “loss and damage” fund will be administered initially by the World Bank and will draw on funding sources from both large developing countries and developed nations, including the US, the EU, and the UK. The absence of a firm target for how much money the fund will disburse suggests that the specific funding commitments and disbursement amounts are still under negotiation. However, it is stated that countries most affected by the climate crisis hope the fund will reach hundreds of billions of dollars within a few years.
This approach of drawing on contributions from both developed and developing countries is in line with the principles of equity and common but differentiated responsibilities in addressing climate change, as outlined in international climate agreements like the United Nations Framework Convention on Climate Change (UNFCCC).
The blueprint for the fund must be formally adopted at the COP28 UN climate summit in Dubai, scheduled to take place at the end of the month. It’s a positive sign that an agreement has been reached by the transitional committee, which was set up under the UNFCCC framework. This indicates that there is consensus and support for the establishment of the “loss and damage” fund. The specifics of the fund, its governance, and the commitment of nations to contribute will likely be a major focus of discussions at the COP28 summit.
Avinash Persaud, a climate envoy for Barbados and the transition committee for Latin America and the Caribbean, said: “This was a challenging but critical outcome. We now have for the first time an instrument that will operationalise an international fund for grant-based financing of reconstruction, rehabilitation and relocation after extreme weather or slow onset events. This is an important step forward and will bring positive momentum to other climate actions.”
Developing countries made key concessions, such as agreeing that the fund could be managed on an interim basis by the World Bank. Developed countries also agreed language that implied they should be the key donors to the fund, as they would be “urged” to contribute while others would be “encouraged” to do so.
The concerns raised by campaigners, such as Harjeet Singh from Climate Action Network International, highlight a common challenge in international climate negotiations. While the establishment of a “loss and damage” fund is a positive step, there is a persistent gap between the financial commitments made by developed countries and the actual financial needs of vulnerable communities in the face of climate impacts.
The issue of climate justice and equitable contributions to addressing climate change has been a contentious topic in global climate talks. Developing countries, often with smaller carbon footprints and less responsibility for causing climate change, are frequently the most severely affected by its consequences. These nations argue that they need substantial financial support to adapt to and recover from the impacts of climate change, and that developed nations, which have historically contributed more to global emissions, bear a greater responsibility for providing such support.
The concerns expressed by campaigners about the agreement not guaranteeing the necessary funds needed for vulnerable countries are a reflection of this ongoing tension between the aspirations of vulnerable communities and the commitments of wealthier nations. The question of how to bridge this gap remains a central issue in climate negotiations.
The challenge of financing climate adaptation and supporting those who are most affected by climate impacts is complex and multifaceted, and achieving meaningful progress often requires ongoing efforts to find common ground and address the concerns of all parties involved.
It is unclear whether campaigners will seek to reopen negotiations over the fund at Cop28. One insider told the Guardian that any party that tried to do so would face attacks from others, who regard this as the best compromise available and want to move on to other substantive issues at the summit.
Several other pressing issues could also derail Cop28. More than 80 countries want an agreement to phase out fossil fuels, but this is strongly opposed by many oil and gas producers. A process known as the “global stocktake”, by which progress will be assessed on meeting the Paris agreement goal of limiting global temperature rises to 1.5C above pre-industrial level, will also be contentious, as large economies will have to face up to the inadequacy of their current efforts at emissions reduction.