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Road to Dubai COP28: Any progress on the new loss and damage fund in Bonn?

The United Nations Framework Convention on Climate Change (UNFCCC) Subsidiary Bodies 58 (SB58) conference in Bonn, Germany, kicked off June 5, 2023, and the first week ended with parties failing to adopt the agenda. Nfamara K. Dampha, IonE research scientist in natural capital and ecosystem services, is in Germany for the negotiations. He shares a look back at loss and damage discussions over the last 30 years and his observations of the first week of negotiations in Germany. 

 

Audience waits for presentation to begin at the UN Climate Conference in Bonn, Germany.

Recognizing that climate mitigation remains unambitious and climate adaptation grossly limited, parties to the UNFCCC and the Paris Accord (CMA) agreed in November 2022 at the 27th Conference of Parties (COP27) in Sharm El Sheikh, Egypt, to establish a loss and damage fund (LDF) to compensate developing countries for deleterious climate change impacts such as frequent floods, severe droughts, intense heat waves, rising sea levels, and loss of ecosystems. It also includes forced displacement and loss of culture, language, and identity, especially in the most vulnerable places, including Least Developed Countries (LDCs) and Small Island Developing States (SIDS).

 

Brief history of global loss and damage discussions

In 1991, the island state of Vanuatu urgently demanded that the global community address loss and damage caused by the effects of the changing climate. It took over 30 years of intense diplomatic efforts as well as climate justice demands from civil society, for rich countries to accept loss and damage as a finance agenda item in the COP27 negotiations last year. 

Over those 30 years, some of the major loss and damage milestones include: 

  • 2007: Loss and damage is included in the Bali Action Plan at COP13 in Bali, Indonesia.
  • 2013: The Warsaw International Mechanism (WIM) for loss and damage is established at COP19 in Warsaw, Poland.
  • 2016: The landmark Paris Agreement emphasizes and recognizes the importance of “averting, minimizing, and addressing” loss and damage due to extreme weather events and slow onset events caused by climate change, and catalyzes the role of sustainable development in reducing the risk of loss and damage. The Paris Agreement calls on WIM to facilitate dialogue about early warning systems and emergency preparedness, irreversible and permanent loss and damage, insurance solutions, non-economic losses, and resilience.
  • 2019: Parties at COP25 in Madrid, Spain, establish, as part of WIM, the Santiago Network for “catalyzing technical assistance for averting, minimize and addressing” climate loss and damage, in “particularly vulnerable” developing countries (see Decision 2/CMA.1, para 43-45). WIM also created opportunities for “strengthening dialogue” on loss and damage among parties and non-party stakeholders to openly and inclusively discuss the arrangements for funding activities that avert, minimize, and address loss and damage.  
  • 2021: At COP26 in Glasgow, Scotland, parties agreed to three rounds for the Glasgow Dialogue on Loss and Damage at the Subsidiary Body for Implementation (SBI) meetings (2022-2024). 
  • 2023: The SBI, Executive Committee of the Warsaw International Mechanism (WIM ExCom), and the Transitional Committee (TC) on Loss and Damage are co-facilitating the Second Glasgow Dialogue between parties and non-party stakeholders on the elements of the “new loss and damage fund (LDF)” and funding arrangements. 

 

Entering the Second Glasgow Dialogue in Bonn, Germany in June 2023

Some fundamental unanswered questions and areas of debate at the meeting in Germany include the scope of the fund: whether and how it will address all phases of loss and damage, including prevention, preparedness, recovery, and rehabilitation; how it addresses non-economic losses, including loss of natural capital assets, ecosystem services, and loss of culture and language; and the “principles of the fund” including how it will avoid duplications and enhance additionality and stakeholder agency as a standalone fund, as well as how it will address slow onset events such as sea level rise and glacial melting.

The first week of the Second Glasgow Dialogue heavily focused on the principles and elements of the funding arrangement instead of filling the fund. CAN International protested daily for rich countries to “fill the fund” and stop making empty promises. Regarding contributions to the new loss and damage fund, I could only recall pledges made at COP27 in Egypt, mainly for LDCs/SIDS from Austria ($50m), Belgium ($2.5m for Mozambique), Denmark ($13m), and Germany ($170m). 

Protesters hold signs that say "fill the fund" and "no more empty pot."

Image credit: Harjeet Singh

 

Developing countries seek reliable, standalone fund

Developing country party negotiating groups such as the Group of 77 plus China, African Group of Negotiators (AGN), Least Developed Countries (LDCs), Alliance of Small Island States (AOSIS), and Like-Minded Developing Countries (LMDCs) strongly agreed to, and argue for, the following elements and principles of the new loss and damage fund:

  • A new, standalone fund that is independent of all existing climate finance mechanisms, 
  • accessible to all developing countries, 
  • grant-based public fund that is locally-driven to address contextual “needs and human rights-based” issues based on the principles of the UNFCCC and the Paris Agreement on Common but Differentiated Responsibilities and Respective Capabilities (CBDRRC), and that 
  • emphasizes equity, fairness, and historical emissions.

The developing countries also seek a fund that is predictable, sustainable, adequate, and reliably sourced from developed countries to address climate change impacts and promote “needs and rights-based” approaches to sustainability. They emphasize the right to life, mobility, cultural preservation, resources for a resilient livelihood, and a decent environment. The new LDF, they underscore, must be inclusive and gender-responsive to adequately address the dire needs of women, children, people with disabilities and mental illness, Indigenous communities, and other marginalized local groups. 

Given that many developing countries are ecologically deprived and economically indebted poor countries, they stressed that the LDF must ensure “zero debt additionality,” meaning the fund must be grant-based without conditions, and, for some parties, conventional insurance schemes are not appropriate for loss and damage financing. Parametric insurance, a non-traditional insurance product that offers pre-specified payouts based upon a trigger event, could be considered. 

 

Developed countries remain lukewarm about a standalone fund and expect participation from emerging economies

Developed country parties argue that the new loss and damage fund should avoid duplication and promote additionality, and emphasize effective disbursement. These considerations raise concerns about their willingness to accept a standalone fund that is independent of existing funds such a

s the Adaptation Fund, Green Climate Fund, Global Environment Facility, and others. They also firmly argue that the new fund must be pragmatic in its implementation and promote the application of “innovative finance” mobilization approaches, including private financing. 

Similarly, developed country parties seek loss and damage contributions from emerging economies like China given their current carbon emissions, which amount to approximately 25% of all global emissions. Many developed countries like the US, Canada, and countries in the EU, are in favor of supporting “particularly vulnerable” developing countries such as LDCs and SIDS, and many remain skeptical if rich countries will pay for climate damages in China, Saudi Arabia, and other emerging economies. 

Finally, raised by Egypt, and supported by developed countries, is the call to clearly separate the new fund from development funds. In other words, the new loss and damage fund must pay for any past, current, and future scientifically attributed damages to development gains in developing countries. 

 

How to address non-economic losses is still unclear

While negotiations are in progress, it seems both developed and developing countries might agree that the new loss and damage fund must address economic and non-economic losses, including damage caused by extreme climate change impacts (e.g., floods, droughts, heatwaves, wildfires) and slow onset impacts (e.g., sea level rise impacts). 

Many unanswered questions remain about how to address non-economic losses and perhaps require scientific studies to be led by the Intergovernmental Panel on Climate Change (IPCC). How to pay for cultural and language losses and loss of critical natural capital and ecosystem services benefits will require additional assessments and an enhanced understanding of the value of nature, culture, and heritage. For example, the Solomon Islands called for the fund to respond to ocean-based loss and damage – an ecosystem critical for the sustainability of their local livelihoods and the macroeconomy. Similarly, the Gambia called for a new loss and damage fund to address the current and projected climate displacement of residents in its island capital city Banjul and island villages like Jinack Island. Banjul experiences severe pluvial and coastal flooding effects annually and its small landmass, sitting less than a meter above sea level, is projected to sink by 2100 or earlier if aggressive mitigation and adaptation measures remain exceptionally limited.

 

Panel discussion and audience at the UN Climate Conference in Bonn, Germany.

 

The future of loss and damage funds

Will COP28 in Dubai later this year mobilize billions of dollars to pay for loss and damage in developing countries? Amongst rich countries, who will contribute, and how much? Will emerging economies or middle-income countries like China contribute? Parties and non-party stakeholders will continue engaging during the second week of discussions here in Germany, coordinating at the informal sessions, debating draft text, and carefully crafting responses to these questions and many other agenda items.

 

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