Why loss and damage funds are key to climate justice for developing countries at Cop28

Nations contributing least to greenhouse gas emissions are least equipped to deal with climate-related destruction

It has been another catastrophic climate year, with supercharged extreme weather events striking every corner of the globe: the deadliest-ever Mediterranean cyclone dropping unprecedented rainfall in Libyasevere drought threatening Indigenous communities and ecosystems in the Amazon, and a surge in heat deaths in Phoenix, Arizona.

Record-breaking global temperatures have played a major role in this summer’s epic ocean storms, wildfires, flooding and droughts, so it is a perverse reality that the countries and communities which have contributed least to the greenhouse gases warming the planet are suffering the most – and are least equipped to cope with the escalating death and destruction.

What is loss and damage?

Loss and damage refers to the irreversible costs of extreme weather and slow-onset disasters such as sea level rise, ocean acidification and melting glaciers caused by global heating. It is about holding the biggest fossil fuel polluters liable for the pain and suffering already caused by climate breakdown. Climate finance for loss and damage is considered separately, and in addition to, securing funds for mitigation and adaptation to help developing nations prepare for what is coming.

Costs can be both economic – resulting from lost lives, livelihoods, infrastructure, homes and territory – and non-economic and harder to quantify, such as lost culture, identity, biodiversity and sovereignty, among others. The demand for loss and damage funds has become a central tenet in demands for climate justice. In other words, people are demanding climate action that addresses the inequities behind the cause and effect of the climate breakdown.

Where are we?

For more than 30 years, developed rich countries have used an array of tactics to block loss and damage funding to the most affected – and least responsible – nations. Finally, last year at the Cop27 summit in Egypt, there was a formal agreement to establish a new, broad fund and funding arrangements.

The victory was thanks in large part to the Egyptian Cop27 presidency and unwavering pressure from the G77 block of developing countries (plus China) led by Pakistan, where unprecedented floods had left a third of the country under water. But agreeing to set up the fund was just the first step.

What’s happened since Cop27?

A transitional committee was tasked with creating a set of recommendations about what the loss and damage fund should look like and how it will function. After a year of testy negotiations in which developed nations sought to minimise their contributions while maximising control over who benefits, both rich and poor nations were forced to make major compromises.

For instance, the final package of recommendations for countries to consider at Cop28 includes the World Bank temporarily hosting the new fund – something which developing countries were steadfastly against. In the end, the US, EU and other rich nations got their way, but only after developing countries secured crucial conditions such as direct access for countries, communities and Indigenous people and a level of transparency that the World Bank is unaccustomed to.

Another key battle was over eligibility, and rich countries tried – but ultimately failed – to limit access only to countries classed as small island developing states and the UN list of least developed countries, a move which would have excluded vulnerable countries such as Pakistan, Colombia and the Philippines.

Will there be new money for loss and damage?

The transition committee’s recommendations do not include mention of scale or startup funding, so it has yet to be decided how much money will be available. It’s also unclear who will contribute how much and when, but the fund’s focus will be on “priority gaps”. In other words, loss and damage money should complement and link into existing funding arrangements like humanitarian aid and the Green Climate Fund. It should be available as grants not loans, and therefore help break the climate-debt nexus.

It is worth noting that the transition committee’s recommendations do not acknowledge the symbiotic relationship between the three strands of climate finance, yet the money needed for loss and damage going forward will depend on the resources and effort spent on mitigation and adaptation now, according to Harjeet Singh, the global engagement director at the fossil fuel non-proliferation treaty initiative. It also omits any requirement that the fund’s operations adhere to human rights obligations.

What happens now?

In the end, the transition committee agreed on a set of imperfect recommendations for countries to consider in Dubai. Advocates say that the details of who will pay for the fund, and how it will work, should be a cornerstone outcome for Cop28.

The transition committee’s recommendations could be adopted in full, or opened up for further negotiation, but failure to agree on the central principles of how this fund will be run and managed would be considered a failure by climate-vulnerable countries.

The G77 plus China will again play an important role, and the bloc is this year chaired by Cuba, an island nation facing multiple climate threats including sea level rise, drought and increasingly destructive hurricanes. The loss and damage in developing countries is already estimated by some studies to be greater than $400bn annually – and expected to rise – so time is of the essence.

But the devil will be in the details, and making sure the fund is fair and fit to meet the needs of developing countries now and in the future could be one key step to achieving climate justice.