Race against time to resolve climate 'loss & damage' fund deadlock

Experts say the top COP28 issue must be tackled before the Dubai meeting.
By Subel Rai Bhandari for RFA
Bangkok, Thailand
Race against time to resolve climate 'loss & damage' fund deadlock A hand reads “pay” calling for reparations for loss and damage at the COP27 climate summit in Sharm el-Sheikh, Egypt, Nov. 18, 2022.
Credit: AP

In a last-ditch effort to advance the creation of a “loss and damage” fund aimed at assisting developing nations impacted by climate change, countries are coming together on Friday to break a deadlock on a few critical issues, including oversight, funding sources and eligibility criteria.

Experts say it is crunch time for the transitional committee meeting in Abu Dhabi to try to reach a compromise and draft a proposal on the fund for adoption at the COP28 climate summit in Dubai, which is less than a month away.  

“The upcoming meeting is a ‘make-or-break moment’ that will determine the success or failure of the new Loss and Damage Fund,” said Harjeet Singh, head of global political strategy at Climate Action Network International, comprising over 1,300 environmental NGOs across 130 countries.

The final ministerial meeting to finesse out the COP28 details ended on Tuesday without a deal due to the deadlock. 

Singh, who is in Abu Dhabi attending the meetings, said government ministers have instructed the transitional committee to develop “a clean text of recommendations so that COP can simply adopt it.” 

“The clock is ticking. We must bridge the trust gap, operationalize the fund, and provide the necessary support to those who need it most. We cannot afford to fail, as the lives and livelihoods of millions are at stake,” he told Radio Free Asia.

Nations agreed to set up a loss and damage fund, which vulnerable developing countries had sought since 1991, at last year’s COP27 meeting in Egypt. 

It was touted as “a victory for the Global South and for climate justice,” according to Zoha Shawoo, a climate and development scientist at Stockholm Environment Institute.

Climate activists hold a vigil for people around the world experiencing the most severe climate impacts, known as loss and damage, outside the Scottish Event Campus (SEC) in Glasgow on Nov. 10, 2021, during the COP26 UN Climate Change Conference. Credit: AFP

The fund covers impacts that cannot be fixed by cutting emissions or adapting to a changing climate. It would aid vulnerable nations facing climate-related harm, including forced migration and non-economic losses, that other adaptation and mitigation funds often overlook.

The emergency meeting of the 24-member transitional committee was scheduled for Nov. 3-5 after four previous meetings were unable to settle on some key issues.

World Bank is ‘unacceptable’

Rich and poor nations are deeply split over whether the fund should be housed at the World Bank, led by the United States and the European Union, who have the biggest say in the bank.

“Rich countries, the U.S. in particular, must abandon their push for the World Bank to host the Loss and Damage Fund,” Singh told Radio Free Asia.

“Instead, they should engage constructively and work to design a fund that is nimble, scalable, and ready to meet the immediate and future needs of vulnerable communities.”

Developing nations want a new, independent entity, said Brandon Wu, director of policy and campaigns at ActionAid USA, as that would give emerging economies more influence and easier access. 

Climate activists demanding climate reparations hold placards at a protest during a meeting of the Warsaw International Mechanism for Loss and Damage, outside a hotel in Makati City, Metro Manila, Philippines, Feb. 28, 2023. Credit: Reuters

The World Bank, whose presidents are appointed by the United States, is “an unacceptable option as a host for… many reasons,” he said.

Governance of the independent loss and damage fund board, potentially influenced by the undemocratic World Bank model, raises concerns about fair representation and decision-making, according to experts interviewed by RFA.

Countries advocating for the World Bank as the host argue that it would expedite fund operationalization and provide built-in legal protection, whereas a new standalone entity would require individual immunity agreements in each operating country.

“But developing countries have argued that this would give disproportionate power to donors to dictate what loss and damage finance looks like rather than recipients and the countries that are facing the impacts themselves,” Shawoo said.

The World Bank’s indirect fund access through intermediaries also reduces control and incurs additional fees, deterring many developing countries, Wu said, adding the World Bank is “a bank, oriented towards lending” and “the loss and damage fund has to be primarily, if not entirely, a grants-based fund not contributing further to debt crises in developing countries.”

Developing country members have also raised concerns about fees, Wu said, adding the World Bank recently raised its fund hosting fees from 17% to 24%, an excessive amount that diverts funds away from the intended beneficiaries.

Who is historically responsible?

Disagreements on crucial issues, including China’s potential beneficiary status, have hindered progress in talks aimed at establishing a fund, with the United States reluctant to contribute if China may benefit.

“The U.S has been taking a position that historical responsibility and principles of equity do not apply at all to loss and damage… And they’re not accepting any language that indicates that developed countries should be the primary contributor to the loss and damage fund,” Wu said.

A demonstrator holds a sign that reads “pay up clean up shut up” during a protest at the COP27 U.N. climate summit, in Sharm el-Sheikh, Egypt, Nov. 12, 2022. Credit AP

The United Nations categorizes countries as “developed” or “developing” based on criteria established in 1992, placing now wealthy and highly polluting nations like Saudi Arabia and China in the lower-income category.

But “developed countries have been advocating for the contributor base to be broader,” so countries like Saudi Arabia or China “would also be required to pay into the fund,” Shawoo said.

Singh said, “rich countries have a legal and moral responsibility” to provide to the fund because of their historical action, as well as their inaction in tackling the issue for decades.

“You have to look at the continuum of climate actions. So earlier we were asking for the cost of actions, which means mitigation and adaptation, loss and damage is cost of inaction,” he added.

The developed countries have also tried to limit the eligibility for funding to the most vulnerable, such as Small Island Developing States, or SIDS, or Least Developed Countries, or LDCs.

This would exclude lower-middle-income countries, like Pakistan and many Southeast Asian countries, who have faced devastating climate impacts, from receiving any money.

“So, we cannot say that a particular country is not eligible when that is a developing country,” Singh said, adding that the LDCs are a dynamic list.

“Three countries from my own region I live in India -- Nepal, Bhutan and Bangladesh -- are going to be out of this list of least developed countries by 2026,” he added. “What does that mean if they are affected? Once they cross the threshold, they’re not going to be supported?”

Edited by Malcolm Foster


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