The ‘loss and damage’ deal
How will the fund established during U.N. climate talks help nations most hurt by global warming?
SHARM EL SHEIKH, Egypt — The decision Sunday by developed countries to establish a fund to help poor nations that have been hit hard by a warming planet was one of the most significant since U.N. climate talks began 30 years ago.
It was an unequivocal confirmation that poor countries, with limited resources, face the biggest impacts of extreme weather events such as floods, heat waves and storms, and industrialized nations that have done the most to contribute to climate change have a responsibility to help.
While government leaders, environmentalists and activists celebrated the plan for such a fund, there are many questions, including how it will work and what the long-term repercussions might be.
Here is a look at the development of the idea of “loss and damage,” the term used in climate negotiations, and what we know about the fund.
History
In the early 1990s, the Alliance of Small Island States, a group of low-lying coastal and island countries, began calling for the establishment of a loss-anddamage fund as the United Nations was creating a framework to deal with climate change on an international level.
Since then, the idea has been a part of annual U.N. climate summits. However, it was often talked about on the margins of negotiations, something developing nations and activists would push for, while many wealthier countries used their weight to squash the idea.
For the first time, at this year’s COP27, the fund was included in the agenda and became the centerpiece of discussions.
Who will fund it?
The fund will initially draw on contributions from developed countries and other private and public sources, such as international financial institutions, with an option for other major economies to join down the line.
The final text points to “identifying and expanding sources of funding,” something the EU, the U.S. and others had pushed for during negotiations, suggesting that nations that are highpolluting but considered to be developing should also pay into the fund.
During the talks, China said money for the new fund should come not from it but from developed countries.
But there’s precedence for China to voluntarily pay into climate funds if the U.S. does too. When the Obama administration pledged $3 billion to the Green Climate Fund in 2014, China paid $3.1 billion for the fund.
More details of who pays will be decided by a committee that plans to get the fund going within a year.
Who will receive money?
The deal says the fund will assist “developing countries that are particularly vulnerable to the adverse effects of climate change,” though there will be room for middle-income countries that are severely affected by climate disasters to also get paid.
Pakistan, which was devastated by flooding that put a third of the country underwater, and Cuba, recently battered by Hurricane Ian, could be eligible.
How the loss-and-damage fund will fit in with “other institutions, agencies that are out there doing humanitarian work, helping people rebuild, dealing with migration and refugee crises, dealing with food security, water security” will need to be worked out, said David Waskow, the World Resources Institute international climate director.
Those details will be hammered out by the committee in the coming year.
Rebuilding trust
Beyond financial help, the fund is seen as a huge step forward, but how it’s ultimately viewed will depend in part on how fast it can be set up.
In the closing session Sunday, Antigua’s Lia Nicholson said the transitional committee should be set up immediately and given clear mandates.
“This loss-and-damage fund must become the lifeboat that we need it to be,” she said.
There is a credibility gap because of past broken promises.
In 2009, rich nations agreed to provide $100 billion a year to help developing countries adapt to climate change. However, that initiative has never been fully funded.
Repercussions
One of the main reasons rich nations long opposed a loss-and-damage fund was the fear that it would open them up to long-term liability.
With the decision to start the fund, that concern is still at play, as evidenced by how negotiators made sure the language didn’t say “liability” and that contributions are voluntary.
Despite those caveats, the establishment of such a fund could have repercussions both legal and symbolic.
Several Pacific Island nations have been pushing for the International Court of Justice to consider climate change. They argue that international laws must be strengthened to protect their rights if their lands are engulfed by rising seas. The establishment of a loss-and-damage fund could bolster those arguments.