Addressing climate-induced loss and damage: Major outcomes and challenges
The dispute over the demand for loss and damage compensation became more intense at the COP 21 after the negotiation text included an option for “liability and compensation”
S. M. Saify Iqbal
Climate-induced loss and damages generally refer to the residual effects of climate change, which include the adverse impacts generated from sudden-onset disasters such as cyclone, tornado, hurricane, hail storm, flash flooding, etc. and slow-onset disasters such as sea-level rise, ocean acidification, salinization glaciers retreat, etc. Some of these impacts are purely economic which can be expressed by monetary value (e.g. damage to infrastructure), while others are non-economic which are not quantifiable (e.g. loss of life, livelihood, biodiversity, culture, and identity).
Basically, loss and damages are particularly important for developing countries as they are more vulnerable to climate change impacts due to their geographic position, climate conditions and limitable financial and institutional capacity. People of the Least Developed Countries (LDCs), Small Island Developing States (SIDS), African countries and even some developed countries are vulnerable to severe risks and unavoidable losses due to the lack of effective adaptation strategies, inadequate financial capacity for further recovery and not having long-term planning.
In 1991, the Alliance of Small Island States (AOSIS), presided over by former Ambassador Robert Van Lierop of Vanuatu, proposed the establishment of an international insurance pool based on the polluter pays concept, which explained how insurance fund could help to prevent, minimize and address loss and damage and compensate the most vulnerable nations. In the following years, calls for further exploration of insurance and requests for compensation were made but those claims produced nothing substantial until the first inclusion of the term loss and damage under a UNFCCC decision adopted at COP-13, in the adaptation section of Bali Action Plan.
The dispute over the demand for loss and damage compensation became more intense at the COP 21 after the negotiation text included an option for liability and compensation. Paragraph 52 of the Paris Agreement unequivocally states that there will be no scope of liability or compensation which had been one of the key demands of developing countries in the lead up to COP 21. In exchange for the inclusion of the limiting global temperature rise target (below 1.50C above the pre-industrial level) in the Paris agreement, developing countries accepted the decision text does not involve or provide a basis for any liability or compensation at that time.
At COP 22, there was no substantial progress observed about the mobilization of loss and damage finance, but in the next year, at COP 23 in Bonn (under the presidency of Fiji), a decision was taken by the secretariat to organize an expert dialogue named as Suva Expert Dialogue which was held from 2-3 May, 2018 in Bonn where developed countries requested a call for public financing while parties like Seychelles and some non-state actors advocated for innovative sources of loss and damage financing. On 17 September 2018, the COP 23 requested the Secretariat to prepare a report on the Suva Expert Dialogue to explore a range of information, insights, and opinions with regards to mobilization and securing of expertise, and enhancing support such as finance, technology, and capacity-building to avert, minimize and address loss and damage but that report was merely welcomed by the COP 24. Moreover, the ToR (Terms of Reference) for the 2nd review of WIM was developed by the Subsidiary Bodies in June 2019 which was much more comprehensive than the first review (2016).
Also, global leaders came to a conclusion at SUVA Expert Dialogue on loss and damage in Bonn that insurance is not the ultimate solution to address loss and damage. A report from the Heinrich Bll Stiftung North America indicates that only two percent of the cost of extreme climate disasters is covered by insurance; for instance, while Dominica was hit by Hurricane Maria that caused loss and damage worth of 1.37 billion USD, only US$ 19.3 million was paid out by insurance. Also, when the 2015-16 droughts in Malawi caused loss and damage worth of 366 million USD, only 8.1 million USD was paid out by insurance. These instances show clearly that a new source of financing for loss and damage is inevitable in addition to the financial pledges made for adaptation. Again, the issue of loss and damage financing was one of the significant agendas in last years climate change conference (COP 25) which took place from 2-13 December, 2019 in Madrid with several delegates from countries stressing that funding for addressing loss and damage is going to either make or break. There were clear tensions in the rooms for talks between the negotiators of developing countries, particularly SIDs and LDCs, calling for new and additional funds in order to compensate for the climate impacts that their countries despite being not accountable. But, developed countries dont want to be held responsible for the emissions which they started since the industrial revolution. Especially, the United States and Australia were against any type of financing to address loss and damage in spite of being historically responsible.
The second review of the WIM was also done at COP 25 which provided a better opportunity of being committed in order to ensure necessary actions and support such as additional financing options, capacity building, and technical support. Over 150 civil society groups have called for the creation of a specific financing facility to help vulnerable countries by sending an open letter to Chiles Minister for Environment and President of CoP 25, named Carolina Schmidt. Negotiators from developing countries argued that the funds should be financed by regular contributions from rich countries and taxes on financial transactions, global air travel, and fossil fuels.
On the other side, polarized positions continued to exist regarding the issue of WIM governance with a clear divide between developed and developing countries. To date, developing countries want to proceed the work on loss and damage under both the Convention and the Paris Agreement but developed countries are in favour of working on loss and damage under the Paris Agreement only. Despite governance questions, a decision was taken at COP 25 on the results of the WIM review. The analysis of the results focused on the following elements, which were the most disputed topic in two weeks in Madrid a) Urgent, scaled up, new and additional finance for addressing loss and damage; b) Enhanced institutional arrangements for facilitating action and support to address loss and damage.
Given this context, the President proposed a procedural fix in which the results of the WIM review would end with a clear operational language under the Paris agreement, which stated that the WIM governance would not be further prejudiced by that approach. A relevant COP decision would then note the outcome of the WIM review, again without prejudging further discussions on WIM governance and the establishment of COP 26.
Furthermore, the discussions on the WIMs role in addressing loss and damage took an alarming turn at COP 25, when certain countries started to refer to Paragraph 52 of the Paris Agreement. The paragraph 52 would allow developed countries to refuse their commitment to providing any additional funding which made the situation extremely hard for the WIM governing instruments to be strengthened in order to reflect the developed countries inaction to take a concrete decision for channelizing loss and damage finance.
All in all, the decision text agreed at COP 25 reflects numerous requests made by G77 countries and China, which have maintained a unified position on loss and damage during the Madrid meeting. In light of the growing devastating impacts, developing countries have expressed the need for a significant improvement in WIMs capacity to facilitate work in this area. Developing countries requests to achieve this include, among others, called for increased financing from developed countries, a more visible inclusion of loss and damage in financial mechanism operating institutions and increased capacity-building efforts and expanded institutional settings under the WIM. Based on the G77/China coordinated effort, developing countries requested a strengthened WIM to help developed countries to take action in implementing approaches in order to deal with loss and damage such as new and additional finance from developed countries; enhancing the relationship between ExCom and the SCF (Standing Committee on Finance); establishing a direct link between ExCom and the Green Climate Fund (GCF) to support the identification and access of available finance; establishing a group of experts under ExCom to carry out focused work on enhanced actions and support by next year and establishment of the Santiago Network so that developing countries can provide technical assistance directly.
At the end of COP25, there were little expectations on the progress of loss and damage finance but several developed countries clearly narrated that they will not be the part of any type of liability and compensation. Contrarily, developing countries argued that funds need to be spent for addressing loss and damage must be compensated rather than helped and it has to be done unconditionally to address the historical injustice causing the current climate emergency. Also, they advocated that investment in the new loss and damage fund must be diverted from markets-based solutions and fossil fuels subsidies and aside from this, any existing climate and adaptation funding must be supplementary.
The writer is working as a Senior Research Assistant at Center for Participatory Research and Development CPRD.
