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How will nations at COP27 discuss climate change recovery funding?

Funding for loss and damage will take centre stage at COP27, the UN Climate Change Conference.

In the past year, catastrophic flooding overwhelmed both Pakistan and Nigeria, wildfires scorched dozens of countries, and extreme heat waves blanketed large parts of the planet.

These events killed thousands of people, destroyed essential infrastructure, and destabilized entire economic sectors.

In many cases, the costs of recovering and rebuilding from these disasters far exceed the financial capacity of governments, which both leaves countries more exposed to climate impacts in the future and undermines the ongoing health and well-being of communities.

As the climate crisis intensifies, the gap between the costs of severe impacts and the ability to pay is growing, widening global levels of inequality, and adding urgency to a topic that will take centre stage in the upcoming United Nations Climate Conference, or COP27, in Sharm El Sheik, Egypt, from Nov. 6 to Nov. 18.

With countries now preparing their COP27 delegates, expectations for the gathering have centred on the topic of “loss and damage.”

Loss and damage refers to the costs of recovering from climate impacts such as extreme storms, rising sea levels, severe droughts, and powerful wildfires that destroy lives, infrastructure, and economic sectors.

As these impacts intensify, many countries are financially overwhelmed and are advocating for global financing mechanisms grounded in concepts of fairness and solidarity, and informed by the political nature of the climate crisis.

“Climate change is a problem that was created by and is continuously created by emissions of greenhouse gasses that emerge from rich people’s lifestyles,” Saleemul Huq, director of the International Centre for Climate Change and Development, told Global Citizen.

“Rich people, mostly in rich countries, are the ones causing the pollution and then, on the other side of the coin, the victims of that pollution are the poorest people on the planet and that’s not right.

“If we happen to be one of those humans whose carbon footprints are above average, then we are responsible for causing problems for our fellow citizens who are the poor,” he said.

“We must accept moral responsibility. We must accept that it’s wrong. And we must do something about it to help them.”

Huq is a leading advocate for climate justice and an expert in global climate policy. He stressed the importance of tackling the issue now to save lives and money in the long-run.

“This is not going away,” he said. “Every day, climate change is going to get worse. There’s no escaping it, not even in the rich countries. The US just got hit by Hurricane Ian and the insurance industry is saying they won’t insure Florida’s homes anymore.

“They now have non-trivial impacts even in developed countries, and much bigger and more devastating impacts in developing countries,” he added. “To ignore it and put our heads in the sand is total negligence and violation of our responsibility as leaders.”

What is loss and damage?

Loss and damage generally falls into two broad camps, according to the World Resources Institute.

The first involves economic activities and infrastructure that you can put a clear price tag on. For example, if a flood wipes out agricultural production in a region, then the affected country would calculate the loss in revenue to farmers and the resulting supply chain disruptions and come up with a clear figure.

The second camp involves harder-to-calculate harms, such as loss of life, culture, and community continuity. Calculating these losses may hinge on providing indefinite social safety nets, paying for relocation, and investing in cultural revitalization.

Although related, loss and damage is distinct from climate mitigation and climate adaptation, which are both pre-emptive, anticipatory forms of climate action. Mitigation involves reducing emissions to prevent future climate impacts (loss and damage), whereas adaptation involves investments in things that will reduce the severity of impacts (loss and damage).

Three key things to know about climate loss and damage 

Discussions around climate loss and damage attempt to pin down the role of climate change in environmental disasters.

Climate disasters already cost countries hundreds of billions of dollars annually.

COP27 can set the stage for world leaders to commit to a mechanism that allows for adequate loss and damage funding, especially for developing countries.


Why Does Loss and Damage Funding Have to Go Through the UN?

Loss and damage funding can and should come from any source — governments responding to domestic climate impacts, non-profits and philanthropies investing in recovery efforts, and even community crowdsourcing.

Already, coalitions are emerging to allow for multilateral funding for loss and damage. After last year’s COP26 in Glasgow, for example, Scotland established the Climate Justice Fund, which has since corralled tens of millions of dollars from governments, non-profits, philanthropies, and corporations.

The V20, a gathering of finance ministers from vulnerable developing countries, has also established a loss and damage fund.

But only through global coordination, involving all countries, can the scale of necessary funding be delivered, according to Huq.

And this international consensus can really only occur in the UN, where the governments of the world come together to negotiate global norms and rules. In 2015, countries achieved consensus on the need to mitigate greenhouse gas emissions to prevent catastrophic temperature rise.

Now, under the Paris climate agreement framework, a mechanism for loss and damage funding can be incorporated.

Why isn’t there a UN loss and damage fund yet?

Advocates have raised the issue of loss and damage in international forums for more than three decades, but their efforts have never gained serious traction because of stonewalling by powerful countries like the United States that would be expected to lead the funding effort due to their outsized role in causing the climate crisis.

“The polluting countries don’t want to talk about loss and damage,” Huq said. “Then they agree to talk about it but don’t want to pay for it.”

Huq said that COP26 actually set the world backward in terms of loss and damage funding.

Developing countries had urged delegates to create a facility that could be hashed out over the next few years to financially handle loss and damage claims.

Instead of a facility, developed countries like the US managed to enact a three-year dialogue on the subject at the end of which recommendations would be made.

This is the sort of kicking-the-can-down-the-road that has led to such slow progress on climate action in general, Huq said.

He added that countries like the US worry that an international fund would open the door to liability and compensation claims from countries harmed by climate change.

However, he argues, this perspective frames the issue in the wrong direction. Instead of anticipating litigious battles, countries could sufficiently finance loss and damage funds on the front end to ensure that claims are swiftly met and climate-affected communities can recover.

Reducing the overall bill would then depend not on battling country claims but on mitigating the climate crisis to avert future impacts.

What’s unique about COP27?

Momentum has been building for years for countries to tackle the topic of loss and damage, but this year the pressure will reach a head.

Huq said that developing countries have already petitioned Egypt to elevate loss and damage funding to an agenda item for the conference, distinct from the narrow discussions stemming from COP26, and have threatened to boycott the conference altogether if this demand isn’t met. Developed countries in the EU have since supported this demand, along with the US, he said.

As a result, the stage is set for COP27 to generate consensus for the creation of the first loss and damage facility that could provide essential funding in the years ahead.

“And in that sense, COP27 is COP1,” Huq said. “It’s a brand new situation, very different from what we had before.”

How would loss and damage be determined?

In recent years, scientists have gotten much better at determining the specific role climate change plays in extreme environmental events.

Now, they can look at a hurricane and calculate how strong it would have been without the instigating variables of climate change such as warmer water and air temperatures and higher sea levels. They can then compare this model to the real-world event and figure out the net effect of climate change. It’s in this zone of “net effect” that loss and damage claims come into play.

“The attribution now is undeniable, it’s credible, it’s scientifically accurate,” Huq said. “It’s a probabilistic attribution. Scientists say this event has been enhanced by 10% or 20% or 50%, so 50% excess damage is attributable to human-induced climate change and that now drives the argument for loss and damage.”

These impacts already cost hundreds of billions of dollars annually and they’ll exponentially grow as climate change intensifies. Over the next 50 years, the consulting firm Deloitte reported that climate impacts could cost the global economy $178 trillion.

What would a loss and damage fund look like?

Huq stressed that any loss and damage facility will be decided through the democratic process of the UN, and the US has already prevented the topic from being discussed through the lens of liability and compensation.

As a result, countries will likely voluntarily contribute to any such fund, or agree on specific financing targets, and then funding will be disbursed on an as-needed basis according to how much money is available.

The Green Climate Fund is a good model for how a loss and damage fund could be structured. The GCF receives funding from countries worldwide and then distributes funds to developing countries for mitigation and adaptation projects.

A loss and damage fund would theoretically function in the same way, but would instead disburse funds in the aftermath of environmental disasters. (Disclosure: The Green Climate Fund is a funding partner of Global Citizen.)

What can Global Citizens do?

Loss and damage funding is essentially humanitarian aid that helps communities recover in the aftermath of disaster.

It’s important for countries to react to these crises and fund relief efforts in a spirit of solidarity, but it would be foolish not to address what’s causing these disasters at the root: a global economy that releases too many greenhouse gas emissions, consumes too many natural resources, and pollutes too many environments.

Without an economic transformation, these disasters will become exponentially more expensive and eventually undermine the current economic system.

As a result, efforts to secure loss and damage funding must be paired with ongoing efforts to transition away from fossil fuels and develop regenerative, resilient economies.

From a purely financial perspective, countries can vastly limit loss and damage costs by accelerating this transition. From a broader humanist perspective, countries can vastly reduce the cumulative harm of loss and damages by adopting this all-hands-on-deck attitude, according to Huq.

Climate loss and damage must be adequately funded as a matter of justice — of repaying people for what’s been taken from them — but it should also be prevented as a phenomenon altogether.

We’ve entered the era of loss and damage, according to Huq, but we should seek to leave this era as fast as possible. In other words, we can no longer allow the countries least responsible for climate change to face the most dramatic impacts.

This is where Global Citizens come in.

You can use whatever power available to you — including taking action with Global Citizen via our app or website — to organize within your communities, support politicians and policies advocating for climate justice, and demand that world leaders take meaningful climate action at COP27 and beyond.

You can learn more about the issues at stake, find specific actions you can take to help fight climate change and its impacts, and join the broader movement for climate justice here.


This article was originally written by Joe McCarthy for Global Citizen.