Shortly after the opening ceremony of the 2023 United Nations climate talks in Dubai, delegates from nations around the world gave a standing ovation to celebrate the agreement to launch a long-awaited loss and damage fund to help vulnerable countries recover from climate-related disasters.
But applause may not yet be warranted. The agreement itself leaves many on the fence and has been met with criticism from climate justice advocates and front-line communities.
I teach courses in global environmental politics and climate justice, and I have been participating in and observing these negotiations for more than a decade to pursue demands for fair climate solutions, including compensation for loss and damage, for countries that are least responsible for climate change.
Brief history of loss and damage
“Breakthrough” was the term often used to describe the decision to finally create a loss and damage fund at the COP27 climate conference in 2022. Many countries rejoiced at this “long overdue” agreement; This comes 31 years after Vanuatu, a small Pacific archipelago, first offered compensation for loss and damage related to climate-induced sea level rise in earlier negotiations.
But the agreement was only a framework. Most of the details have been left to a transition committee that meets throughout 2023 to forward recommendations for this new fund to COP28. The United Nations report, summarized at the committee’s second meeting, revealed that funds provided from rich countries to help poor countries adapt to the ravages of climate change increased by 65% from 2019 to 2020, reaching US$ 49 billion. This is still well below the UN estimates of $160 billion to $340 billion it will need annually by 2030.
While the meetings continued, developing countries, which have long been wary of the use of interest-bearing loans by traditional financial institutions, which has dragged many low-income countries into debt, suggested that the fund be independent. However, developed countries insisted that the fund be housed within the World Bank and postponed recommendations until just before COP28.
The devil is in the details
While any agreement to finance climate disaster damages is sure to be portrayed as a historic achievement, further research shows that it should be viewed with hesitation and caution.
First, there are no details about the fund’s scale, financial goals or how it will be financed. Instead, the resolution merely “invites” developed countries to “take the lead” in providing financing and support and encourages commitments from other parties. It also doesn’t detail which countries will be eligible to receive funding, stating vaguely that it will be for “economic and non-economic losses and damages associated with the adverse impacts of climate change, including extreme weather events and slow-onset events.”
The commitments made so far have been insufficient.
Calculations for early commitments total just over $650 million; Germany and the United Arab Emirates have pledged 100 million dollars, and the UK has pledged 75 million dollars. The United States, one of the biggest contributors to climate change, has committed only $17.5 million in comparison. This is a surprisingly low starting point.
Additionally, the notion that this fund represents liability or compensation for developed countries (a major concern for countries with a long history of carbon pollution) has also been completely dispelled. In fact, he states that responding to loss and damage is based on cooperation.
In a rare achievement for the developing world, funds have been made available to all nations—even at subnational and community levels—despite performance indicators that have not yet been determined.
Additional concerns were raised about the fund’s temporary host, the World Bank. In fact, deciding on the host institution was one of the key points that nearly derailed previous negotiations.
On one side, the United States and other developed countries insisted that the fund be hosted by the World Bank, which has always been run by an American and has historically propagated pro-Western policies. But developing countries have resisted World Bank involvement, citing their historical experience with lending and structural adjustment programs, citing the bank’s role in financing oil and gas exploration for years as a cornerstone of their development efforts.
After a stalemate and US efforts to block a compromise, a compromise was reached to house the fund within the World Bank for four years, with guardrails to ensure its independence and influence. After this window, the host structure will be reviewed, leading to either a fully independent fund or its continuation within the World Bank.
The concern of critics of this route is the risk that compromise will result in a permanent hosting situation.
There are other issues, such as the composition of the fund board, which allows only national representatives and not civil society representatives such as Indigenous groups, as developing countries demand. The scope of funding that will be allowed also remains unclear. The fund’s uncertain status opens the door for countries to count private loans, conditional import credits, and even funds from the fossil fuel industry as part of their commitments to finance loss and damage, while at the same time the industry continues to fuel climate damage. .
What will happen next, starting in 2024?
To date, the international climate community does not have a solid track record of climate finance commitments. Each successive fund has been woefully underfunded since its inception, from the Green Climate Fund, which supports green projects in the developing world, to the Adaptation Fund, which increases climate resilience for the most vulnerable countries.
In 2021, the total of the entire climate finance ecosystem, from national commitments to private investments, reached $850 billion. Experts state that this amount should be close to 4.3 trillion dollars.
This target represents 20% year-on-year growth by the end of this decade; a significant increase compared to recent years.
From 2011 to 2020, total climate finance grew by just 7% annually. If this trend continues, not only will developing and most vulnerable countries lose faith in this process, but the need for loss and damage financing will also increase.
The new fund board has been mandated to hold its first meeting on January 31, 2024. While this early start time is laudable, the new fund will take another series of meetings to decide as droughts continue to kill crops and storms continue to flood homes. who will qualify, how they can apply, and how and when the funds will actually be distributed.
University of Southern California student researcher Will Erens contributed to this article.
This article is republished from The Conversation, an independent, nonprofit news organization providing facts and analysis to help you understand our complex world.
Written by Shannon Gibson USC Dornsife College of Letters, Arts and Sciences.
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Shannon Gibson is affiliated with the Global Justice Ecology Project.