COP28: Countries agree on how to fund climate ‘loss and damage’

The world has agreed to key details of a loss and damage fund on the first day of the COP28 climate summit in Dubai, United Arab Emirates, allaying fears that the issue would unravel negotiations on other urgent issues at the meeting.

This advances the agreement made at the COP27 climate summit in Egypt last year to help low-income countries pay for the growing damages caused by climate change. Negotiators have worked for the past year to thrash out key details of this “loss and damage” fund, with battle lines forming over who will pay into it and who will have access to it.

In Dubai on 30 November, countries agreed to the fund largely as described in a previous consensus proposal, although “the language on financing for it got watered down a little”, says Friederike Roder at humanitarian advocacy group Global Citizen.

Around $300 million has already been pledged for the fund, including $100 million from both Germany and the UAE, $75 million from the UK and $17.5 million from the US.

Roder says this is a far cry from the hundreds of billions of dollars needed to address loss and damage, but this early agreement could help smooth debates on the many other urgent issues at the summit, including an agreement to triple renewable energy capacity by 2030 and a decision on what to do about fossil fuels.

What is ‘loss and damage’?

The UN doesn’t have a formal definition of loss and damage, but it broadly refers to economic or other losses caused by climate change that go beyond a country’s ability to adapt. This could include sudden damage caused by extreme weather linked to climate change, or longer-term consequences of sea level rise, for instance.

Debates around the issue stretch back to the first climate talks at the UN more than 30 years ago. They have largely focused on establishing a way for high-income countries to support low-income nations that are most vulnerable to climate change impacts, despite having contributed the least to the problem through greenhouse gas emissions.

What did countries agree to at COP28?

Countries at COP28 adopted text very similar to the consensus proposal reached by negotiators earlier this month. Discussions over that proposal were tense. It was “high drama”, says Preety Bhandari at environmental non-profit organisation the World Resources Institute.

The consensus relies on compromises on several issues that have divided “developed” and “developing” countries. These terms are used by the UN based on long-established conventions, but in many cases the designations don’t reflect countries’ levels of income.

The points of debate over loss and damage included where the fund would be hosted, which countries are expected to contribute to the fund and which countries would be able to access it. Nothing is final until the agreement at the end of the summit, but these issues appear to have been settled.

One key compromise is the agreement to initially host the fund at the World Bank, despite concerns from developing countries that locating the fund in the donor-controlled bank would make it harder for them to access funding.

Crucially, for high historical emitters such as the US and the UK, contributions to the fund also won’t be mandatory or linked to historical emissions. The text merely “invites all sources of funding to contribute to the fund for it to operate at significant scale”. That “makes it very tenuous what kind of funding will flow in or not”, says Bhandari.

However, this does open the possibility that relatively wealthy countries like China or Saudi Arabia might contribute to the fund, despite officially being classified as developing countries. “It’s very important for the historical polluters to try to bring the other current polluters to the table,” says David Nicholson at Mercy Corps, a humanitarian aid group.

Despite efforts by some developed countries to limit access to the fund to only the most vulnerable countries, the text also leaves access to the fund open to all developing countries.

That wariness comes in part from past broken promises. At a UN climate summit in 2009, high-income nations pledged to supply $100 billion a year by 2020 to help low-income countries adapt to climate change and decarbonise, but they failed to do this on schedule and the target may have only just been met last year.

“Many of us are still waiting for action on loss and damage that we were promised during COP27,” says Fatima Denton at the United Nations University Institute for Natural Resources in Africa, based in Ghana. “Until we commit to a framework that demands contributions from developed nations, the COP process is at risk of remaining a beauty contest – with nations putting on their best attires and pledging to new funds, even before the ink dries on previous ones.”

How much money is needed for loss and damage?

Roder says the roughly $300 million in funding already pledged at COP28 is a good first step, but calls it a “timid start” given the scale of funding that may be needed to pay for loss and damage.

How much is ultimately needed is unclear. The text doesn’t specify how much funding is required for loss and damage, but during negotiations, developing countries proposed a target of providing $100 billion each year by 2030.

Even that is below some estimates of the true scale of loss and damage driven by climate change, which is likely to increase in the future. An assessment by the Vulnerable Twenty Group, a coalition of 68 climate-vulnerable countries, found their economies had lost $525 billion between 2000 and 2019 due to climate change, equivalent to a fifth of their GDP. In September, a study estimated that $143 billion a year in damages are already attributable to extreme weather driven by climate change.

The funds to address loss and damage would need to be provided in addition to the hundreds of billions of dollars required to help low-income countries adapt to climate change and reduce emissions, says Nicholson. “We need to be really clear that whatever is happening in loss and damage does not reduce the ambition for climate finance as a whole.”

“These are mind-boggling figures,” says Roder. “What’s important to note is it’s actually possible.” She points to the trillions of dollars of revenue generated by major fossil fuel companies, which researchers have linked to trillions of dollars in climate-related damages. “The money is in the system. We just need to rechannel it.”

What role will climate science play in the loss and damage debate?

The agreement at COP27 to establish a loss and damage fund was partly enabled by advances in climate science that have allowed researchers to link particular weather events to climate change. Despite improvements in this “attribution science”, it remains controversial to use such research to inform decisions on how to distribute loss and damage funding.

One issue is that many of the countries most vulnerable to climate change have limited weather data on which to base attribution studies, says Joyce Kimutai at the Kenya Meteorological Department. “The tools that enable you to produce evidence are not available in those regions,” she says. For instance, a study of extreme flooding in central Africa this year was unable to conclusively show a link with climate change because of a lack of rainfall data.

For that reason, Kimutai argues that access to loss and damage funds for vulnerable countries shouldn’t be contingent on demonstrating that climate change drove a given event – at least not until the science catches up. “For regions that are very vulnerable, they really need that funding now,” she says.