Loss and Damage after COP28: Where does it sit within the existing landscape for climate action?

Loss and Damage after COP28: Where does it sit within the existing landscape for climate action?

By Sam Greene, Brock Hicks and Jess Vujovic

The aftermath of Typhoon Vamco in the Philippines, 2020. The economic cost of loss and damage caused by climate change in developing countries has been projected to be $290–580 billion by 2030, rising to $1–1.8 trillion by 2050. (photo credit: Basilio H. Sepe / Greenpeace)

COP28 was a landmark moment for Loss and Damage. As advocates for more just climate finance, what does operationalizing the Loss and Damage Fund mean for us? Where will the new UNFCCC facility sit in the existing climate finance ecosystem? And where does adaptation end and loss and damage begin? In the wake of COP28, we were left with many questions about how the fund will be operationalized, how allocation decisions will be made, the risks of it complementing or duplicating existing adaptation finance and action, and how it will avoid the problems of current financing models.

The first in a series on loss and damage after COP28, in this blog post we discuss where loss and damage fits within existing climate finance and climate responses, in particular adaptation efforts.

In subsequent blogs, we will explore what and for whom loss and damage funding should be used and how this could be done in practice. Given the troubled history of funding for adaptation, we will discuss how the Loss and Damage Fund can be more accountable and equitable and what it would mean to have locally-led loss and damage action and a finance architecture that prioritizes climate justice over profits.

The Loss and Damage Fund will join a crowded climate finance ecosystem

While a variety of funds exist to support adaptation and capacity building, the Green Climate Fund (GCF) is the only multilateral UNFCCC fund that addresses loss and damage. However, an IPCC-cited study (2021) estimated that only 24 percent of approved GCF projects refer to loss and damage and only 16 percent explicitly link loss and damage to their main activities. And, while loss and damage requires responsive and even anticipatory funding, the GCF is notoriously slow and cumbersome. The average approval for a project takes two years and to date, the GCF has only disbursed $4.1 billion of the $13.5 billion currently allocated.  Finally, despite the establishment of “direct access” principles that enable country institutions to access funds without international intermediaries, three-quarters of its funds are led by large multilateral organizations such as UN agencies and the World Bank. Critics say that its direct access modalities are overly complicated and that its ‘readiness’ programmes to support countries in this process are inadequate. 

While the Global Shield against Climate Risks, launched at COP27, is primarily an insurance-based mechanism, it may have the most overlap with the new Loss and Damage Fund. The Global Shield works by pre-allocating funds (unlike conventional insurance models) based on country-level risk assessments. These assessments will be used to identify “adaptation measures and measures to protect against residual climate risks” (i.e. loss and damage). While procedures for awarding funding are yet to be decided for the Loss and Damage Fund, like the Global Shield it will also seek to allocate funds with greater speed, ease and responsiveness.

Beyond these initiatives, humanitarian assistance from international agencies may offer the longest-running larger-scale loss and damage financing. Finally, loss and damage projects may overlap with humanitarian assistance. While loss and damage action can learn from and complement humanitarian response, it should be careful not to replicate its reactive model and instead include more proactive and anticipatory measures. Designers should not create additional burdens for countries but instead support them to own the funding and disbursement process and to put in place systems for rapid response.

Loss and Damage requires a mosaic of solutions

Parties created the Loss and Damage Fund because existing climate funds do not provide the “mosaic of solutions” first called for by the Maldives’ Environment Minister Aminath Shauna nor do they recognize the limits to adaptation and the scale of funds needed to address accelerating losses and damages to climate impacts. Fund designers and decision-makers should pay special attention to existing finance mechanisms that address loss and damage to avoid duplication and to fill the most pressing gaps in the current architecture. They should also learn from the shortcomings of models like the GCF and provide greater speed and urgency, as well as a bigger role for local leadership in decisions on when, where and how funds are disbursed.

In particular, the new mechanism should have simpler access rules and dedicate substantial funding to small grants for community organisations so that the most impacted receive assistance quickly (with special attention given to transparency and corruption issues this might create). If community-level civil society organisations are to be eligible for funds, then they also need a high-level seat on the board to influence decision-making and monitoring. Finally, they should design for slow-onset events and non-economic losses – such as spiritual sites or cultural heritage – as well as for rapid-onset climate disasters.   

While the fund is in its early stages, there is already grave concern that it will replicate past issues. As the choice to initially house the fund within the World Bank shows, fund designers are prioritizing supply concerns (the preferences of donor countries) over demand concerns (what countries and communities in the Global South need). World Bank leadership would also likely compromise the speed needed to meaningfully address loss and damage as their expertise is in negotiating loans, not responding to damage from environmental disasters.

Finally, to make the fund complementary to existing mitigation and adaptation finance instead of duplicative, we should ensure loss and damage’s place within the New Collective Quantified Goal (NCQG). To be approved at COP29, the NCQG will build on the $100 billion climate finance pledge from 2010 and include measurable spending targets. Including loss and damage financing targets within the NCQG will enable more unified and transparent funding, enabling greater accountability and making clear the gap between donor commitments and country needs.

Where does adaptation end and loss and damage begin?

Effective adaptation reduces our need to finance loss and damage. By increasing the capacity of households and communities to anticipate climate risks, make appropriate adaptation responses, and absorb hazards as they happen, we can reduce losses.

The pillars of climate action and their relationship to loss and damage (source: the authors)

However, because of the growing adaptation gap and the scale of climate hazards, unavoidable damages from climate hazards are now inevitable and growing. It may be too late to prevent floods that will wash away public infrastructure and people’s houses and assets; droughts that overwhelm the capabilities of farmers and herders to adapt, or saline intrusion that undermines farms and freshwater sources.

Climate information could have a key role in identifying where loss and damage activities might be funded in place of adaptation. With limited data available and the inherent uncertainty in climate systems and local contexts, climate stakeholders will need to combine available data with local knowledge of climate risks to make appropriate assessments about the limits to adaptation and the need for loss and damage measures. This will require tools that enable communities to explore long and short-term climate scenarios using their own knowledge of the context along with available scientific information.

We should also consider the trade-offs between adaptation and loss and damage measures. For example, in some cases governments may prefer to build new infrastructure instead of trying to fix legacy systems that are costly to repair or inefficient to use and maintain. In other cases, people may prefer support for new livelihoods rather than returning to previous ones where they were unsafe or their earnings were unreliable. Finally, with limited resources available for climate action, we should let communities help decide what to save and what could be lost. Their priorities may not be the same as their governments or international donors or even other communities nearby.

After years of campaigning, operationalizing the Loss and Damage Fund was a big win for global south countries, but we still have many questions about how it will operate

To be effective, it must prioritize climate justice for the most vulnerable countries. Its ability to do this will be determined by the amount of finance it successfully disburses, what types of projects it enables and the details of how it operates.

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