Climate Change

Funding Loss & Damage: Differences persist as COP28 looms

Contentions persist over the contributors, recipients and headquarters of the LDF

By Tamanna Sengupta
Published: Wednesday 27 September 2023
A medicane in Libya in September 2023 led to the deaths of at least 4,000 people. The non-LDC and non-SIDS status of the country makes it ineligible for the Loss and Damage Fund despite the vulnerability to extreme weather events. Photo: @WFP_DE / X (previously Twitter)

On September 22, 2023, country representatives put forth their expectations on the operationalisation of the Loss and Damage Fund (LDF) at ministerial consultations at the United Nations headquarters in New York. Long standing debates were brought back as speakers included both developed and developing parties.

At the outset, every speaker acknowledged the historic agreement on establishing a separate LDF at the 27th Conference of Parties (COP27) to the UN Framework Convention on Climate Change in Egypt. Acknowledgements of the efforts made by the 24-member Transitional Committee (TC) in considering all options echoed across the room. 

The TC, however, still has important creases to smooth out on the scope of the LDF, Chairs Richard Sherman (South Africa) and Outi Honkatukia (Finland) pointed out at the ministerial. 

Read more: COP27: Let us not reinvent the wheel to finance loss and damage

Who will contribute?

One issue is the LDF’s sources. Countries like China; Argentina on behalf of the ‘Argentina, Brazil and Uruguay’ (ABU) bloc; and Syria called for developed nations to pledge contributions to the fund. 

Developed countries, including the European Union, United Kingdom, Norway, France and Canada stressed that “all countries capable of doing so” should fund the LDF.

Article 9 of the Paris Agreement, which stated that “developed country parties shall provide financial assistance to developing country Parties,” was referenced by the Alliance Of Small Island States (AOSIS) in the context of equitable allocation of the LDF.

Russia said the LDF should follow Article 9 such that developed countries are mandatorily required to contribute and other parties can do so voluntarily. Germany and Japan stressed a need to move past the bifurcation of “developed” and “developing” countries altogether, since the world has changed since 1992.

The United States emphasised that in establishing Loss and Damage as a standalone issue with its own fund and separating it from mitigation and adaptation, there remains “no existing donor base”, and all who can should contribute.

The US, which is also the biggest historical polluter, also disagreed with references to the principle of “Common but Differentiated Responsibilities” in deciding donors, arguing that it does not seem relevant in this context.

Who will receive funds?

The same group of developed countries reiterated their demand for the LDF to be limited to the Least Developed Countries (LDC), Small Island Developing States (SIDS) and “particularly vulnerable” countries. Some took a softer stance like Norway, who advocated for a “minimum allocation floor” for LDCs and SIDS, and Australia who proposed “prioritising” the particularly vulnerable. 

Read more: Run-up to COP27: ‘John Kerry is scared of the floodgates of litigations on accepting loss and damage’

Others like Germany more aggressively stressed that “the fund should not address countries that do not suffer under particular vulnerability”. Article 4.4 of the UNFCCC commited developed countries to assisting particularly vulnerable countries.

However, the absence of agreed metrics on what constitutes particular vulnerability has long been questioned as it can have many interpretations. 

The G77 and China — the largest intergovernmental group of developing countries — maintained their demand for the LDF to be accessible to all developing nations. Timor-Leste and Bangladesh, which belong to the LDC group, supported this call. 

China and AOSIS called for all developing countries to be beneficiaries, with special attention to LDCs and SIDS. Barbados, one of the SIDS, said an LDF that “doesn’t make Pakistan and Libya eligible is not worth having”, given that the non-LDC and non-SIDS status of these countries would make them ineligible despite their vulnerability to extreme weather events. 

Where to house LDF?

Another division arose around the headquarters of the LDF. The US, Canada, Ireland, Slovakia, Australia and Japan vouched for the World Bank to be the host, citing its on ground presence and ease of operation. These countries opine that it is an existing system like the World Bank that can ensure fast operation, as starting from scratch will take time. 

Read more: Poorer countries must be compensated for climate damage. But how exactly do we crunch the numbers?

Pakistan, AOSIS, Guatemala, and Barbados called for the LDF to be an Operating Entity of the UNFCCC, primarily to ensure that equity is upheld and funds are given as grants in order to prevent further debt traps for developing countries. 

The World Bank’s governing body also has low representation of the Global South, which could lead to discrepancies in accessing funds.

The fourth and final TC meeting of the year is scheduled for October 2023, where the Committee will decide on final recommendations regarding the operationalisation of the LDF. 

The AOSIS have put forth an expectation of the LDF providing $100 billion starting from March 2024. India, the Dominican Republic and Barbados also called for LDF to begin operations from 2024. A resolution of these debates at COP28 will decide whether these expectations are within reach.

Read more: 

Subscribe to Daily Newsletter :

Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.