GS Paper III

News Excerpt: 

On the first day of COP 28, member countries have agreed to make a Loss and Damage (L&D) fund operational.

History of Loss and Damage Fund

• This fund was first announced after COP-27 in Sharm El-Sheikh, Egypt.
• Creating a specific fund for loss and damage marked an important point of progress at COP27 to assist developing countries in responding to loss and damage. 
• They established a ‘transitional committee’ to make recommendations on operationalising both the new funding arrangements and the fund at COP28.

What is the Loss and damage fund?

• It is a global financial package to ensure the rescue and rehabilitation of countries facing the cascading effects of climate change.
• The term refers to the compensation that rich nations, whose industrial growth has resulted in global warming and driven the planet into a climate crisis, must pay to poor nations, whose carbon footprint is low but are facing the brunt of rising sea levels, floods, crippling droughts, and intense cyclones, among others.
• According to Adelle Thomas, a lead author of the Intergovernmental Panel on Climate Change’s (IPCC) 2022 report, “Impacts, Adaptations and Vulnerability”, says that loss and damage mean different things to different groups, and there is no agreed-upon definition within the United Nations Framework Convention on Climate Change (UNFCCC).
• “Loss and damage are often categorised as either economic or non-economic. Economic loss and damage are negative impacts that we can assign a monetary value to. These include the costs of rebuilding infrastructure damaged due to a flood or the loss of revenue from agricultural crops destroyed due to drought. Non-economic loss and damage are negative impacts where it is difficult or infeasible to assign a monetary value. These are things such as trauma from experiencing a tropical cyclone, loss of community due to displacement of people, or loss of biodiversity. "
• The World Bank will be the “interim host” of the fund for four years. It is expected to operate by the principles of the UNFCCC and the Paris Agreement.
• All developing countries are eligible to apply, and every country has been “invited” to contribute to the fund.

Funding for Loss and Damage Fund:

• Payments are voluntary, and a certain percentage has been set apart for a category of countries called Least Developed Countries and Small island developing states.
• Financial commitments have been made by the United Arab Emirates, $100 million – the host country, Germany $100 million; the United States, $17 million, the United Kingdom, $50.6 million (approx.), and Japan, $10 million as part of the L&D. The European Union also committed to $145 million, over and above the German contribution.

Need of Funds: 

• Loss and damage from climate change cost about $1.5 trillion ($1,500 billion) in 2022, according to a study published by the University of Delaware. Several developing countries and some of the poorest lost an average of about 8.3% of GDP due to climate change.
  • Research shows that 55 vulnerable countries have suffered $ 525 billion combined climate crisis-fuelled losses in the last 20 years.
• Today, the US, the UK, and the EU are considered to be responsible for 50% of all emissions. By Bringing Russia, Canada, Japan, and Australia into the picture, it jumps to 65% of emissions.

Conclusion:

• Loss and Damage (L&D) fund compensates countries already dealing with climate change. The fund doesn’t specify how often it will be replenished, and this absence is raising questions about the sustainability of the fund.
• Previously, the developing nations were not keen to have the World Bank manage the fund as they saw this as a means by which richer nations could have more control over the finances, but now they have accepted this term.