The idea of the new Loss and Damage Fund is centered around compensation for harm caused by climate change. Countries with the highest historic carbon emissions – and therefore most responsible for the worst effects of a warmed planet – should pay for climate-induced damages, most of which occur in vulnerable states across the Global South.
by Christian Perkins, ‘24 for Annotations Blog
The most significant outcome of last year’s United Nations Conference of Parties was undoubtedly the creation of a new Loss and Damage Fund. Some thirty years in the making, the agreement provides a framework through which developed countries can rectify the adverse impact of decades of excessive emissions. Those emissions disproportionately affect communities across the Global South, despite developing countries’ relatively small share of historic carbon consumption. When rising seas threaten nations like Kiribati, rich countries responsible for glacier melt should compensate for land lost. Likewise, historic floods in Senegal attributable to climate change should trigger the new Fund.
However, for the multibillion-dollar Fund to be effective, negotiators at the upcoming 28th Conference of Parties (COP28) in Dubai must agree upon a governance model that is different from the one used by existing climate finance institutions.
A successful Loss and Damage Fund must be well-funded, responsive, and free of geopolitical posturing. For existing multilaterals like the Green Climate Fund (GCF), the World Bank’s Climate Investment Funds (CIFs), the Global Environmental Facility, and others, these standards have been difficult to live up to. At COP28, negotiators should capitalize on the momentum generated by last year’s breakthrough to meet growing expectations of how Loss and Damage could serve the Global South.
Though historic, last year’s negotiations established Loss and Damage in name and concept only, with operational details left for future meetings. In Dubai, a primary concern will be securing enough financing to jumpstart operations. Other UN finance institutions, such as the GCF, struggled out of the gate to mobilize initial resources, which stymied mitigation and adaptation projects in developing countries for years. To counter similar stagnation, leaders from countries like Barbados and Marshall Islands should continue flexing their moral authority to pressure Global North countries into paying their share of damages.
Loss and Damage must also equip itself with a reliable enforcement mechanism that ensures developed economies follow through on their commitments. However, convincing all nations to agree on self-imposed enforcement is difficult. There is little incentive for developed economies – who are responsible for funding Loss and Damage – to risk financial penalty for reneging on previous commitments. Such was the case when former President Trump opted out of a $2 billion pledge to the GCF, which reversed years of efforts to provide climate-related assistance to vulnerable countries. Without meaningful enforcement, countries reliant on the new Fund for financial reparation will be left subject to the political ebbs and flows of high-income nations.
Enforcement mechanisms for Loss and Damage could start with the simple “name and shame” game, where responsible countries are made to pay up to the Fund to preserve their international reputation. Architects would be foolish to rely solely on such an unreliable approach, however. Instead, the Fund could fall back on international law, relying on institutions like the International Court of Justice (ICJ) to issue verdicts that reinforce Loss and Damage obligations. The most anticipated opinion expected from the ICJ, originally proposed by the UN General Assembly at the behest of Vanuatu, will rule on the legal obligation of high-emitting states to address and alleviate the symptoms of greenhouse gas emissions Here, the common but differentiated responsibility principle, which acknowledges the outsized role of industrialized economies in contributing to climate change, should dictate damages paid to Global South countries via the Fund.
Loss and Damage must also disburse funds much faster than existing climate institutions. If these reserves are to serve as compensation for climate-induced disaster, onerous application processes and lengthy review panels will only hinder their deployment. As such, the Fund should construct a governance framework different from the usual board of directors or trust fund committees, both of which are notoriously slow to make decisions and allocate resources, a first order criticism leveled at the Global Environmental Facility by developing countries.
A more effective governing structure must be led by technical experts rather than politically-appointed country representatives. An independent group of specialists would be better suited to determine where irreparable climate damage has occurred and how to accurately calculate its costs. Once calculated, there should be little room for geopolitical equivocating – those responsible for knowingly inducing such damage must pay.
There should be little room for geopolitical equivocating – those responsible for knowingly inducing such damage must pay.
Representatives from recipient nations must also comprise the bulk of the Fund’s directing body, with only a small share of Global North participation. Where existing climate institutions strive for equal representation between donor and recipient countries, an effective Loss and Damage Fund must empower nations grappling with climate devastation to steer resources in a direction of their choosing. The paternalistic structure of existing climate governance must cease; the role of compensatory countries in the Loss and Damage process should end once routine, sufficient damages are paid.
Lastly, the new governance system must work quickly to define its scope. That is to say, Fund leaders must explicitly lay out what qualifies as climate-caused loss and damage, what reconstruction and reparative activities it will finance, and how those finances will be delivered. Without clear designations, the Fund will face similar obstacles as its predecessors, where inconsistent applications of “adaptation,” “mitigation,” and “resilience” left recipient countries confused, frustrated, and vulnerable to further climate harm. Without direction from nations vulnerable to climate loss, high income countries may limit the channels through which finances flow, which could cripple the Fund’s ability to repay debts unpaid.
If the agreement on its creation was a tall order, crafting the Loss and Damage Fund’s priorities and governing arrangement will be trickier still. Yet, there exists no world in which the Fund is successful under the status quo. Negotiators from high-emitting countries must deliver on debts owed, and those suffering from climate damage must be bold in shaping a fund that is both effective and just.
Meet the Author: Christian Perkins
Christian is a graduate student at Princeton University's School of Public & International Affairs (SPIA), where he studies climate policy. Most recently, he worked for the U.S. Environmental Protection Agency (EPA), but after starting at Princeton, became interested in international climate finance. He is also working on projects exploring the role of the Green Climate Fund (GCF) in vulnerable country groups, and will attend the 28th Conference of Parties (COP28) in Dubai later this year. When he graduates in May of 2024, Christian hopes to work within the international climate policy space, representing either the U.S. government or another institution that does meaningful work to address climate change. You can reach him at [email protected].