COP28: Know what is the Loss and Damage Fund

The loss and damage fund is a global financial package designed for the countries facing the cascading effects of climate change. The fund aims to ensure the rescue and rehabilitation of such countries. The loss and damage fund was first announced at the COP (Conference of Parties) 27 in Sharm el-Sheikh, Egypt, last year. However, it was formalized only at COP 28 that rich and poor countries did manage to overcome their differences and agree on key points of the fund.

Fifteen developed countries and a developing nation (COP28 host UAE) have made funding pledges so far. The initial funding is estimated to be $475 million, out of which the host UAE pledged $100 million, the European Union promised $275 million, $17.5 million came from the US, and $10 million from Japan.

Why and how was the Loss and Damage Fund organised?

The term refers to the compensation by rich nations, whose industrial growth led to global warming and drove the world into a climate crisis. It was demanded that these nations pay poorer nations, whose carbon footprint is low but are facing the brunt of climate change impacts such as heatwaves, rising sea levels, floods, droughts, and increased cyclogenesis, to name a few.

The fund aims to give financial assistance to rebuild and be rehabilitated. It differs from climate adaptation funds because loss and damage refer to a situation where communities can no longer adapt to climatic impacts or prepare for it because the damage has already been done.

How much damage has been caused by industrialization?

The Industrial Era that started in 1850 disrupted Earth’s natural mechanism of the production and absorption of greenhouse gases. The United States, United Kingdom, and the European Union are said to be responsible for 50% of all emissions. If we bring Russia, Canada, Japan, and Australia into the picture, the figure totals 65%, accounting for two-thirds of all emissions. China, the world’s biggest emitter in the last 15 years, is responsible for 30% of global emissions yearly. Compared to all, India is only responsible for 4% of historical emissions.

How much loss and damage is the world facing?

In the last 20 years, 55 vulnerable countries have reportedly suffered losses worth $525 billion on account of the climate crisis. In fact, the number is expected to increase by 2030. According to the report by IPCC, losses and damages are going to amplify further as global warming continues to rise. The impacts will continue to be unequally distributed, impacting the developing nations the most. In fact, socially and financially weaker sections would be the hardest ones to be hit.

How big is the Loss and Damage Fund and how will it operate?

The World Bank will monitor the loss and damage funds initially, with the source of funds being rich or developed nations as well as some developing countries. However, the scale or the replenishment cycle of the fund remains unclear, but one thing is clear: the world needs several trillion dollars to deal with the climate crisis.

Previously, the developing nations were not keen to be part of this fund, but at the insistence of the World Bank, so as to avoid sole control over the funds by richer nations over the finances, developing nations accepted this deal.