COP27: What does the concept of “loss and damage” mean for extreme weather between rich and poor countries

Two of the big buzzwords at this week’s climate conference in Egypt are likely to be “loss and damage.” But what do they mean and why do they cause arguments?

The negotiations have focused, so far, on the question of how to reduce greenhouse gases and how to deal with the impacts of climate change.
A third issue could dominate COP27: whether highly industrialized countries, which contributed most to causing the problem, should make payments to countries experiencing the impacts directly.
Disasters such as floods, droughts, hurricanes, landslides and forest fires are becoming more frequent and intense as a result of climate change and the most affected countries have been asking for financial assistance to deal with the consequences for years.
This is what the words “loss and damage” mean. The term covers both economic losses (homes, land, farms or businesses) and non-economic losses (the death of people, cultural sites or biodiversity).

After intense negotiations for two days and one night before the opening of COP27, delegates agreed to put the issue on the official agenda.

The money demanded by poorer countries is in addition to the $100 billion a year in climate finance that richer nations have agreed to transfer to poorer countries to help them:

• Reduce greenhouse gases, known as “mitigation” in climate talks

• take action to address the impacts of climate change, known as “adaptation”

“People suffer loss and damage from supercharged storms, devastating floods and melting glaciers, and developing countries have little access to timely support to rebuild and recover before the next disaster strikes,” said Harjeet Singh, head of global policy strategy at Climate Action Network International.

“It is the communities that have contributed least to causing the crisis that are now on the front lines of the worst impacts,” he adds.

How much is the bill for loss and damage?

A report published by the Loss and Damage Collaboration, a group of more than 100 researchers and policymakers from around the world, reveals that 55 of the most climate-vulnerable economies suffered economic losses of more than $500 billion between 2000 and 2020. And that could rise by another $500 billion over the next decade.

“Every fraction of warming that increases means more climate impacts, with losses in developing countries estimated at between $290 billion and $580 billion by 2030,” the authors say.

The paper notes that sea levels in Latin America have continued to rise at a faster rate than in the rest of the world, especially along the Atlantic coast of South America, the subtropical North Atlantic and the Gulf of Mexico. Central Chile’s mega-drought has been going on for 13 years. This constitutes the longest drought in this region in at least 1,000 years, exacerbating a deadly trend and putting Chile at the forefront of the water crisis.”

Last year also marked the third with the highest number of named storms on record. There were 21, including seven hurricanes during the 2021 Atlantic season.World Bank officials say between 150,000 and 2.1 million people each year are pushed into extreme poverty in Latin America due to disasters, including those caused by climate change. Food and nutrition security could be severely affected, with a projected reduction of around 20% in bean and maize crop yields,” they say. The World Bank estimates that about 1.7% of GDP is lost each year due to climate-related disasters. “Several countries are experiencing deeper and longer droughts and more intense storms and floods that are disrupting economic activities and affecting livelihoods,” the multilateral agency reveals. “In Uruguay, for example, climate-related impacts have become more frequent and intense. The droughts of 2017-18 and related crop and livestock losses cost around 0.8% of GDP in 2018 alone.”

The world has seen an average global temperature increase of 1.1ºC compared to the pre-industrial period.

Poorer and less industrialized countries argue that the impact of extreme weather undermines any progress they make in terms of economic development. Some point out that they have been burdened with debt, as they need to borrow to rebuild what has been damaged and lost.

Since when are payments for losses and damages being discussed?

Seven years ago, the groundbreaking Paris Agreement recognized the importance of “avoiding, minimizing and addressing loss and damage associated with the adverse effects of climate change.” But how to do this has never been decided.

“Loss and damage remained a very toxic topic and we have had very, very heated discussions between developed and developing countries,” says Jochan Flasbarth, state secretary at Germany’s Ministry for Economic Cooperation and Development.

“There were concerns in developed countries that it could become a legal obligation for large emitters. This has always been a red line for most developed countries.”

Negotiators at COP27 in Egypt said rich countries wanted to make clear they accepted no responsibility or any obligation to pay compensation for loss and damage.

Developing countries opposed that, but it has now been agreed that liability and compensation will not be discussed. The agreement reached states that the financing of losses and damages will be raised at COP27 with the aim of having an interim decision at next year’s COP in Abu Dhabi and a conclusive one by 2024.

“We have been demanding regular, predictable and sustainable financing to deal with the crises that one or another developing country suffers almost every day,” said Alpha Oumar Kaloga, the African Group’s chief climate negotiator at the UN climate meetings.

“This agreement represents progress, but we will have to see how the talks go.”

Singh, of the Climate Action Network, says the agreement was a compromise. “Indeed, it is a betrayal of trust how rich countries cornered developing countries to accept language that keeps historic polluters safe from compensation and accountability, without offering any concrete commitment to support vulnerable people and countries.”

What are the main disagreements about loss and damage?

It can be difficult for countries to agree which organization will handle payments for loss and damage.

Developed countries point out that there are mechanisms both within the apparatus established by the United Nations Framework Convention on Climate Change (UNFCCC) and outside it, which could assume responsibility.

Developing countries argue that no existing agency is appropriate.

“Where were these bodies when, for example, Pakistan was devastated by recent floods, including when it happened to Nigeria or the recent Hurricane Ian that hit the Caribbean?” asks Michai Robertson, chief climate finance negotiator for the Alliance of Small Island States (Aosis), a group of 39 small island countries that participates as a bloc in UN climate meetings.

“They don’t deal with loss and damage,” he adds.

Both Aosis and the African Group are pushing for a new financial mechanism linked to the UNFCCC system, but quite separate from existing climate finance agencies. However, Flasbarth admits that this idea of an independent body might not gain support.

Has there been any progress in the run-up to COP27?

During COP26, Scotland pledged just over $1 million in funds for loss and damage. Last month, Denmark announced it would contribute $13 million.

And last week, the European Parliament adopted a resolution calling for focusing on financing developing countries and prioritizing grants over loans, to “avoid, minimize and address” loss and damage.

In addition, the G7 and V20, a group of 55 vulnerable countries, recently agreed to launch an initiative called the Global Climate Disaster Shield, which would provide funding for loss and damage, partly through an insurance system.

Aosis claims that this cannot be legitimate, because the V20 does not even have half as many members as Aosis.

“The G7 should talk to all of us and not just the countries it has selected,” says the group’s chief climate finance negotiator, Michai Robertson.

Can poor countries absorb even more climate finance funds?

There have been problems in the past with both financial institutions that release climate finance and countries that receive it.

The bureaucracy of international financial agencies makes funds take a long time to become available. And in some of the recipient countries there are problems of poor governance and corruption.

However, poorer nations will not regard this as a justification for setting aside loss and damage.

Source: BBC