Loss & Damage Fund operationalisation ‘welcome step’ but concerns remain

Experts say fund’s scale, capitalisation and replenishment cycle of finances coming from developed countries are issues that need fleshing out

The operationalisation of the Loss and Damage Fund (LDF) on the first day of the 28th Conference of Parties (COP28) to the United Nations Framework Convention on Climate Change and the pledges by many developed and developing countries to fill it up with around $550 million is a major win for the COP28 presidency of the United Arab Emirates. Something that its staunchest critics have also agreed upon.

But a lot of questions still remain unanswered regarding the character of the finances that have been pledged, scale of financing still required, how and when these finances would be replenished and how soon they can be made available to the communities in developing countries undergoing losses and damages.

Concerns Remain

“Even though the operationalisation of the LDF is a very welcome step in the right direction, there are still questions around its scale, capitalisation and replenishment cycle of finances coming from developed countries,” Harjeet Singh of Climate Action Network (CAN) International told Down To Earth (DTE).

“This operationalisation of the LDF is an important but a baby step. It will be crucial that the fund is adequately financed. We need hundreds of billions of dollars every year and this should mostly be in the form of grants so that the debt burden of vulnerable developing countries does not increase further,” Surya Deva, the United Nations Special Rapporteur on the Right to Development told DTE.

“The World Bank, as the current host of the LDF, has to act in a fair and equitable manner so certain countries are not able to monopolise the fund,” Deva contended.

“The World Bank has been a problem for a long period of time because of its neo-colonial character that is not fair and democratic. But the LDF being hosted by it could be an opportunity to reform the Bank as well as the international financial architecture which includes the International Monetary Fund,” Deva added.

He noted that state obligations should not be substituted with the obligations of non-state actors such as private companies. States should pay adequately to the fund in proportion to their historical responsibility of causing loss and damage.

“We should also look at non-monetary contributions such as transfer of technology and technical knowhow,” said Deva.

How LDF was operationalised

The LDF has been in the making at climate change conferences for the past 30 years. The momentum for its establishment has grown in recent years as the world has been witnessing growing greenhouse gas (GHGs) emissions and associated rapid increase in average temperatures and consequential changes in the climate of the planet.

The most drastic of these impacts are in the form of extreme weather events such as floods and tropical cyclones. For instance, the massive floods caused by extreme rainfall in Pakistan in August 2022 and heatwaves all across the northern hemisphere during the summer season showed the world that the era of loss and damage was here.

This has mainly happened as developed countries have not cut down their emissions (mitigation) first and fast in the past three decades.

They also did not provide the finances, technologies and capacity building to developing countries for taking measures so that their communities could adapt to the rapid changes around them. The adaptation finance gap keeps growing every year and currently stands at $194-367 billion.

The Earth is now in a state not been seen for more than 100,000 years in terms of GHGs in the atmosphere, daily average temperatures and other consequences in terms of extreme weather events.

This is increasing the loss of human lives, destruction of infrastructure, losses related to livelihoods, culture and heritage – all accounted for in loss and damage.

The realisation that loss and damage is happening now and the need to provide finances for it led to the establishment of the LDF at COP27 in Sharm El-Sheikh in Egypt in November 2022. After this, the transitional committee (TC) for the operationalisation of the LDF was set up with 14 developing country members and 10 developed country members.

Its mandate was to come up with recommendations to COP28 on how to organise the fund (its governing board and secretariat), where to get the finances for the fund (sources), how much money would be needed in the fund (scale) and who would be able to access this money and how (eligibility and access).

The TC met over four scheduled meetings (TC 1-4) from March to October and one urgent meeting (TC 5) from November 3-4. The last meeting was called as the first four had failed to reach consensus on the above recommendations.

Even towards the end of TC 5, the consensus was not technically reached as the representative of the United States had dramatically walked out of the meeting room at the last moment.

The issue was around language in the text which seemed to oblige developed countries responsible for historical GHG emissions present in the atmosphere causing the current losses and damages, mostly in developing countries that are not as responsible for the GHG emissions.

Most developing countries were also not happy with the final draft of the recommendations. Their main problem was with the World Bank hosting the secretariat of the LDF for an interim period of four years.

They have always held that the principles and characteristics of the World Bank, which is dominated by the US, is not in line with the needs and vision of the LDF.

But the developing countries also wanted the LDF to be operationalised at COP28 and hence they compromised and let the World Bank host the LDF for the interim period but with strict conditions.

These conditions were around eligibility for all developing countries to access the fund, direct access to vulnerable communities through national governments, access for countries that are not members of the World Bank and the fact that the principles of the Board of the fund, that would have a majority of developing countries, would supersede the principles of the World Bank.

But there had been confusion for the past month among civil society about whether the US would come back to the consensus or if more drama would ensue before the LDF was operationalised with the conditions in place.

This confusion was dispelled when the COP28 presidency introduced a final draft text on the night of November 29, one day before COP28 officially began. The draft text did not have any changes from the original text that came from the TC and was smoothly adopted by all parties after the adoption of agenda for the conference on the first day.

Now civil society organisations like CAN International want to keep the pressure on developed countries to increase the finances flowing into the LDF and its inclusion in other finance negotiations under the Global Stocktake which has to end at COP28 and the New Collective Quantified Goal which is being discussed as well.

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