COP28 Review: Loss and Damage Fund

*Emeka Ezenwoye

Image source: UNFCCC

The COP28 UN Climate Change Conference in Dubai, the United Arab Emirates, was the biggest. A total of about 85,000 participants, including more than 150 Heads of State and Government, were among the representatives of national delegations, civil society, business, Indigenous Peoples, youth, philanthropy, and international organizations in attendance at the conference, which took place from 30th November to 13th December 2023.

Hundreds of world leaders, activists, journalists and climate experts gathered at last year’s United Nations climate conference to witness the approval of a loss and damage fund and an agreement on transitioning away from fossil fuels. At the same time, countries faced crushing assessments of their carbon emissions. States attending the 2023 Conference of the Parties (COP28) were under pressure to adopt a new climate agreement amid controversy over the appointment of Sultan al-Jaber as president because of his position as a United Arab Emirates oil tycoon and his alleged questioning of climate science. Countries were also falling behind in the first review of their progress towards reducing emissions to keep global warming in check.

COP28 was particularly significant as it marked the conclusion of the first ‘global stocktake’ of the world’s efforts to address climate change under the Paris Agreement. Having shown that progress was too slow across all areas of climate action — from reducing greenhouse gas emissions to strengthening resilience to a changing climate to getting financial and technological support to vulnerable nations — countries responded with a decision on how to accelerate action across all areas by 2030. This includes a call on governments to speed up the transition away from fossil fuels to renewables such as wind and solar power in their next round of climate commitments.

Operationalization of the Loss and Damage Fund

Developing a specific fund for loss and damage marked an important point of progress, with the issue added to the official agenda and adopted for the first time at the end of COP27. COP28 started on a positive note with the approval of a loss and damage fund that was first tabled at COP27 in Egypt.

Fig 2: An image of Displaced Persons (Image source: Business Day)

Delegates present at COP28 approved the operationalization of a fund to assist developing countries in responding to economic and non-economic loss and damage associated with the adverse effects of climate change. The COP28 President Dr. Sultan Ahmed Al Jaber praised the approval of the loss and damage fund — the first time a decision has been adopted on the first day of any COP — as setting “a clear ambition for delegates to agree to a comprehensive, ambitious Global Stocktake decision over the next twelve days.” The fund will be hosted by the World Bank for an interim period of four (4) years, at which time an independent assessment of the World Bank’s performance as a host will be conducted.

The governments of various countries took the ground-breaking decision to establish new funding arrangements, as well as a dedicated fund, to assist developing countries in responding to loss and damage. The governments also agreed to establish a ‘transitional committee’ to make recommendations on how to operationalize both the new funding arrangements and the fund at COP28.

In terms of how the Fund will be financed, the agreement provides that the Fund will be able to “receive contributions from a wide variety of sources of funding, including grants and concessional loans from public, private and innovative sources, as appropriate.” This suggests that businesses will be able to contribute to the Fund along with national-level contributions.

The fund is meant to support vulnerable communities and developing nations that are struggling to cope with the impact of climate disasters such as the destruction of crops caused by floods. According to the UNFCCC, several countries have pledged a total of about $661m, which falls far short of the estimated $400bn damage caused by climate change each year. In September 2023 a group of developing countries had asked for at least $100bn to be committed to the fund. The pledges/contributions to this fund include: UAE ($100 million); UK ($51 million); US ($17.5 million); Japan ($10 million); European Union ($245 million, including $100 million pledged by Germany) and China ($10 million).

Furthermore, the draft agreement on the loss and damage fund lays out several methods for how countries can access funds, including direct access by national governments and small grants to support vulnerable communities. The potential uses for these funds — subject to restrictions that the Board of the Fund may impose — are equally expansive, including humanitarian relief and reconstruction after extreme weather events and funding for climate adaptation actions that address slow onset events such as desertification and sea level rise. Countries will need to rely on global businesses to implement these climate relief, resilience, and adaptation projects, creating an opportunity to grow markets and protect and expand supply chains in developing countries that traditionally lack financing for such projects.

Significance of the Loss and Damage Fund to Developing Countries

The following explains the significance of the Loss and Damage Fund to developing countries like Nigeria.

Vulnerability to Climate Change: Developing countries often bear the brunt of climate change impacts due to their geographical locations, economic structures, and lower adaptive capacities. Nigeria, like many other developing nations, is vulnerable to climate-related disasters such as floods, droughts, and extreme weather events. The Loss and Damage Fund acknowledges these vulnerabilities and seeks to support countries facing severe impacts.

Compensation for Irreversible Losses: Climate change can lead to irreversible losses and damages that go beyond what can be adapted to or mitigated. These may include loss of lives, cultural heritage, and ecosystem services. The fund recognizes the need for compensation for such losses, providing financial support for affected countries to cope with and recover from these impacts.

Humanitarian Assistance: Developing countries often lack the resources and infrastructure to effectively respond to large-scale climate-related disasters. The Loss and Damage Fund can serve as a source of humanitarian assistance, helping affected communities in developing countries to rebuild and recover from the aftermath of extreme events.

Capacity Building and Risk Reduction: The fund is not just about financial compensation; it also aims to build the capacity of developing countries to better understand, anticipate, and reduce the risks associated with climate change. By investing in adaptation strategies and risk reduction measures, the fund contributes to long-term resilience and sustainability.

Global Solidarity: The establishment of the Loss and Damage Fund reflects a commitment to global solidarity in addressing the impacts of climate change. It acknowledges that the responsibility for climate change and its consequences lies with historical emitters, and the fund serves as a means for wealthier nations to support those who are disproportionately affected.

International Climate Negotiations: The existence of the fund is also a recognition of the need for ongoing international negotiations on climate change. It reinforces the principle of “common but differentiated responsibilities,” emphasizing that developed countries, which historically contributed more to greenhouse gas emissions, have a greater responsibility to assist developing nations in dealing with the consequences.

Overall, the UAE as the host, effectively managed the organization of the largest COP in history. The conference reached landmark agreements on loss and damage and a clear ambition to transition away from fossil fuels.

Emmanuel Emeka Ezenwoye is the Lead on Climate Policy and Natural Resource Governance at Clean Technology Hub.