The latest UN Climate Change Conference (COP28) marked a “historic” decision on the operationalisation of the Loss and Damage Fund. For decades, the issue of loss and damage increasingly faced by the world’s most climate-vulnerable communities has constituted a key frontier in the ongoing battle for justice in international climate action, particularly in relation to the chorus of demands for wealthy polluters to recognise and act in accordance with their historical responsibility for climate change and its related impacts. Although lauded by many as an emblematic win for climate justice, this article questions what the operationalisation of the new Fund has meant for climate justice in real terms. How has the Fund advanced action for the most vulnerable in line with historical responsibility, or has it at all?
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Climate Justice and Loss and Damage: The Story So Far
In the context of global average temperatures continuing to consistently break all-time monthly records into 2024, and the confirmation last month that the critical 1.5C global warming threshold has been consecutively breached over a twelve-month period for the first time in history, the issue of the ever-increasing economic and non-economic losses and damages faced by the world’s most vulnerable communities in the Global South could not be more crucial.
Used as shorthand to refer to the economic, social, and cultural losses and damages caused by human-induced extreme weather events and slow-onset climate changes to natural systems and human communities, “loss and damage” has for decades constituted a central frontier in the ongoing battle for climate justice.
With present and projected losses and damages disproportionately impacting vulnerable communities in the Global South – that is, those with generally the least responsibility for historical emissions and the smallest financial capacity for tackling climate-related impacts – the issue of loss and damage has become central to global civil society demands that developed country polluters in the Global North act in line with their historical responsibility for the majority of the world’s cumulative fossil fuel emissions. Calls for wealthy polluters to ameliorate their historical climate debt have most commonly taken the form of demands for compensatory financial flows to developing countries, to support the least responsible yet most vulnerable communities in dealing with the adverse impacts of climate change.
Exemplified by the failure of developed Parties to meet their promise of US$100 billion in climate finance flows to developing countries per year by 2020, it is clear that wealthy nations are not doing enough to ensure climate finance is equitable.
In this context, the agreement at COP27 to establish a Loss and Damage Fund was widely lauded as a “landmark” decision for climate justice. A year on, COP28 commenced with the “historic” agreement on how to operationalise the Fund, celebrated by the Convention’s proponents as “an important symbol of global solidarity… and a step forward in international climate justice.” Last year’s decision comes as an all too welcome win for the long-awaited institutionalisation of loss and damage finance under the United Nations Framework Convention on Climate Change (UNFCCC), following decades of near-total exclusion from international climate policy.
Celebration of the Fund has been tentatively echoed by many across civil society, with the international humanitarian organisation CARE remarking that the decision marked “a landmark day for climate justice after 30 years of rich countries blocking the way.” Many others, however, have criticised the Fund as the “bare minimum” and, notably, even a “failure… of climate justice.”
With civil society and policymakers so divided over the normative success of the Fund for climate justice, it is essential to dive into the specificities of how this “historic” decision has (or hasn’t) advanced just climate action for the most vulnerable in line with historical responsibility.
More on the topic: Explainer: What Is ‘Loss and Damage’ Compensation?
What Does the Operationalisation of the New Fund Mean for Climate Justice?
The decisions adopted regarding the operationalisation of the new Fund on the opening day of COP28 represented the culmination of a year’s fraught negotiations by the 24 member Transitional Committee, established in Sharm el-Sheikh to prepare a comprehensive proposal on the Fund’s practical implementation. Agreement to accept the recommendations of the Committee was momentously reached on the first day of the Conference and followed over the next two weeks by a flurry of financial pledges from the Convention’s most economically developed (and most historically responsible) parties. Although the swift decision and influx of pledges on day one certainly reflected an ostensible “step forward in international climate justice,” the reality underlying the hopeful promises is not so straightforward.
1. Contributors to the Fund
Undoubtedly the most significant detail regarding the Fund’s advancement of climate justice has been the stipulation for “developed country Parties [to continue] to take the lead to provide financial resources for commencing the operationalisation of the Fund.”
Although not made explicit, for many, the Fund’s tacit recognition of the distinction between present vulnerability to and historical responsibility for climate change still amounted to a significant win.
“This Fund is recognition that those experiencing the worst impacts of the climate crisis are the least responsible for causing it, which is a huge accomplishment”, said Zahra Hdidou, the Senior Resilience and Climate Advisor for ActionAid UK.
For many others, however, the omission of any officially mandated contributions structured on the basis of historical responsibility represents a glaring failure for climate justice.
“The continued denial by wealthy historic polluters of their responsibility to pay for climate harms, hiding behind paragraphs and footnotes, is out of touch with reality,” remarked Lien Vandamme, Senior Campaigner at the Centre for International Environmental Law.
Although the call for developed Party leadership has been outwardly interpreted as an affirmation of their historical obligations to developing countries, the broader legal coaching of the decision within the Paris Agreement serves to fundamentally reject the idea that financial leadership on the Fund is denotative of historical responsibility. A controversial footnote to Article 8 of the Paris Agreement confirmed that loss and damage policy “does not involve or provide a basis for any liability or compensation.”
Adherence to the footnote, then, has for many rendered void the potential for the Fund to advance recognition of historical responsibility, with developed Party financial leadership instead notionally rooted in the supremacy of their economic capacities only. Indeed, the US-driven provision incorporated into the Committee’s recommendations to ensure contributions remained discretionary served to solidify the rejection of developed country responsibility from the final decision. The voluntary nature of the contributions effectively guarantees that a long-term mobilisation scale structured by a certain notion of responsibility is not relevant. In this context, pledges reflect merely the (limited) goodwill of an affluent neighbour, rather than a systemic recognition of historical liability.
2. Contributions to the Fund
The influx of financial pledges made across the two weeks of the Conference appeared to many observers as demonstrative of an equitable commitment to supporting the most vulnerable. Total pledges from developed Parties by the end of week two exceeded US$700 million. Of this total, US$300-400 million was promised by the EU collectively, $100 million from the UAE, $50 million from the UK, $17.5 million from the US, and $10 million from Japan.
Although ostensibly a triumph for the most vulnerable, the $700 million has in fact been found to constitute less than 0.2% of the economic and non-economic losses developing countries face each year from climate-related impacts. UN estimates on the annual costs of climate-related losses range from US$160-340 billion per year by 2030. The current pledges, “while welcome, … [are] a drop in the ocean compared to the scale of funding needed,” said Tasneem Essop, the Executive Director of Climate Action Network (CAN) International.
With funding commitments falling so overwhelmingly short, the equity of a discretionary financial mechanism for loss and damage must once again be called into question.
“It is immoral… that rich nations cannot find adequate funds for addressing climate impacts, yet could instantly find billions of dollars, not millions, but billions of dollars to support a war on the people of Gaza,” remarked Essop in her address to the world leaders at COP28.
The insufficiency of current pledges is couched within the broader structural inadequacy of climate finance flows to developing countries overall. The larger failure of developed country Parties to meet the $100 billion per year by 2020 target points to injustice of a voluntary system of climate finance in which contributions have no benchmark, such as historical responsibility, against which they are able to be mandated and monitored.
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Under the present funding arrangements, many contributions have been derived from the reshuffling of pre-existing official development assistance and climate finance sources. To begin to be equitable, it is essential that the Fund be able to mandate new and long-term sources of funding that ensure the most responsible polluters pay. The failure of the new Fund to do so is becoming increasingly inadmissible, in view of various recent studies that have highlighted how appropriate funds could be raised from taxations on fossil fuel industry profits and levies on high-emissions activities.
Oxfam reported last year that taxes on the UK’s biggest polluters could have raised up to £23 billion (US$29.1 billion) via an excess profits tax on fossil fuel companies, redirected fossil fuel subsidies, frequent flyer levies, taxes on private jets and superyachts, and ring fencing 20% of wealth tax proceeds.
3. Hosting of the Fund
The second big outcome witnessed in Dubai was the decision for the Fund’s secretariat to be hosted by the World Bank on a four-year interim basis. The decision constituted a distinct point of contention during negotiations, in which a developing country-backed proposal to establish a stand-alone Fund was summarily rejected in favour of the US-led recommendation that the Bank as host would streamline the operational establishment of the Fund, enabling financial support to be promptly disbursed to the most vulnerable.
The justice implications of the Bank-hosted Fund are complex. In light of concerns over the procedural equity of the Bank’s core stakeholders consisting of some of the world’s largest historical polluters, worries may to an extent be quelled, considering that the Fund will ultimately operate under its own governance structure, rather than under the Bank’s Boards of Directors. The Fund’s Board shall consist of 26 total members, 14 of whom are mandated to come from various groups of developing countries.
The broader issue for many observers across global civil society and developing countries, then, lies with the Bank’s institutional history of climate inaction. A stark report by The Bretton Woods Project, a civil society watchdog for the World Bank and IMF, outlines the billions of dollars invested in the fossil fuel industry by the Bank, including over US$12 billion for new fossil fuel projects between 2014 and 2018.
“[The Fund] cannot be under the control of an institution with a history of inequitable and environmentally detrimental practices,” said Climate Action Network (CAN) International’s Harjeet Singh.
4. The Beneficiaries of the Fund
In view of what for many are the flagrant shortcomings of the Fund, it may be easy to understate the institutional win that the establishment of a loss and damage funding mechanism has signalled for climate justice. The agreement made at COP28 has promised to “target people and communities in climate-vulnerable situations (including women, children, youth, Indigenous Peoples, and climate-induced migrants and refugees in developing countries…)” and consider “a minimum percentage allocation floor for the least developed countries and small island developing states.”
At the most basic level, the operationalisation of the Fund represents a significant victory for climate justice – for countries and communities on the frontline of the climate crisis, and for the global networks of actors and organisations that have for decades fought for equitable financial support on their behalf.
“For me, the real victory of COP28 was the power of people and civil society to finally deliver outcomes put off for 30 years, something unimaginable just two or three years ago,” said Catherine Pettengell, Executive Director of CAN-UK.
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Just Climate Finance Without Historical Responsibility?
Although the purportedly “historic” decision on how to operationalise the new Loss and Damage Fund did not advance climate action for the most vulnerable in line with historical responsibility, it is plain that the increasing recognition of the financial and humanitarian responsibility of developed country parties for ameliorating the vulnerability of the developing represents a promising future direction for climate justice.
For now, the tension over whether just and effective climate action is achievable without recognition of historical responsibility remains at the centre of global debates over the efficacy of international climate finance. As this year’s UN Climate Change Conference, COP29, set to be explicitly dedicated to the issue of climate finance, approaches, we shall soon see whether equitable advancements are to be made in the issue-area of loss and damage. As noted by Chiara Martinelli, Executive Director of CAN-Europe, “[this] year’s negotiations on the future level of climate finance will, therefore, be a critical litmus test for a truly global course correction.”
Featured image: Oliver Kornblihtt/Mídia NINJA
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