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On the Money

In dialogue at COP27: What's lost, what's damaged and what's at stake

The impacts of rich nations’ historical emissions are causing are a clear and present danger right now. Who pays the bills remains very much in debate.

Person standing at a podium, with sign about Pakistan crisis behind him, during COP27

Antonio Guterres, Secretary-General of the United Nations/Courtesy of UNFCCC

How often has your inbox been hit by "loss and damage" of late? This week: What’s lost, what’s damaged and what’s at stake. 

The increased severity and frequency of natural disasters being caused by climate change, including cyclones, floods and droughts, have led to massive economic and non-economic losses and damages

Translated to human terms, think of the thousands killed and millions left homeless in Pakistan from floods this year — incalculable human suffering —or the $40 billion in related economic losses for the entire country, which has an annual GDP of $346.3 billion. The equivalent percentage losses for the United States would be around $2.5 trillion. 

Negotiations on loss and damage of this nature taking place at the COP27 climate negotiations this week are being driven by a few key elements, which I’ll get into below. But the theme underpinning the technicalities and transactions being discussed and debated in Sharm el-Sheikh is the intersection of climate finance and financial responsibility.

That is, the impacts of rich nations’ historical emissions and the unbearable human and economic loss they are causing are a clear and present danger — right now. Who pays the bills remains very much in debate.

As Madeleine Diouf Sarr, chair of the Least Developed Countries Group on Climate Change, which represents nearly 1 billion people across 46 developing nations, wrote

"Last year, at COP26 … low- and middle-income countries jointly proposed a Loss and Damage Finance Facility. Wealthy countries rejected this, and instead offered a three-year ‘dialogue’. Talk does not feed the starving or shelter the homeless."

Context for the Facility

The COP (a.k.a. Conference of Parties) bureaucratic structures can be challenging to navigate. When it comes to "facilities," the one you may have heard referenced previously is the Global Environment Facility (GEF). It provides grants and blended finance — that is, a blend of development finance and philanthropic funding to mobilize private capital for emerging markets — to fund projects that address issues such as biodiversity preservation, climate change adaptation and food security. 

The proposed Loss and Damage Finance Facility that Sarr referenced above is a body of funding meant to directly address the unavoidable climate catastrophes that developing countries are both vulnerable to and already experiencing. 

Those in richer nations tend to speak and act on climate issues with a future focus — a commitment to something by some future date, often decades hence. But those in poorer nations are feeling devastating climate impacts in the here-and-now. 

As David Waskow, director of the World Resources Institute’s International Climate Initiative, said on the undertone of urgency at this year’s conference: "We are living in the impacts now. So it’s [COP] not like how it was 10 or 15 years ago."

Similar to the rationale for the GEF, the argument for the Loss and Damage Finance Facility is rooted in the reality that we are living in the era where the value of adaptation finance alone is proving insufficient, as severe impacts of climate change are greater and arriving sooner than previously expected. 

The "atlas of human suffering" across the world’s poorest regions is not a future state. 

What comes next?

What’s unclear is whether rich nations will be willing to pay, and if so, how much. 

COP is, of course, an international convention composed of representatives of member states (and a small city-state of fossil-fuel industry lobbyists). And while the technical challenges that both public and private transition finance pose are real, those challenges are not what’s thwarting action on loss and damage finance. 

Recognition is growing that climate change is a moral problem with technical​​ solutions, and the Loss and Damage Facility is representative of this intersection. The problem demands courage and the solutions take calculations, and they’re both necessary. 

Rich countries’ negative response at COP26 to the proposed loss-and-damage mechanism — requesting a three-year "Glasgow Dialogue" to explore a path forward — is an example of the type of uncourageous can-kicking about which critics around the world are increasingly intolerant. 

We’ll see if both rich nations and private financiers find the billions in their budgets that are needed, now. 

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