A Long-Sought Loss and Damage Deal Was Finalized at COP27. Now, the Hard Work Begins

Three months after delegates at COP27 drafted an outline for a loss and damage deal under which rich, developed nations would compensate developing countries for permanent and irreversible climate impacts, the United Nations Framework Convention on Climate Change is taking some first concrete steps to flesh out the agreement.

In the past few days, the UNFCCC announced the members of a committee that will decide how to implement the Sharm el-Sheikh deal. The announcement was delayed as some developed countries missed the first deadline to pick their delegates.

Developing countries and small island states have a majority on the council with 14 representatives, while developed countries have 10 seats. The committee will meet toward the end of the month, but the exact date hasn’t been released yet.

The committee will decide which countries will pay into the fund, which countries will be eligible to receive money, and through which channels the funding will flow. Researchers estimate the economic costs of loss and damage in developing countries at between $290 billion and $580 billion per year, adding up to a total of between $1 trillion and $1.8 trillion by 2050.

There won’t be any compulsory measures to force countries to pay. The final amount in the fund will depend on what UNFCCC parties are willing to contribute, but there will be reviews to determine whether the funding is meeting the needs, similar to the voluntary national pledges to cut emissions under the Paris Agreement. The new loss and damage committee is expected to finish its work in time to submit a plan for approval at COP28 in Dubai late this year.

Scotland tried to spark some momentum for loss and damage funding with a pledge of $2.3 million in 2021 at COP26 in Glasgow, and since then, about a half-dozen other countries have announced funding specifically for loss and damage adding up to several hundred million dollars—a drop in the bucket compared to what is really needed, according to climate policy experts. 

What Is Loss and Damage?

Loss and damage is the term used in U.N. climate talks to describe impacts that can’t be avoided by mitigation or disaster risk management, or addressed through adaptation—for example, the loss of land to sea level rise, or the loss of agricultural areas to desertification. It also includes impacts that are difficult to quantify, such as the loss of culture, identity, ecosystem services and biodiversity.

Given the failure so far to curb greenhouse gas emissions, such loss and damage is already happening unavoidably in many places, said Farhana Sultana, a geography professor and research director at Syracuse University’s Maxwell School of Citizenship and Public Affairs’ Program on Environmental Collaboration and Conflicts. 

Sultana authored a landmark 2022 paper in the journal Political Geography that helps place the loss and damage into the context of what she calls “climate coloniality”—the fact that the world’s poor, developing countries are disproportionately harmed by carbon emissions to which they contributed almost nothing because they are still affected by the legacies of racism and colonialism.

Among them: austerity measures those countries are forced to enact, and high interest rates they often must pay, to maintain access to loans from the developed world necessary to rebuild after hurricanes and other climate-amplified natural disasters.  

“When you can’t adapt to climate change at all and face interconnected issues surrounding loss and damage, the unbearable heaviness of climate coloniality is worsened,” she said. “This means destruction, devastation and loss are so profound that one can’t finance one’s way out of it.”

Paying a Fair Share

Developed countries in the Global North are responsible for about 79 percent of cumulative greenhouse gas emissions, but less developed countries in the Global South, often lacking financial and technical resources, have taken the biggest hit from climate change. All the world’s countries agreed in principle to tackle that basic unfairness at the UNFCCC’s 1992 founding, recognizing “common but differentiated responsibilities.”

In Article 4, under “Commitments,” the UNFCCC document states,“The developed country Parties and other developed Parties … shall also assist the developing country Parties that are particularly vulnerable to the adverse effects of climate change,” with full consideration to funding, insurance and and technology transfers to meet the needs arising from the adverse effects of climate change, “by providing new and additional financial resources.” 

The document specifically mentions small island countries; nations with low-lying coastal regions, growing deserts and decaying forests; countries prone to natural disasters and problems related to polluted cities; and even “countries whose economies are highly dependent on income generated from the production, processing and export, and/or on consumption of fossil fuels and associated energy-intensive products.” It is an all-inclusive list that would seem to cover nearly every country of the world.

The flame of climate justice based on those declarations flickered for the next decade, but really started burning bright in 2013 at COP19 in Warsaw, said Rachel Cleetus, climate and energy policy director for the Union of Concerned Scientists.

“After years of advocacy, especially from small island nations, that was the first time that there was an acknowledgement of loss and damage,” said Cleetus, who regularly attends the annual global climate talks. Just before the Warsaw talks, super-typhoon Haiyan had raged across the Philippines, killing more than 6,000 people. That trauma and the emotional response helped spark creation of the Warsaw International Mechanism for Loss and Damage, Cleetus said.

“I remember that the Philippines negotiator was literally in tears, asking for an acknowledgement of the devastation,” she said. “He went on a hunger strike. It was a very, very painful traumatic moment in UNFCCC history and there was even a walkout by some delegates.”

But the Warsaw agreement omitted any reference to liability and also avoided creating a specific mechanism for funding, which is “why the issue has continued to simmer and has been such a challenge,” she said. 

A Brief History of Loss and Damage Delay

Since 2013, a Warsaw Mechanism committee has been meeting regularly, most recently this week in Manila, in a typically long UNFCCC process that helped set the stage for the Sharm el-Sheikh loss and damage deal. 

But the vague language in the underlying UNFCCC documents remained a stumbling block for years, even when new language in Article 8 of the Paris Agreement once again specifically mentioned loss and damage, as well as non-economic losses, but basically kicked the can of implementation back to the Warsaw Mechanism, which lacked any enforcement mechanism. 

As the devastation wrought by climate change intensified into the 2010s, calls for climate justice kept growing louder. Two years after COP21 in Paris, Hurricane Maria caused damage estimated at 225 percent of Barbados’s gross domestic product, according to the International Monetary Fund. The country was spending 55 percent of its GDP on servicing its international debt, and 5 percent on health care and environmental protection.  

Cleetus said the issue came to a head once again at COP26 in Glasgow, where developing nations asked for an “explicit understanding” of how loss and damage can be addressed “through finance, as well as through human-rights related issues.” But the impasse continued, with the United States leading opposition by developed countries to any language that could imply liability for climate damages.

By the time COP27 began last November in Sharm el-Sheikh, loss and damage was “the number one issue,” she said. “Coming out of this COP there would have to be not just an acknowledgment of loss and damage, but that there needs to be a funding mechanism. And that’s what was secured at Sharm el-Sheikh. But the fight is still on.”

Developing Nations Should Lead Loss and Damage Talks

The U.S. is one of 10 developed, rich nations, along with representatives from 14 poorer, developing nations, on the new loss and damage committee that will meet for the first time at the end of the month. John Kerry, President Biden’s special climate envoy, was credited with helping to break the gridlock at Sharm el-Sheikh by throwing support behind the decision to move ahead with creating a loss and damage financing mechanism.

But there is still a long way to go, said Sultana, the Syracuse University climate justice expert. 

“Loss and damage funding must be designed such that targeted communities have ownership and access over the funds and activities,” she said. Additional measures to ensure transparency and access for smaller countries and organizations must also be ensured, she added. 

The financing should be via grants, not loans, to ensure there is no additional debt burden, and projects should be targeted at a small scale to make sure “loss and damage funding works in conjunction with humanitarian and development aid as well as climate finance, without replacing them,” she added.

While climate campaigners cheered the hard-won loss and damage deal at Sharm el-Sheikh, vague language—and lack of transparency—could again impede progress, said Sven Harmeling, a climate policy and negotiations expert with several international climate advocacy groups, including Care Climate Change and Climate Action Network Europe.

The scheduled meeting is less than a month away, but at this point nobody even knows if it will be open to observers, he said.

“I think one of the challenges of this transitional committee is that the COP27 decision doesn’t spell out how the committee will operate,” he said. “I don’t know whether it was just no time to discuss it, or whether there was opposition, but normally, I mean, a certain level of openness to observe is the standard practice.”

Basically, the committee will have to form itself before making any decisions and for now, the public knows very little about what will happen next. 

“I think we have to wait for a communication next week, and maybe then we might have to follow up and make noise about it” if the UNFCCC doesn’t effectively address transparency, he said.

How Much Will Loss and Damage Cost?

Harmeling said the committee will likely have to grapple with how to proceed with loss and damage funding in the context of existing climate finance tools. That includes the Green Climate Fund, an entity created under the Paris Agreement to help developing nations finance longer-term adaptation and mitigation projects, like shifting energy systems, or making water supplies more resilient.

The loss and damage funding, by contrast, is for responding to future climate impacts. “We don’t know exactly what will happen in the next year in Algeria or in Pakistan or wherever,” Harmeling said. “You need to have mechanisms in place that can respond quickly. I worked a lot on the Green Climate Fund, and the idea of just tagging loss damage onto that already complex mechanism would result in a neglected stepchild that will not be treated properly.”

It’s hard to quantify how much loss and damage funding is needed, but Harmeling said some experts estimate about $50 billion per year as a target for a few years from now, which would put it on a similar scale to funding for adaptation and mitigation. By comparison, the U.S. defense budget is about $800 billion annually. 

Governments can certainly do their part, but civil society aid groups are often already on the ground in vulnerable areas and can sometimes help communities “at a level that governments may not be able to reach in a decent amount of time,” he said.

“I don’t think anyone expects that all losses in the future will be covered by this fund,” he said. “That’s not reality, but the problems are going so big and they are already reversing economic progress in many of these countries. The gap at least needs to be shortened by such international transfers, I would say.”

As the biggest historical greenhouse gas polluter on the planet, the U.S. is watched closely by other countries, but the days of everyone else waiting for the U.S. to lead are over, said Harmeling, who has worked on international climate policy for nearly 20 years. 

U.S. climate policy can shift radically with every two-year election cycle, affecting the country’s funding pledges, as when former President Trump reneged on climate funding commitments made by former president Barack Obama.

So from the broader view of global solidarity and supporting developing countries the rest of the world needs to move on and find ways to make things like loss and damage work with or without the U.S., he said.

“Other countries have done their job and put the money on the table, and they feel, I think, as a fairer community, than maybe the U.S. may feel,” he said. “But if you look at how large the U.S. economy is, and how much money is spent on many different things, I think there’s a good case to be made that the U.S. needs to hold itself accountable and own up to their contribution to the problem, and they should do more to reduce emissions.”

In general, he said the public wants fairness and accountability, and the more they learn about the climate crisis and how it affects vulnerable people, the more willing they are to support financing.

Science Can Show Who Should Pay

There are scientific tools that can help ensure a fair allocation of funds. A 2022 study in Climatic Change includes very precise estimates of how much each country’s emissions contributed to climate damage in other countries. 

Co-author Justin Mankin, a geography professor at Dartmouth, said the timing of the paper was serendipitous, given the increasing urgency of loss and damage talks.

“What our project does is, it says, we can now leverage advances in the detection and attribution of climate change … down to the event scale,” he said. An example is how researchers calculated how much of Hurricane Harvey’s rain that swamped Houston in 2017 was due to global warming, and then attached a cost to that. Following that method, it’s theoretically possible to figure out who owes who how much for climate impacts, he said.

The precise tracking of the cost of climate impacts “removes some of the uncertainties that have undermined loss and damage progress to date,” he said. “Until recently, there’s been this inability to prove that any one country’s or corporation’s emissions are the cause of harm to another party.”

If you’re trying to assign responsibility, he said, “that chain of causality can’t be ambiguous. There can’t be any plausible deniability. You know, we’re all emitting greenhouse gases, and many countries have hidden behind a veil of plausible deniability.”

Mankin said it helps to look at the coin from the other side. Not only are poorer countries suffering climate damage they didn’t cause and can’t afford; they are also seeing a negative wealth transfer, the cost of climate impacts, that is “underwriting the economic well-being of the people who are causing global warming.”

That’s the vicious cycle of climate coloniality that a well-functioning loss and damage fund could help break, said Sultana, the Syracuse University climate justice researcher.

“Loss and damage can be seen as redressing some of the harms,” she said. “It offers a mechanism to confront issues already occurring with more clarity and structure. It also offers funds directly to the most marginalized communities.”

But in the end, it’s still inadequate, she said.

“It’s like a Band-Aid solution to stem a bleed that’s not being stymied with reductions of greenhouse gas emissions, or by addressing the complex global and local politics of maintaining the colonial imperial matrices of power that saturate the world,” she added.

“But if loss and damage can initiate, by some modest measure, processes of restitution, redress, and reparations, while there is also parallel action to reduce debt burdens on nation-states and the elite capture of politics and funds,” she said, “then it offers potential pathways for climate justice internationally.”