Unmasking the Controversy: The Context and Battle Over Loss and Damage in Climate Change

By Shena Cavallo, Philanthropic Partnerships Officer

For decades, small-island and Global South nations have expressed climate change concerns, fearing rising seas could destroy their homes. They view UN climate negotiations as a way to secure funds from those they hold responsible for climate change. Yet, many developed countries resist financial responsibility.

As the climate crisis worsens and COP28 (Conference of the Parties) approaches, the term “loss and damage” is increasingly in discussion. But what does it mean? This framework encompasses the irreversible destruction and loss related to the climate crisis, which cannot be resolved merely by mitigation (e.g., reducing greenhouse gas emissions) or adaptation (e.g., switching to drought-resistant crops). Loss and damage occurs when efforts to reduce emissions fall short or when adaptation strategies fail.

For many, it’s too late to simply adapt. People worldwide face irreversible losses due to climate change, largely resulting from extractive mining industries. The devastating consequences include loss of life from storms, floods, and landslides which destroy properties and farmlands. We’ve witnessed land loss and the obliteration of Indigenous knowledge and practices through displacement. These losses arise from both extreme weather events and slower phenomena like sea-level rise. Since 1991, approximately 189 million people in developing countries have been impacted annually by extreme weather. Specifically, 29 climate disasters in 2022 caused over USD $1 billion in damages. By 2050, climate change could reduce global economic output by 4%, affecting poorer countries more drastically.

Losses and damages associated with climate change can be direct and quantifiable, such as revenue loss from crop damage or the cost of rebuilding infrastructure. However, such losses can also encompass the more astute yet ambiguous category of “non-economic losses and damages” (NELD). NELD refers to a wide array of detrimental impacts that are challenging to quantify in monetary terms. These may include the loss of culture and language, trauma from these losses, and loss of access to burial sites or religious shrines. As Yolanda Muñoz, the Coordinator of the Disability Rights and Climate Justice Board, put it, NELD can also refer to “the loss of autonomy that some people with disabilities face after a climate-induced disaster.”

The trajectory of the Loss and Damage framework exposes the glacial pace of global policy negotiations witlarge, despite the many lives at stake. It demonstrates how activists and the most vulnerable are ahead in recognizing and solving the problem. After three decades of advocacy, COP27 last November 2022 established a dedicated fund for loss and damage, acknowledging that other financial channels could also be considered.

Loss & Damage: A Three Decade Timeline

1991: Loss and damage was first proposed by Vanuatu on behalf of the Alliance of Small Island States (AOSIS), suggesting an insurance plan for countries at risk from rising sea levels.
2007: The term “loss and damage” resurfaced at the international climate negotiation in Bali, calling for enhanced action on adaptation and disaster risk reduction strategies.
2009: AOSIS proposed new mechanisms for insurance schemes, risk management, and compensation to vulnerable countries, calling on developed countries to pay due to their historical and current emissions. This raised questions on liability and compensation.
2010: The US, EU, and other wealthy countries continued to oppose any talk of compensation.
2010: A two-year working plan was finally agreed upon at COP16 in Cancún, which included discussions on risk reduction, rehabilitation, and insurance, but not compensation.
2013: The Warsaw International Mechanism for Loss and Damage (WIM) was established, aiming to address Loss & Damage through enhancing knowledge, strengthening dialogue, and enhancing action and support, including finance, technology, and capacity building.
2015: Loss and Damage was recognized as the third pillar of the work under the UN Framework Convention on Climate Change (UNFCCC), in addition to mitigation and adaptation, in the Paris Agreement. However, it ruled out any admission of liability or compensation related to loss and damage.
2019: The Santiago Network for Loss and Damage (SNLD) was formed to connect developing countries with technical assistance providers, knowledge, and resources, though its operationalization has been delayed.
2022: At COP27, governments agreed to establish a dedicated fund to assist developing countries in responding to loss and damage. It was agreed that a transitional committee would form to make recommendations on how to operationalize both the funding arrangements and the fund at COP28.
2023: After significant and extended debate, the transitional committee proposed that the World Bank will host the fund for the initial four years, a controversial proposal that much of civil society has criticized and that all countries should be able to access the funding. Thus far, developed countries are not set to be obligated to pay into the fund. Further debate and refinement are slatted for COP28 beginning November 30th.

The exact definition of loss and damage, the sources of financing, and the beneficiaries of the fund are still contentious, and its realization heavily depends on the specifics and execution. Global North countries, who have contributed the most to the climate crisis, aim to both limit beneficiaries and broaden contributors. The operationalization of the Santiago Network for Loss and Damage (SNLD) and the new funding arrangements remain unresolved. The situation demands urgent attention as climate change continues to exert a heavy toll, particularly on vulnerable nations–for instance, Africa’s projected loss and damage costs due to climate.

The nascent Loss and Damage framework, born out of relentless advocacy by small island states and developing nations, holds significant transformative potential. Yet, numerous challenges persist, including defining loss and damage, sourcing funding, and identifying fund beneficiaries. While a potential fund offers hope, it should not be the culmination of our efforts. We must push for a comprehensive definition of loss and damage and a radical transformation of the global financial system. Freedom from debt will enable countries to invest more in climate change preparedness and response. In the coming weeks, Global Greengrants will also showcase some examples and insights from partners currently grappling with the effects of climate change and their thoughts on loss and damage debates.

FAQs

Why should philanthropy (and other actors) engage on this issue?

With little consensus on what constitutes climate change loss and damage, it’s time to influence the debate. The impacts are a matter of life and death for many, and harm those least responsible for climate change. A Loss & Damage framing rooted in climate reparations could address historical injustices and immediate needs. The IPCC has recognized the link between colonialism and climate change; however, as others note, the international community must move beyond simply “writing a check” and transform the current extractive, profit-driven system. Increased financial compensation is needed to overhaul the current exploitative system. Loss & Damage can be transformative if linked to broader demands for systemic change, while holding the power to unite movements like Indigenous rights, migration, climate justice, and housing rights.

Does loss and damage have any basis in the human rights framework?

Human rights arguments are intrinsically connected to loss and damage. The aftermath of a crisis, or slow onset events, can create barriers for people in realizing their rights to health, food, housing, self-determination, and even the right to life.

“Effective remedies for people whose rights have been harmed have often been overlooked in international climate negotiations,” the Special Rapporteur on human rights and climate change stated in his latest report to the UN General Assembly. He continued: “Major emitting countries have neglected their duty to cooperate according to the principles of international cooperation.”

For more on human rights arguments, click here.

How can we ensure that Loss & Damage parameters are determined by those facing the greatest challenges?

A crucial strategy involves listening to grassroots communities and those most affected by climate change. This includes individuals who have been displaced, or have lost land and livelihoods. These groups possess in-depth understanding of the problem and often, in the absence of support or with minimal funding and delayed humanitarian responses, have developed their own solutions.

Any framework for loss and damage must also be prepared to consider aspects beyond those that are quantifiable or deemed valuable by financial markets and capitalism. This includes mental health, traditions, community cohesion, and intergenerational knowledge. These are all elements that people deeply value and that can suffer setbacks or be irreversibly damaged in the aftermath of a climate crisis.

How would retroactive loss and damage support be determined?

Determining need and the extent of loss and damage financing are key issues for the Transitional Committee. Existing concepts like the UN Vulnerability Index could provide a basis. The UN and Commonwealth are exploring vulnerability beyond physical geography to include socio-economic factors, shifting towards a risk framework that acknowledges non-climate structural vulnerabilities.

Efforts to advance a holistic, intersectional understanding of loss and damage should also be accompanied by advocacy and efforts to reform the international development, humanitarian, and international financial policies and practices to ensure a fairer system addressing colonialism and oppression.

Some suggest confining loss and damage to ‘residual’ impacts for the distant future, post other climate actions. However, evidence shows that unavoidable losses and damages are already happening. Advocates urge the Fund to cover all types of losses and damages, including slow onset events, economic and non-economic losses, and disaster responses.

Are countries currently required to contribute to loss and damage?

At this time it remains unclear which countries are obligated to provide financing for the L&D Fund and which countries will be entitled to its benefits. This is a contentious issue, in part because Global North countries want to limit the number of countries that could benefit from the fund, while broadening the scope of countries that should pay. The UN Framework Convention on Climate Change (UNFCCC) clearly lays out who should pay and who can receive climate finance through the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC).

What is the process for distributing the funds, who can access it, how will it be managed?

Many activists and countries at the forefront of the climate change battle prefer grants over additional debt, which is currently the primary form of climate change financing. According to ActionAid, 93% of countries most vulnerable to climate change are in debt distress or at significant risk of it. Many also propose that control should be given to those at the local level. For instance, Tony La Viña Associate Director for climate policy and international relations at the Manila Observatory, suggested that funding should be managed not by national governments, but by local communities, including local governments, to ensure that needs are met swiftly.

Some propose that only the most vulnerable countries should be able to access the funding, but the transitional committee has proposed that the fund should develop a “resource allocation system” based on available evidence with a specific percentage allocated to LDCs (least developed countries) and small island states.

What is the accountability of companies, including the fossil fuel industry?

Companies, especially in the fossil fuel sector, bear substantial responsibility for climate-related loss and damage. They should be contributing in excess of $209 billion annually in climate reparations, as highlighted. It’s crucial to advocate for a comprehensive definition of Loss and Damage and a radical overhaul of the global financial system to enable enhanced climate change preparedness and response. External debt often hinders countries from choosing sustainable paths, as emphasized in ActionAid’s report. Global Greengrants will soon share insights from partners dealing with climate change and loss and damage debates.

Loss & Damage: A Three Decade Timeline

FAQs

Useful Links: