Ilandlocked nations are threatened by rising seas. Drought threatens large parts of Africa. And the floods will inundate countries all over the world.
For years, developing countries have been the most vulnerable to climate change alerted to these threats and asked their wealthier colleagues to help pay to address these climate-induced losses. The rich countries that caused the problem with decades of uncontrolled burning of fossil fuels instead insisted they would help vulnerable countries expand clean energy and finance efforts to adapt to extreme weather. Payment to the so-called loss and damageit seemed to be a bridge too far.
This week the dam finally broke. At COP27, the United Nations climate conference in Sharm el-Sheikh, Egypt, which ended early Sunday morning, delegates from countries around the world agreed to create a fund to channel money from the Global North to the Global South to help pay for mounting costs for climate-related damage. Nations also accelerated a program to provide technical assistance to vulnerable countries. And they called for an overhaul of institutions like the International Monetary Fund (IMF) and the World Bank to deal with climate-related loss and damage.
Overall, the result represents a revolutionary change in the way the world understands climate policy. Yes, climate policy is partly about solar panels and wind turbines, raising streets and building sea walls. But now officially, for the first time on this global scale, it is also about paying the inevitable losses.
“This is the beginning of a new paradigm that really takes into account the severity of climate change,” said Leah Nicholson, a negotiator representing the Alliance of Small Island States (AOSIS) at the closing session of the conference. “The establishment of this fund signals to the world that loss and damage will no longer be borne solely by those governments and people least responsible; today is a step towards climate justice.”
This step forward ushers the world into a new era of climate policy, where paying to offset the worsening effects of climate change gets top marks in international climate discussions – and questions of how to pay for it enter the conversation in the capitals of developed countries around the world. COP27 ends an uphill battle, but also marks the beginning; and the decisions made over the next few years will determine what this new paradigm looks like.
The push for policies to deal with loss and damage dates back to the very beginning of UN climate change discussions. In 1991, then chair of AOSIS, the island nation of Vanuatu proposed a scheme to pay small island nations when their land becomes uninhabitable as a result of sea level rise. From the outset, these talks were shunned and shunned by the major developed countries, whose negotiators feared that acknowledging the losses and damages would lead to unlimited liability for rich countries. At major climate conferences in the decades that followed, vulnerable countries repeatedly raised the issue with scant results.
But ignoring a problem won’t make it go away. Climate-related damage has accelerated in recent years, and many delegates gathered in Egypt agreed that the devastation of recent months has made the conversation about loss and damage impossible to avoid. “We heard the cause of grief and despair resonating from one end Pakistan on the other hand, a country with literally more than a third of its area flooded, a resounding alarm about the future that awaits us,” said Sameh Shoukry, the Egyptian foreign minister who served as president of COP27, after the talks concluded.
So for the past two weeks, negotiators have been haggling over the details of what such a fund might include. Key questions included who could receive funding and who should contribute. Developed countries have remained adamant that the fund should be open to a range of funding sources – including from countries such as China, which have become major emitters even though they were not 30 years ago, when the UN climate process was created. At the same time, developed nations seek to prevent funding from going to countries like Saudi Arabia, which are technically developing countries but have access to far greater funds than many of their more vulnerable counterparts. Both issues are to be resolved in the coming years. Delegates also discussed how contributing countries can finance these programs. The European Union’s proposal to impose taxes on fossil fuels, air transport and shipping to pay for loss and damage has raised eyebrows in negotiating teams.
“Creating a financing mechanism is the story of COP27 and a huge milestone,” said Cassie Flynn, head of climate policy at the United Nations Development Programme. But “this is just the beginning of the loss and damage financing journey, and negotiators will have to confront very quickly some questions around the ground rules: who provides in this fund, who can receive in this fund?”
No matter what happens, no one expects the new fund to provide enough funding to really address the scale of the loss and damage challenge, so a number of other solutions have been put forward. During the conference, delegates discussed an insurance scheme organized by Germany to help cover certain losses and the creation of a program known as the Santiago Network that would provide technical assistance to vulnerable countries. Offer from Barbados for debt relief for developing countries with financial difficulties as they grapple with climate challenges, has received support from countries around the world, rich and poor, large and small. The topic will be high on the agenda in the months leading up to the spring meetings of the IMF and the World Bank.
“Loss and damage is a complex issue that affects our immediate, medium and long-term plan,” Shona Aminat, Minister of Environment, Climate Change and Technology of the Maldives, told other delegates on the morning of 20 November. “We need a mosaic of solutions.”
It may not be clear at first glance, but between the lines, the COP27 deal also contained something of a win-for large developed countries such as the USA. These rich nations successfully I hit back any attempt to seek official responsibility; contributions to the loss and damage fund will be voluntary. After the decision was finalized, a US State Department official noted that “there is no liability or compensation in the settlement.” In the coming years, it’s safe to assume that US attorneys will be fighting tooth and nail to ensure that the fund stays that way.
But the conversation will inevitably evolve. On Friday, Vanuatu announced that 86 countries now support its plan to ask the International Court of Justice (ICJ), the UN’s judicial body, to issued an advisory opinion on States’ obligations to address climate change. Vanuatu plans to take the issue to the UN General Assembly in December and, if approved, the ICJ will take up the matter to offer an opinion that includes what rich countries owe for their historic emissions. It’s an opinion that could influence a number of court decisions around the world.
“It will affect everything,” says Ralph Regenvanu, Vanuatu’s climate minister. “If you’re sitting across from someone and you’re both equally aware that there are these statutory obligations, maybe now there’s a shadow of a stick.”
Clearly, the conversation is just beginning.
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