For almost 30 years, in response to climate impacts, the least-developed and most vulnerable nations have called for financial and technical loss and damage support. Unfortunately, the United States and European countries — which account for more than 40 percent of historic greenhouse gas emissions — have so far left their calls unanswered, leaving a major trust deficit in their wake which threatens to undermine national climate commitments and global goals.
As climate impacts intensify, it is past time for wealthy nations to come to the table with a package of solutions to address loss and damage directly. This November, leaders will gather in Sharm El-Sheikh, Egypt, for the United Nations Framework Convention on Climate Change conference (COP27), creating the opportunity to do just that.
Limited multilateral progress
First introduced in the UNFCCC context in 1991 by the small island nation of Vanuatu, the loss and damage concept can be broadly understood as the harm caused by observed impacts and projected risks of climate change — both economic and non-economic, in the short and long term. Yet despite vulnerable countries’ repeated calls for support, wealthy nations, in particular the United States, have historically been unwilling to enter into concrete discussions on a loss and damage dialogue for fear of legal liability. This issue should have been put to rest by the 2015 Paris Agreement, which specified that agreed-upon language recognizing the importance of loss and damage does not provide a basis for liability or compensation. Their opposition has resulted in limited multilateral progress on the issue, and so far only piecemeal approaches have been stood up.
Last year, the leaders of vulnerable countries arrived in Glasgow for COP26 with heightened expectations for concrete action. But after the United States and European Union blocked calls for a facility providing financing for loss and damage, vulnerable countries were left with yet another dialogue mechanism and small, albeit symbolically significant, financing pledges by the Scottish government and Wallonia.
With momentum all but stalled, Denmark tried to revive the debate last month by pledging $13 million to loss and damage-related activities. This pledge works in concert with Germany’s Global Shield Against Climate Risks, one key element of its G7 presidency. The initiative builds upon an insurance partnership in cooperation with some of the most vulnerable countries, an approach already pursued by the German government.
While the Global Shield may be a good start, there is a need to build on its substance at COP27. And unfortunately, the United States lags behind its G7 partners; while the Biden administration ramps up its work on climate mitigation and adaptation, there is a distinct lack of political will within U.S. senior leadership and Congress — and a lack of awareness generally — to address loss and damage.
A global solidarity fund
Against this backdrop, wealthy nations must arrive at COP27 with a comprehensive set of funding and policies to address loss and damage. This should start with ensuring loss and damage is adopted swiftly on the official — not provisional — UNFCCC agenda and speeding up the Glasgow Dialogue’s three-year decision-making timeline on the provision of finance.
However, even if these items are agreed upon, it’s unlikely that COP27 will be decisive on the lynchpin issue of creating a loss and damage financing facility. In the absence of consensus, there are additional approaches that could be leveraged to make meaningful inroads from wealthy nations on loss and damage.
One potential compromise may follow the example of a Global Solidarity Fund, using the Scottish and Danish pledges as a starting point. This would include creating a global contingency fund into which wealthy nations would pay and from which vulnerable counties could draw to address acute instances of loss and damage-related impacts. This could work similarly to the EU Solidarity Fund, which was created in response to severe flooding in Europe in 2002 and to date has dispersed more than $7.9 billion. Estimates for loss and damage finance needs globally far exceed this amount, underscoring the importance of finding a vehicle that helps build momentum for this issue.
To complement these efforts, leaders could also create a dedicated funding window under the Green Climate Fund (GCF), a fund established within the UNFCCC to deliver climate finance to developing nations. Roughly 20 percent of GCF projects include activities that could form elements of a potential loss and damage program. Such a programmatic approach could build on potential instruments, including risk-transfer schemes, catastrophe bonds, social protection schemes, and contingency finance. Although U.S. congressional appropriations supporting GCF funding are tenuous at best and at the mercy of political winds, a dedicated funding window can leverage lessons learned and help to more systematically address loss and damage activities.
It is not about guilt
As an even more far-reaching political response, wealthy nations could utilize the idea of a club structure — a type of coalition of the willing — to bring together multiple existing, bottom-up approaches to loss and damage. Germany employed this structure under its G7 presidency to drive forward ambitious mitigation action; a similar effort on loss and damage could include the Global Shield initiative, the Vulnerable 20 (V20) approach to a loss and damage fund, and U.S. programs for disaster risk response and catastrophe bonds.
The issue of loss and damage is not about guilt — it’s about action. If wealthy nations continue to keep their proverbial heads in the sand and refuse to acknowledge the justified calls for loss and damage action at COP27, their climate pledges will appear disingenuous and international trust will continue to erode — and more importantly, more lives and livelihoods will continue to be lost.
There is a path forward, and it’s time for the United States and European nations to take it.