Loss and Damage Fund Approved at COP28 Summit

December 1, 2023

GS Paper III Environment and Ecology

Context: COP28 participants reached a groundbreaking consensus to operationalize a Loss and Damage Fund, a crucial step towards addressing the devastating consequences of climate change for vulnerable countries.

Loss and Damage Fund: Key Highlights

Loss and Damage Fund was proposed during COP-27 in Sharm El-Sheikh, Egypt in 2022.
The fund will operate through an independent secretariat located at the World Bank and has received commitments of at least $450 million from various countries. However, a significantly larger sum is necessary to fulfill its intended purpose.

Also Read: COP28 Climate Summit

Genesis of Loss and Damage Fund:

COP 19, 2013	At COP 19 in Warsaw, representatives of member countries formally agreed to establish the loss and damage fund.
COP 25, 2019	Santiago Network for loss and damage fund was set up, but the developed countries didn’t commit any funds
COP 26, 2021	Glasgow Dialogue on finance for loss and damage fund was established to continue discussions over the next three years on the fund.
COP 27, 2022	At COP 27, the member states agreed to set up the loss and damage fund and a Transitional Committee (TC) to figure out how the new funding mechanisms under the fund would operate.
COP 28, 2023	Member nations reached an agreement to activate a Loss and Damage fund aimed at compensating countries already grappling with the impacts of climate change.

What is the Loss and Damage Fund?

- Aims: The loss and damage fund provides support to less affluent nations (such as Small Island Nations like Tonga, Fiji) that have contributed minimally to climate change but are disproportionately vulnerable to severe climate-related incidents.
- Based on the Polluters Pay Principle.”
  - This principle holds accountable entities responsible for environmental damage, making them liable for expenses related to remedial measures and compensating those affected by their actions.
- Interim Host and Operational Period: The World Bank will serve as the “interim host” for the fund for a duration of four years, operating in line with the principles of the UNFCCC and the Paris Agreement.

Eligibility and Contributions:

- All developing nations can apply for funds, and every country has been “invited” to contribute voluntarily.
- A specific allocation has been set aside for Least Developed Countries and Small Island Developing States.

What are the challenges associated with Operationalising the Loss and Damage Fund?

Hosting at the World Bank: The World Bank imposes high overhead fees for fund maintenance, prompting developing countries to seek an independent secretariat and a dedicated funding mechanism.
Developed Country Contributions: Developed nations, notably the U.S., have shown hesitancy in committing as primary donors to the fund, raising concerns over funding sources.
Common But Differentiated Responsibilities (CBDR) Principle: Developed nations have opposed references to CBDR, equity, and liability within the fund’s draft, diluting its original purpose and essence.

Source: The Hindu