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: 

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