Finding funds

General Studies Paper -3

Context:

A healthy loss and damage (L&D) fund, a three-decade-old demand, is a fundamental expression of climate justice.

Introduction

• Loss and damage refer to the negative consequences that arise from the unavoidable risks of climate change, like rising sea levels, prolonged heatwaves, desertification, the acidification of the sea and extreme events, such as bushfires, species extinction and crop failures.
• The L&D fund is a corpus of money and technologies that will be replenished by developed countries and used by the rest to respond to the more unavoidable effects of climate change.
• On the first day of the COP28 climate talks under way in the United Arab Emirates (UAE), representatives of the member-states agreed to operationalise the L&D fund.

Steadfast efforts of the G-77 bloc

• The announcement was dearly won at the end of the COP27 talks in Egypt last year, member-states agreed to launch such a fund, thanks largely to the steadfast efforts of the G-77 bloc of countries plus China, led by Pakistan. Four meetings of the Transitional Committee (TC) were to follow to determine how its money would be disbursed.

Advantages of Loss and Damage Fund

• In addition to financial losses, loss and damage also refers to human casualties, ecosystem and cultural heritage degradation, and ecosystem degradation. As a result, the fund will fully compensate for all losses brought on by climate change.
• The fund guarantees climate justice to the most developing countries and small island nations’ vulnerable communities, who have paid the price without even causing environmental pollution.
• Climate finance has till now focused only on mitigation and adaptation. Two-third of the finance has gone into climate change mitigation and one third has gone into adaptation. The LDF draws the focus of climate finance towards reparations for the loss and damage.

Major issues

• It will be hosted by the World Bank for an interim period of four years and will be overseen by an independent secretariat. The Bank is expected to charge a significant overhead fee.
• While some countries have committed amounts to the fund — from $10 million by Japan to $100 million each by Germany and the UAE — whether they will be periodically replenished is not clear.
• The committed amounts are also insufficient, totalling $450 million (for now) against an actual demand of several billion dollars. This shortfall, though it is premature to deem it so, comes against the backdrop of developed countries missing their 2020 deadline to mobilise a promised $100 billion in climate finance and managing to deliver only $89.6 billion in 2021.
• The contributions are voluntary even as every country has been invited to contribute.
• Finally, the World Bank will have to meet some conditions on managing the fund, including a degree of transparency it has not brooked so far, and submit a report to the Parties to the Paris Agreement. If its stewardship is determined to be unsuitable, the fund can ‘exit’ the World Bank.

Ensuring effectiveness

• It is important that a Loss and Damage Fund tackles the gaps that current climate finance institutions such as the Green Climate Fund do not fill.
• Combined adaptation and mitigation finance flows in 2020 fell at least US$17 billion short of the US$100 billion pledged to developing countries.
• The Transitional Committee will provide recommendations for the set up and operations of the fund. The Committee will also recommend which countries should receive funding and who should be paying into the fund. All that needs to be decided upon.
• But for the fund to be effective, the root cause of climate change must be tackled – and that involves reducing emissions. Unless emissions are drastically reduced, more and more countries will face the devastating effects of climate change. The world urgently needs to find more resources for mitigation, adaptation and loss and damage so that climate change will not erode humanity’s chances to deliver on the Sustainable Development Goals.

Way forward

• The L&D fund’s contents need to be easily accessible to those who need it most, in timely fashion, sans pedantic bureaucratic hurdles, and in sufficient quantities. As things stand, there is little guarantee that any of these requirements will be met. While the L&D fund is finally online, a lot more needs to be done.