Is the Loss and Damage Fund Becoming an Empty Promise?

When the Loss and Damage Fund was created last year, it was hailed as a triumph for climate justice. But it might turn out to be just the opposite, as it not only fails to deliver the support developing countries need to cope with loss and damage, but also provides an excuse not to include such support in new climate-finance goals.

WASHINGTON, DC – So far this year, floods, heat waves, droughts, storms, and wildfires have led to thousands of deaths, threatened the health and livelihoods of millions of people, and caused tens of billions of dollars in damage – at least $41 billion by June. In September and October, just two hurricanes – Helene and Milton – cost the United States alone over $100 billion. Recent research suggests that climate damage could cost the global economy between $19 trillion and $59 trillion per year by 2049. The message is clear: mobilizing large amounts of climate finance today is essential to safeguard our future.

Of course, not everyone bears the same responsibility for the climate crisis. The fundamental injustice of climate change is that the countries that have contributed the least to the problem often suffer its worst effects. In recognition of this, the 2015 Paris climate agreement stipulated that developed economies must provide financial resources to support developing countries’ mitigation and adaption efforts.

As it stands, however, the world’s high-income countries are dedicating only about $100 billion annually in public finance to support climate efforts in developing economies. Even this relatively low number is a recent development: though the commitment was made in 2009, it was fulfilled for the first time only in 2022 – two years after the target date. Making matters worse, much of the support has come in the form of loans, including non-concessional financing.

The good news is that at this year’s United Nations Climate Change Conference (COP29), now taking place in Baku, Azerbaijan, countries are supposed to agree on an updated spending target: the New Collective Quantified Goal on climate finance (NCQG). Unfortunately, however, despite nearly three years of technical and political deliberations – involving thousands of pages of formal submissions, academic studies, and advocacy papers – the necessary scale of the NCQG remains highly contested. At this point, it is far from clear that world leaders will agree on an NCQG at all, let alone a sufficiently ambitious target.

It would be difficult to overstate the consequences of failure. The NCQG will play a significant role in shaping the next round of climate-action plans – so-called nationally determined contributions (NDCs) – which countries will submit early next year, per the Paris agreement. If the NCQG is insufficient, countries will be unable to do what is necessary to close the global emissions and adaptation gaps. Just a subset of the existing developing countries’ NDCs will cost an estimated $5-6.8 trillion by 2030.

But mitigation and adaptation are only part of the challenge. Developing economies also face escalating loss and damage – not only from extreme weather, but also from slow-onset events, such as melting glaciers, desertification, and sea-level rise – which could cost them $447-894 billion per year by 2030. Failure to agree on a sufficiently robust NCQG, including finance to address loss and damage, would weaken an international climate regime that is supposed to emphasize solidarity and fairness.

That seems not to matter to developed countries: led by the United States, they have explicitly rejected any obligation to compensate developing countries for climate-change-related loss and damage. And the stage is set for them to get away with shirking their responsibility. Though loss and damage was given its own article in the Paris agreement (separate from adaptation), it was intentionally left out of the financing commitments under the pact. Moreover, rich countries can claim that this issue is already covered by the designated Loss and Damage Fund (FRLD) that was created last year at COP28.

But this claim is disingenuous, and a closer look at the FRLD’s terms reveals why: all financial contributions are to be completely voluntary. This funding is “based on cooperation and facilitation,” and does “not involve liability or compensation.”

Furthermore, the US obliterated the distinction between rich and poor countries as the basis for contributions to the Fund – with implications for collective action under the international climate regime and the Paris agreement. Unlike, say, the 2010 Green Climate Fund charter, the FRLD text never names developed countries as the ones providing the financial support.

It should not be surprising, then, that one year in, FRLD pledges total just $702 million, with few additional pledges expected in Baku (so far, there have been only three). This includes a paltry $17.5 million commitment from the US – the country that has emitted by far the most greenhouse gases historically. That figure is orders of magnitude smaller than America’s “fair share” contribution, which according to one calculation, would amount to $340 billion annually (for both adaptation and loss-and-damage support).

So, the FRLD, hailed as a triumph for climate justice a year ago, might turn out to be a Pyrrhic victory, not only failing to deliver the support developing economies need to cope with climate-related loss and damage, but also providing an excuse not to include such support in the NCQG. It could even set the stage for other kinds of climate-finance contributions to be made voluntary for the foreseeable future.

Developing-country governments and civil-society representatives at COP29 must maintain pressure on rich countries to deliver a meaningful NCQG obliging developed countries to provide climate finance, even if it invites others to do so voluntarily. Developed-country governments will be judged harshly in the court of public opinion unless they rethink their callous approach to climate-finance negotiations and deliver adequate resources to developing countries suffering from a climate crisis that they did not cause.

Cover photo: Resul Rehimov/Anadolu via Getty Images