What Is "Loss and Damage" from Climate Change? 8 Key Questions, Answered

The planet has already warmed by approximately 1.1 degrees C (2 degrees F) due to human-induced climate change. Millions of people today are facing the real-life consequences of higher temperatures, rising seas, fiercer storms and unpredictable rainfall.

Rapidly reducing greenhouse gas emissions is essential to limit temperature rise and secure a safer future for us all. So is making major investments to protect communities from severe impacts that will continue to worsen.

Yet, collective efforts to curb emissions and adapt are currently not enough to tackle the speed and scale of climate impacts — meaning that some losses and damages from climate change are inevitable. How countries handle these losses and damages has been a key issue at UN climate negotiations and beyond.

Here, we provide an explainer on the concept of “loss and damage” and what’s needed to address it.

1) What Is Loss and Damage?

“Loss and damage” is a general term used in UN climate negotiations to refer to the consequences of climate change that go beyond what people can adapt to; for example, the loss of coastal heritage sites due to rising sea levels or the loss of homes and lives during extreme floods. This also includes situations where adaptation options exist, but a community doesn’t have the resources to access or utilize them.

To date, there is no official definition of loss and damage under the UN.

Loss and damage is harming and will continue to harm vulnerable communities the most, meaning that addressing the issue is an urgent matter of climate justice. But the subject has historically been fraught with contention both inside and outside of UN climate negotiations. In particular, countries have struggled to reach agreement on how much money developed countries should supply to address loss and damage in developing nations, which have contributed the least to the climate crisis but are often hit hardest by its impacts.

2) What Counts as Loss and Damage?

Loss and damage can result from extreme weather events like cyclones, droughts and heatwaves, as well as from slow-onset changes such as sea level rise, desertification, glacial retreat, land degradation, ocean acidification and salinization. In some cases, damages may permanently alter places; for example, rising seas encroaching on low-lying islands, or drought shrinking water supplies and turning once-productive farmland into barren land.

Damages from the effects of climate change can be further divided into two categories — economic losses and non-economic losses — though there is overlap between the two.

Economic losses and damages are those affecting resources, goods and services that are commonly traded in markets, such as damage to critical infrastructure and property or supply chain disruptions. This can play out at an international or national scale as well as locally, such as impacts on individual farmers or communities.

In coastal Bangladesh, for example, salt farming is a major source of employment. Yet in recent years, frequent cyclones, tidal surges and heavy rainfall have hampered salt production, eroding the country’s self-sufficiency and forcing it to import salt to manage the market shortfall.

Non-economic losses and damages can be some of the most devastating — such as the incalculable toll of losing family members, the disappearance of cultures and ways of living, or the trauma of being forced to migrate from ancestral homes.

Take the communities in Kosrae, Micronesia, who have lost burial grounds due to coastal erosion caused by sea level rise. Likewise, the loss of sea ice in the Arctic has affected the cultural identity and hunting practices among Inuit communities. While harder to quantify and monetize, non-economic losses have severe and detrimental effects on communities’ well-being.

3) What Is the Difference Between Mitigation, Adaptation and Addressing Loss and Damage?

Under the Paris Agreement on climate change, countries recognized the importance of “averting, minimizing and addressing” loss and damage. Loss and damage can be “averted” and “minimized” by curbing greenhouse gas emissions (mitigation) and by taking preemptive action to protect communities from the consequences of climate change (adaptation). Climate adaptation measures include protecting communities from sea level rise by helping them move to higher ground, preparing for extreme weather disasters by investing in early warning systems, protecting food supplies, switching to drought-resistant crops and much more.

Addressing loss and damage is the crucial third pillar of climate action: providing support to people and communities after they have experienced climate-related impacts.

Loss and damage is linked to adaptation and mitigation because it happens when efforts to reduce emissions are not ambitious enough and when adaptation efforts are unsuccessful or impossible to implement. The second installment of the IPCC’s 6th Assessment Report, published in February 2022, acknowledges that as the magnitude of climate change increases, so does the likelihood of exceeding adaptation limits. It differentiates between “soft” limits — when adaptation options exist but communities don’t have the financial resources needed to pursue them — and “hard” limits, where “there are no reasonable prospects for avoiding intolerable risks.” These limits are particularly acute in vulnerable communities that lack the resources needed to implement effective adaptation options.

Coral reefs offer a good example of where adaptation is likely to reach its limits. The IPCC found that 70%-90% of tropical coral reefs will die by mid-century even if temperature rise is limited to 1.5 degrees C (2.7 degrees F), with nearly total loss under 2 degrees C (3.6 degrees F) of warming. This will lead to irreversible losses of biodiversity and have a major impact on coastal communities that eat and sell fish that live along reefs.

While further research is needed to fully understand the limits of climate adaptation, it’s clear that losses and damage are already happening, and many communities lack the resources to deal with them. Climate plans and policies should account for loss and damage alongside mitigation and adaptation.

4) What’s the History of Loss and Damage in UN Climate Negotiations?

The issue of loss and damage has been a live — and contentious — one in UN climate negotiations for over three decades.

When the United Nations Framework Convention on Climate Change (UNFCCC) was first being drafted in 1991, the island nation of Vanuatu (on behalf of the Alliance of Small Island States) proposed creating an insurance scheme to provide financial resources to countries impacted by sea level rise. Under its proposal, each country would contribute funds based on their relative contribution to global emissions and their share of the global gross national product. However, the proposal was rejected, and the issue of loss and damage was not mentioned when the text of the Framework Convention was adopted in 1992.

Loss and damage first appeared in a negotiated outcome of the UN climate talks in 2007 as part of the Bali Action Plan. Yet it wasn’t until 2013 that the issue gained real traction in these negotiations, when parties formed the Warsaw International Mechanism on Loss and Damage to avert, minimize and address loss and damage. The Warsaw Mechanism was mandated to share knowledge, strengthen dialogues among stakeholders, and mobilize expertise to enhance action and support for loss and damage. But neither the Warsaw Mechanism nor any other established mechanism delivered funding to help countries manage loss and damage.

In 2015, developing nations successfully pressed to include an article on loss and damage (Article 8) in the Paris Agreement. However, finance related to loss and damage was ignored. In fact, developed countries secured language in the accompanying COP decision explicitly stating that loss and damage “does not involve or provide a basis for any liability or compensation.”

A large coalition of climate-vulnerable countries advocated at COP26 in 2021 for creating a new finance facility or fund dedicated to loss and damage. But developed nations again rejected their proposal. Instead, countries established a two-year Glasgow Dialogue to discuss possible arrangements for loss and damage funding. They also agreed to fund the Santiago Network on Loss and Damage (SNLD), which aims to provide developing countries with technical assistance to address loss and damage. Some EU member states pledging more than €30 million ($32 million) towards the network.

At COP27, countries agreed for the first time to put loss and damage funding arrangements on the formal agenda. This culminated in a historic decision to establish a “loss and damage fund,” which governments aimed to operationalize the following year. Countries also resolved key questions around the SNLD’s governance structures, paving the way for its full operationalization in 2023.

On day one of COP28, after months of intense and contentious negotiations, countries set the loss and damage fund in motion and agreed on critical details, like selecting the World Bank as its host. Over the following two weeks, countries pledged almost $700 million to start filling the fund. The Santiago Network on Loss and Damage was also operationalized, with the UN Office of Disaster Risk Reduction and UN Office for Project Services as its hosts and the U.S. pledging an additional $2.5 million.

This was a landmark moment for loss and damage negotiations — but the work is far from done.

In the lead-up to COP29 in 2024, countries will be looking for confirmation that the World Bank can meet the conditions required to host the loss and damage fund. Some of these conditions include the ability to institute firewalls to ensure the independence and integrity of the fund’s board and secretariat; allowing countries direct access to resources from the fund; and ensuring universal access to all parties of the Paris Agreement, even if they are not members of the World Bank. Countries will also be watching the Board of the Fund for institutional arrangements that ensure the fund can deliver resources at the speed and scale necessary.

Finally, developed nations must put forth much more finance to fill the loss and damage fund. While the $700 million pledged at COP28 is a start, vulnerable countries may face as much as $580 billion in climate-related damages by 2030.

5) Is Loss and Damage an Issue of Liability and Compensation?

One reason loss and damage has been so contentious historically is due to developed countries’ concerns that compensating for losses and damages caused by adverse climate impacts may be construed as an admission of legal liability, triggering litigation and compensation claims on a major scale. As such, developed countries fought to include language in the Paris Agreement to prevent them from being legally on the hook to provide compensation.

This concern was addressed in loss and damage funding discussions at COP27 and in the final decision at COP28, which states that “funding arrangements, including a fund, for responding to loss and damage are based on cooperation and facilitation and do not involve liability or compensation.” This provided the assurance that developed countries were looking for to continue negotiations and set the loss and damage fund in motion.

6) What Are Some Possible Sources of Funding for Addressing Loss and Damage?

Some developed countries point to humanitarian aid, disaster-risk management and insurance as sources of finance for loss and damage. Other, more innovative sources have also been proposed, such as levies on air travel and shipping, financial transactions taxes, taxes on windfall profits of fossil fuel companies, and other non-public sources. But these can’t function separately. To address the scale and scope of the problem, they all need to be part of the “mosaic of solutions.”

For example, in the wake of devastating floods in 2022, Pakistan needed short-term humanitarian assistance as well as long-term support for rebuilding. Meanwhile, Palau is concerned that tuna are migrating out of its fishing areas as the ocean warms. Without the ability to fish for tuna, some Pacific Island nations could lose income averaging 37% of government revenue. While humanitarian aid would not be poised nor mandated to address this problem, other forms of finance could.

This underscores the need for broader funding arrangements, including the dedicated loss and damage fund, which can coordinate and align various types of funding from both within and outside of the UNFCCC to adequately address loss and damage. The new fund will facilitate coordination with a wide variety of funding arrangements through multilateral development banks, relevant UN agencies, multilateral climate funds, the International Office of Migration, the Santiago Network and others.

Outside of the UNFCCC, there have been additional important developments for financing loss and damage. These include the Climate Vulnerable Forum and Vulnerable Twenty (V20) Group’s crowd-sourced loss and damage fund and the G7 and V20’s Global Shield Against Climate Risks initiative, which aims to enhance existing financial structures on climate risk and loss and damage finance.

7) What Activities Could Finance for Loss and Damage Support?

Action to address loss and damage could span a range of activities and should be shaped by the communities experiencing climate change impacts. Examples include weather-indexed crop insurance for farmers or proactively setting aside funds to rebuild critical infrastructure when disaster strikes.

It could also entail providing immediate humanitarian assistance after an extreme weather event; offering relief and rehabilitation to victims through provision of basic amenities; enabling social protection systems to provide emergency cash transfers to the poor; and enhancing microcredit institutions to provide financing for livelihood restoration.

Loss and damage funding could also help people rebuild when their homes are destroyed. For example, while early warning systems in Bangladesh have helped radically reduce fatalities from extreme weather events, people leave the storm shelters to find their homes and livelihoods destroyed, and have thus unquestionably experienced loss and damage.

Finally, when necessary, funding for loss and damage can assist with migration and relocation of people who are permanently displaced, and/or help diversify skills if their original livelihoods are no longer available.

8) What Needs to Happen Next to Address Loss and Damage?

Climate impacts are already causing widespread disruptions and are only poised to worsen, even with ambitious action on emissions reductions and adaptation. The need for loss and damage solutions — most notably, finance to enable them — is more urgent than ever before.

With the loss and damage fund now in motion, the international community will have to work diligently to finalize the details of new funding arrangements and to mobilize finance at scale. Developing countries and communities on the front lines of climate impacts are counting on them.

Cover photo: Harko, 12 years old, walks across the land with her younger brother in search of water during a drought in Ethiopia. Photo by UNICEF Ethiopia/2016/Ayene