COP27 agreement on Loss & Damage Fund key for poor nations

Devil in details : Developed countries must keep commitment


November 20, 2022

/ By / Paris

COP27 agreement on Loss & Damage Fund key for poor nations

COP27 ends with an agreement, but will rich countries keep their word? (Photo: UNFCCC)

After opposing any deal on creating at loss and damage fund at COP27, the rich nations finally gave in at the last minute. While it is a landmark agreement in uniting the world in the battle against climate change, the real challenge, as usual, lies in its implementation. The rich countries are already far off meeting their 2009 commitment to finance the developing nations to extent of USD 100 billion. Loss and damage fund risks being as meaningless unless the rich nations are bound down legally and actual funds flow to poor countries within a tight deadline and schedule.

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At the end, it seemed like an encore. COP27, the climate change summit at Sharm El Sheikh, the Egyptian Red Sea resort town, was supposed to end on November 18. However, right from the opening plenary, the meeting was wracked by a deep divide between the rich and the poor countries over numerous issues, notably the rich countries keeping their commitment to finance poor countries adequately to deal with climate change that has been wrought upon the world, largely due to a highly disproportionate share of carbon emissions, historical and current, that the rich countries are responsible for.

As a result, November 18 came and went but the meeting could not conclude as the meeting was under a microscope as the entire world was watching the proceedings. Finally in the early hours of Sunday, the rich countries gave in, having failed for the past two weeks to divide the developing world, in order to prevent any agreement on loss and damage fund, a new funding mechanism that the poor countries have been pushing for, as part of the commitments made by the rich nations at numerous climate change meetings, notably COP15 in Paris in 2015.

Creating a specific fund for loss and damage does indeed mark an important point of progress, with the issue added to the official agenda and adopted for the first time at COP27. The dedicated fund will aim to assist developing countries in responding to loss and damage caused by extreme weather events, now frequent recurrence all over the world, but with the poor countries most at risk.

At Sharm El Sheikh, the governments also agreed to establish a ‘transitional committee’ to make recommendations on how to operationalise both the new funding arrangements and the fund at COP28 next year, to be held in Dubai. The first meeting of the transitional committee is expected to take place before the end of March 2023.

Details get murkier

On the face of it, the agreement is indeed landmark as finally the rich countries are deemed to be responsible for climate change and have agreed, in principle, to finance the poor countries in dealing with the impact of climate change and also to curb their own emissions.

But the agreement has a weakness and one which could prove to be fatal, when it comes to the implementation of the agreement. There is no word in the agreement, or at least the parts released to the press today, about the quantum of funding, who will pay how much and neither is any detail available on how the fund would be dispersed and also what happens when the rich nations renege on their promises.

There is adequate evidence on how the rich nations have failed to keep their commitments on all of the above issues, trying to fudge the deals and also come up with weird calculations and of course simply deny their commitment. Take the agreement reached in 2009 in Copenhagen COP. At that meeting the rich nations had agreed to pay a rising amount of money to the poor countries, with a benchmark of USD 100 billion a year by 2020.

Thirteen years later, the developed world’s commitments lie in shambles. The rich nations have adopted funny maths to show any kind of money being sent from rich to poor nations – be it for health, housing or industry or education as climate finance and also added whatever loans companies or banks in rich nations may have made to companies in poor countries for any purpose as climate finance.

This defeats the entire purpose of climate finance. But even taking this fake calculations, they are still far away from their committed figure. According to the estimates of the OECD, a club of rich nations, total ‘climate finance’ flows from rich to poor nations amounted to USD 68 billion.

The fudged maths and the low numbers were raised at the Sharm El Sheikh meeting, too as the final statement expresses serious concern that the goal of developed countries to mobilise jointly USD 100 billion per year by 2020 has not yet been met, and the developed countries were urged to meet the goal, and multilateral development banks and international financial institutions called on to mobilise climate finance.

Emissions cuts lag behind

For over a decade, there have been enough reports warning that the world was failing to do enough to cut emissions. At current rate, even if the targets of cutting emissions by 2030 are met, the world is headed to a 2.4°C rise in temperature, a catastrophic scenario, as anything above 1.5°C is likely accelerate the negative impacts of climate change.

Thus, going into COP27, the expectations were of large-scale upping of targets by large emitters, not just in absolute numbers, but also those in terms of per capita emissions, as rich countries consume far more of carbon budget per person than any developing country.

For instance, India may be the third largest emitter in absolute numbers, but in terms of per capita emissions, it is amongst the lowest in the world, about an eighth of the per capita emissions of most rich nations. Similarly, Estonia may be 83rd largest emitter, but in per capita it is about nine times Indian emissions. This is not climate justice and hence the rich countries have the burden to cut their emissions more aggressively, which they have failed.

As with previous climate change meetings, the outcome of COP27 is a  mixed bag as almost all of the tough decisions have been kicked down the road for next COP in a year in Dubai or, perhaps as it is more likely forever.



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