Launching the Loss and Damage Fund at COP28

December 1, 2023

On the opening day of COP28 in Dubai, a significant development took place with the official launch of the Loss and Damage Fund. This fund aims to provide financial assistance to vulnerable countries grappling with the harsh impacts of climate change. The initial funding stands at an estimated $300 million, with contributions from host UAE and Germany ($100 million each), the UK (£60 million), the US ($24.5 million), and Japan ($10 million).

Understanding the Loss and Damage Fund

The Loss and Damage Fund is a global financial package designed to support the rescue and rehabilitation efforts of countries experiencing the cascading effects of climate change. It represents compensation from wealthy nations, whose industrial activities have contributed to global warming, to less affluent nations facing the severe consequences of rising sea levels, floods, droughts, and cyclones. The fund addresses the impacts on lives, livelihoods, biodiversity, cultural traditions, and identities.

Economic and Non-Economic Loss and Damage

Loss and damage can be categorized as economic or non-economic. Economic loss and damage involve tangible negative impacts with a monetary value, such as the costs of rebuilding damaged infrastructure or the loss of revenue from destroyed crops. Non-economic loss and damage, on the other hand, include intangible negative impacts, like trauma from natural disasters, community displacement, or biodiversity loss.

Industrialization and Climate Damage

The Industrial Era, beginning in 1850, significantly altered Earth’s natural mechanisms for greenhouse gas production and absorption. The US, the UK, and the EU are collectively responsible for 50% of all emissions, increasing to 65% when considering Russia, Canada, Japan, and Australia. In contrast, India’s historical emissions contribute only 3%. China, the largest emitter in the last 15 years, is responsible for 30% of global emissions annually.

Assessing Global Loss and Damage

Research indicates that 55 vulnerable countries have suffered a combined $525 billion in climate crisis-related losses over the past 20 years. This figure is projected to rise to $580 billion annually by 2030. The impact of global warming is disproportionately affecting vulnerable communities, with the socially and financially weaker sections of developing nations experiencing the most significant losses and damages.

Operation of the Fund

Initially overseen by the World Bank, the Loss and Damage Fund’s funding sources include rich nations like the US, the UK, and the EU, along with contributions from some developing countries. While the scale and replenishment cycle of the fund remain unclear, the urgent need is for several trillion dollars. Notably, developing nations, initially hesitant about World Bank management, have now accepted this arrangement.

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