The Fund for Responding to Loss and Damage is ready to accept contributions after signing key documents yesterday, November 11th at the COP29 in Baku. Loss and damage due to the effects of climate change have been a critical issue in climate finance to find ways of providing critical and urgent support for those impacted by the devastation of climate change.
What Is the History of The Fund?
The issue of loss and damage has been a focus in UN climate negotiations for over 30 years, first proposed by Vanuatu in 1991 to address the financial impact of climate change on vulnerable countries. The concept gained traction in 2013 with the Warsaw International Mechanism, but funding was not secured until COP27 in 2022 when countries agreed to establish a dedicated loss and damage fund.
At COP28, the Fund for Responding to Loss and Damage (FRLD) was operationalized, hosted by the World Bank, with nearly $700 million in initial pledges. The Santiago Network on Loss and Damage (SNLD) was also activated, providing technical assistance to impacted countries. As COP29 approached, developing nations continued to seek expanded financial commitments to meet the projected $580 billion in climate-related damages by 2030.
Loss and damage have been contentious because developed countries fear that compensation could imply legal liability, opening the door to large-scale claims. To address this, the Paris Agreement included language to avoid liability for developed nations. At COP27 and COP28, further reassurances were added stating, “loss and damage funding is based on cooperation and does not entail liability or compensation,” allowing negotiations and the fund to proceed.
What This Means for Vulnerable Communities
“This progress enables us to turn pledges into actual support, with funding set to start flowing by 2025,” stated COP29 President Mukhtar Babayev, highlighting the impact on rebuilding homes, resettling communities, and protecting lives. He stressed the need for finalized contribution agreements and additional pledges to meet urgent climate needs.
Executive Director Ibrahima Cheikh Diong added, “Today showed the strength of global solidarity in advancing climate action. We must maintain this momentum to ensure timely assistance reaches those in need,” expressing hope for further progress at COP29.
The climate crisis has greatly impacted communities worldwide, and operationalizing this funding is a groundbreaking breakthrough. For Example, Palau is concerned that tuna migrates from 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.
Possible Sources of Funding for Addressing Loss and Damage
Sweden pledged 200M kr (approximately $19M) to the Fund, subject to government approval. This significant contribution brings the total pledged funding to more than $720M. The COP29 Presidency thanked Sweden for answering the call to action and continues to urge further pledges to the Fund to meet better the needs of communities on the frontlines of climate change.
Beyond the FRLD, developed countries propose diverse funding sources for loss and damage, including humanitarian aid, disaster risk management, insurance, and innovative options like levies on air travel, financial transaction taxes, and fossil fuel windfall taxes.
A coordinated approach is essential to address immediate and long-term needs, as shown by Pacific Island nations’ income loss due to warming seas. The FRLD could align various funding sources through multilateral banks, UN agencies, and the Santiago Network. Additionally, initiatives like the Climate Vulnerable Forum’s crowd-sourced fund and the G7’s Global Shield aim to enhance climate risk financing outside the UNFCCC framework.,
What Next
Climate impacts are already causing widespread disruptions and are only poised to worsen, even with ambitious action on emissions reductions and adaptation. With the Fund for Responding to Loss and Damage ready to accept funding, the need to execute solutions is more urgent than ever. Countries must meet their pledges to enable the fund to meet its mandate starting next year.
The event was attended by COP29 President Mukhtar Babayev, UN Climate Change Executive Secretary Simon Stiell, Executive Director of the Fund for Responding to Loss and Damage Ibrahima Cheikh Diong, Senior Managing Director of the World Bank Axel van Trotsenburg, Vice President of Development Finance of the World Bank Akihiko Nishio, and representatives of Parties and of the COP27 and COP28 Presidencies.
