What is climate “loss and damage”?

Editor’s note: On November 20th delegates at COP27, the UN climate summit, agreed to set up a new “loss and damage” fund to help cover the costs of climate damage in vulnerable countries.

DENMARK’S GOVERNMENT recently pledged just over $13m to developing countries that have suffered damage from climate change. The issue of such payments, known as “loss and damage”, is likely to be prominent at COP27, the UN climate talks in November. Egypt, which is hosting the conference, has said it will prioritise compensation for developing countries. What is loss and damage and why is it so contentious?

Climate change causes costly damage, including from climate-related natural disasters, such as tropical cyclones, and more gradual changes, such as desertification and rising sea levels. Currently, because climate change is caused by greenhouse gases already in the atmosphere, rich industrialised countries are responsible for most of the emissions causing these phenomena. Poor countries often feel the effects first. Providing help after a hurricane or flood might sound like fairly standard foreign aid. But when recast as a matter of liability and compensation, rather than a gift, it becomes much more controversial. Computer models allow scientists to quantify the role that greenhouse-gas emissions play in a given disaster—and therefore the enormous sums that big emitters could be on the hook for.

Unsurprisingly, developed countries have pushed back against this reasoning since it emerged in the early 1990s, when the text of the UN Framework Convention on Climate Change was being drawn up. A group of island countries had proposed that an international insurance fund be created to compensate low-lying countries for the damage caused by rising sea-levels. The suggestion was not included in the final text, but the idea has persisted. Loss and damage is sometimes called the “third pillar” of climate politicking, after mitigation (tackling the root cause of the problem by reducing emissions) and adaptation (preparing for current and future impacts).

In 2015, at the talks that culminated in the adoption of the Paris agreement, developing countries again sought a strong clause on loss and damage financing. But they ended up with only a fudgy reference to the issue. Article 8 of the Paris agreement recognises “the importance of averting, minimising and addressing loss and damage”. Precisely how to do that was left for future discussions.

At COP26 in Glasgow last November, Scotland’s first minister, Nicola Sturgeon, promised £2m ($2.7m) as a one-off loss and damage payment, apparently hoping that other rich countries might (more generously) follow suit. They did not. But the pressure for them to do so is increasing. Last month ministers from a negotiating alliance of 46 countries known as the Least Developed Countries, called the creation of a financial mechanism for loss and damage a “fundamental priority” for COP27. At the UN General Assembly last week, secretary-general António Guterres suggested that windfall taxes on fossil fuel companies might provide the funding for one.

That seems extremely unlikely to happen. There is simply no enthusiasm for the issue among the countries expected to pay out. Some developing countries are tentatively seeking redress through international law. On September 22nd the UN Human Rights Committee ordered the Australian government to pay compensation to indigenous people living on the islands of the Torres Strait, which are being eroded by rising seas. Sophie Marjanac, a lawyer with ClientEarth, an NGO, who represented the islanders, said it was the first time such a payment had been ordered. The government seems sympathetic to the islanders’ plight. But whether that will translate into hard cash—let alone a costly acceptance of liability—remains to be seen. A global framework for loss and damage still looks like a distant prospect. ■