Explained: What Is Loss and Damage?

Chennai city flooded after Cyclone Nivar in 2020.

(PhotoCourtesy: Adaleru Ramamoorthi)

• The term ‘Loss and Damage’ is the economic and non-economic impacts of climate change, including extreme events and slow onset events, in countries that are particularly vulnerable to the adverse effects of climate change.

• Industrialised countries have contributed an estimated 92% of excess historical emissions that responsible for the increasing global warming. But developing countries and small-island nations are paying the price, as extreme weather events cause economic and non-economic losses and damages.

• While India has highlighted that L&D finance will be a key negotiation point in COP27, its updated NDC submitted in August 2022 has no mention of L&D. The economic damage and losses in India from climate change is said to be around 1.8% of its GDP annually by 2050.

• Those advocating for a loss and damage finance facility (LDFF) believe that at the climate conference COP27, to be held this year in Egypt, it is important to foreground the discussions and establish a funding facility.

Ahead of the 27^th United Nations Conference of Parties (COP) to be held in Cairo, Egypt, in November 2022, there are growing demands for a Loss and Damage (L&D) Finance Facility under the United Nations Framework Convention on Climate Change (UNFCCC). Experts tag COP27 as the first climate summit in “the era of loss and damage.”

In 2022, over 119 record-breaking extreme weather events hit developing countries, resulting in billions of dollars of losses. Mongabay-India reported that there’s now an urgency to foreground Loss and Damage at the climate conference COP27.

What Is Loss and Damage?

The Intergovernmental Panel for Climate Change (IPCC) has two definitions for ‘loss and damage’.

• The term ‘losses and damages’ refers to the economic and non-economic impacts of climate change, including extreme and slow onset events, in developing countries that are particularly vulnerable to the adverse effects of climate change. It’s destructive, irreversible, and cannot be addressed by mitigation and adaptation measures.

• Loss and Damage (upper case), or L&D, is a “political debate under the United Nations Framework Convention on Climate Change (UNFCCC) following the establishment of the Warsaw Mechanism on L&D in 2013” to discuss losses and damages.

“Loss and damage occurs when the frequency and intensity of existing climate impacts increases to such an extent that countries and communities are not equipped to handle it. Their capacity to prepare, cope, recover, recoup or rebuild is no longer there."

Ritu Bharadwaj, Principal Researcher at the International Institute for Environment and Development (IIED)

For example, Odisha in eastern India frequently witnesses cyclones from the Bay of Bengal, where sea surface temperatures have risen and are likely to increase by 2.0°C -3.5°C by 2100. The state faces sea level rise, intense cyclones, ocean acidification, storm surges, and so on.

This cascades into impacts on, among other things, monsoon activity, losses in fisheries and agriculture, damages to coastal infrastructure.

With improved disaster preparedness, there has been a dramatic reduction in the loss of life. Yet, Odisha continues to suffer from climate impacts, reducing human and ecosystems’ capacity to recover.

These impacts do not occur in isolation, Bharadwaj said. Other socioeconomic factors like poverty, low literacy, social marginalisation increase the risk of survival, food insecurity and livelihood loss.

A bus stand in Odisha damaged by cyclone Fani in 2019. The state on India’s east coast is vulnerable to sea level rise, intense cyclones, ocean acidification, storm surges, and so on.

(Photo: Government of Odisha/Wikimedia Commons.)

“Often, we only account for the direct loss of lives, livelihoods and infrastructure from climate events. But we also need to account for the secondary and tertiary impacts that these events create, when communities are not provided support.”

Ritu Bharadwaj, Principal Researcher at the International Institute for Environment and Development (IIED)

In her work, she’s found that when livelihoods based on agriculture and fishery are destroyed in Kendrapara in Odisha, people without a social safety net undertake distress migration and end up in situations like trafficking.

Working in inhuman and exploitative conditions creates tertiary impacts for these people, who often suffer from frustration and mental health issues, along with other health and poor sanitation issues. Some of these impacts are incalculable.

“Vulnerable populations are hardly able to recover from one impact and they are hit with another and then another,” Bharadwaj explained. “So, they can’t keep on rebuilding their lives. This is what loss and damage is, and millions of people – as well their ecosystems – are suffering this for no fault of theirs.”

The World Bank estimates that between 32 and 132 million people could fall into extreme poverty due to climate change, depending on the scenarios.

The world is 1.1 degrees Celsius warmer than what it was before industrialisation, and locally, many places have breached that limit too. The IPCC’s sixth assessment report (AR6) noted that losses and damages from climate change will increase rapidly with further warming, in many cases producing risks that people and nature will not be able to adapt to.

Even with the current combined pledges of 193 Parties under the Paris Agreement, the world is on track for over 2.5 degrees Celsius of warming. Near-term actions that limit global warming to 1.5 degrees Celsius, can reduce losses and damages but not eliminate them.

Where Does the Term ‘L&D’ Come From?

L&D was brought up as a demand in 1991 by the island country of Vanuatu, which was representing the Alliance of Small Island States (AOSIS). Thirty-one years and 26 COPs later, this demand has not been realised.

Since then, about 189 million people have suffered the effects of extreme weather-related events in developing countries, every year, according to The Cost of Delay, a report published in October 2022 by the climate advocacy group L&D Collaboration (L&DC).

At the COP26 in Glasgow, the G7, a coalition of 134 developing countries, and China, proposed the Loss and Damage Finance Facility (LDFF), a dedicated stream of finance to specifically address losses and damages.

Zoha Shawoo, associate scientist at Stockholm Environment Institute, said that LDFF could be a separate fund similar to the Green Climate Fund, likely sit within the UNFCCC, and be responsible for channelling loss and damage finance to nations.

Who Will Fund the LDFF?

The vulnerable countries are asking the industrialised world to finance the LDFF. But the industrialised countries have not initiated L&D discussions within the formal framework of the COP.

“At the COP26, the U.S., Canada and Australia stalled the negotiations, demanding evidence on what the amount of finance needed is and on what the measures are for tackling loss and damage.”

Ritu Bharadwaj, Principal Researcher at the International Institute for Environment and Development (IIED)

Rich, industrialised countries have contributed an estimated 92% of excess historical emissions, causing an increase in global temperatures. But it is the developing and vulnerable countries that are hit the hardest by climate change impacts.

In the first half of 2022, developing countries suffered $26.2 billion economic losses even as just six fossil fuel companies – the biggest emitters accelerating climate change impacts – reported a profit of $95 billion, the latest L&DC report showed.

Climate justice is at the heart of L&D. From deflecting blame to shrugging off responsibility and liability, industrialised countries have deployed several delaying tactics to keep LDFF from becoming a reality, L&DC noted.

Losses and damages from climate change will increase rapidly with further warming, in many cases producing risks that people and nature will not be able to adapt to.

(Photo: John Englart/Flickr.)

Is the Funding Similar to Liability and Compensation?

Fears over strict liability and compensation is a key reason many developed countries have blocked the progress on L&D. Distributing finance on the basis of strict liability would be politically infeasible within the UNFCCC and would also impose burdens on vulnerable countries to prove liability, a brief co-authored by Shawoo noted.

“Instead, it might be more effective to deliver loss and damage finance on the basis of solidarity, whilst also accounting for historical responsibility and the polluter pays principle,” Shawoo told Mongabay-India.

“In the UNFCCC process, the developing countries have agreed not to pursue “liability and compensation” (let alone “reparations”). So, the demand for finance to help the victims of losses and damages caused by human-induced climate change, is based on a sense of solidarity and empathy now.”

Saleemul Huq, Director, International Centre for Climate Change And Development (ICCCAD)

Why Is L&D Different From Humanitarian Aid and Adaptation Funds?

The existing climate finance architecture is not suited to addressing loss and damage, Shawoo said.

While adaptation and mitigation funds help avert or minimise losses, there is no clear mechanism to deal with the third component: addressing loss and damage once a climate catastrophe hits, experts at the World Resource Institute noted.

And humanitarian assistance, Shawoo explained, is geared towards emergency responses within four to six weeks of a disaster. It doesn’t fund longer-term rehabilitation, planned relocation or rebuilding livelihoods following sudden onset events and slow-onset events, or non-economic loss and damage.

Since 2017, humanitarian response has managed to raise only half of what is required to fund appeals after extreme weather events. The shortfall is estimated at between $28 billion and $33 billion.

A woman searching for her utensils in debris after her house collapsed during Cyclone Aila. Many developed countries have blocked the progress on L&D due to fears over strict liability and compensation.

(Photo: India Water Portal/Flickr.)

A separate mechanism offers the opportunity to design a fund that is fit for purpose and aligned with core principles of accessibility and recipient ownership, Shawoo said.

In September 2022, Denmark became the first nation to allocate $13 million towards L&D. Last week, the European Parliament called for LDFF to be agreed on at COP27 and to secure $100 billion in international climate finance.

What Will LDFF Look Like? Who Are the Recipients of the L&D Finance?

The LDFF will ensure a comprehensive response to climate impacts by coordinating, overseeing and providing accountability for the finance and support, over and above climate finance.

L&DC notes that “it could be designed to both rapidly distribute finance for emergency relief (based on parametric triggers) and also to support longer-term actions such as rebuilding or relocation programmes.”

Countries need to do locally led needs assessments to work with communities to determine how much finance would be needed and what specific activities would need to be funded, Shawoo explained.

Experts have proposed this as one of the functions of the Santiago Network for L&D, established under the aforementioned Warsaw Mechanism on L&D.

Bharadwaj said countries need to demand for funding for loss and damage in their Nationally Determined Contributions (NDCs), a formal mechanism within UNFCCC for quantifying global targets and level of finance and support needed to achieve climate ambition and manage climate impacts.

"While India has highlighted that L&D finance will be a key negotiation point in COP27, its updated NDC submitted in August 2022 has no mention of L&D," she said. The economic damage and losses in India from climate change is said to be around 1.8% of its GDP annually by 2050.

“But have they even listed out any measure for loss and damage? No,” Bharadwaj said. “Unless India explicitly identifies these issues in its NDCs, they may not be formally recognised. NDCs must clearly articulate the needs, providing strong arguments for finance they need.”

She added that revised NDCs submitted before COP27 are an important means for developing countries to present evidence to influence negotiations. This can help in making a strong case for L&D.

Shawoo’s latest research, scheduled to be published ahead of COP27, shows it would be rather than a top-down approach, it would be effective to have countries submit their requests for finance with limited conditionalities imposed on how it is utilised.

Why finance to address Loss and Damage must be agreed at COP27.

(Photo: The Cost of Delay)

“Finance that is distributed as grants, particularly small grants that are directly targeted towards and reach grassroots organisations and local communities, are likely to be more effective–especially since they would give local communities greater autonomy and decision-making power over how the finance is utilised,” she said.

Huq said operational details and financial architecture can be negotiated once the LDFF is established. Developing countries, activists and negotiators want an agreement to establish LDFF at the COP27. And they are hoping the industrialised countries don’t block it during negotiations.

(This article was originally published at Mongabay. It has been re-published here with permission.)