Is Cop29 a waste of time? Not if rich countries commit to paying for climate damage in developing countries

“An ambitious new climate finance target” should be every country’s priority at the latest round of international climate negotiations in Baku, Azerbaijan. That is according to Simon Stiell, who is leading the United Nations process to negotiate an agreement to limit global warming.

The discussions are stuck at the beginning of the second week. The aim is to raise money to drive a global shift to clean energy and ensure that those bearing the brunt of escalating climate disasters are resilient enough to respond.

Finding this funding is more difficult in the wake of the US elections. President-elect Donald Trump has promised to pull his country, the world’s richest and largest historical emitter of greenhouse gases, (again) from the Paris Agreement and possibly completely from international climate negotiations.

Political bedfellow Javier Milei, the far-right president of Argentina, has done just that withdrawn his country’s delegates from the talks.

Trump has also suggested he will repeal the Inflation Reduction Act of 2022, which expanded tax credits for investments in renewable energy and green technology in the US and mobilized private financing for climate action amounting to billions of dollars.

Neglecting these efforts will fuel increasing climate disasters, such as the recent floods in Valencia, Spain. How the global community acts to compensate the countries least able to bear these consequences is more important than ever.

Why does it matter?

The stakes are enormous for low- and middle-income countries. Extreme weather, together with slower impacts such as sea level rise or soil degradation, can plunge developing countries into a spiral of debt, forcing them to pay for reconstruction over and over again.

This diverts money from measures to reduce carbon emissions, but also from healthcare, education and other public services. Many of the economic gains that poor countries have made in recent decades undone by climate change.

A downed power line surrounded by palm trees.

Climate change is a heavy burden for poor developing countries.
EPA-EFE/Ernesto Mastrascusa

The loss and damage caused by the warming climate has loomed over negotiations between rich and poor countries for more than a decade. Last year’s Cop28 summit in Dubai opened with the announcement that a new fund would be established. Direct compensation for the disproportionate losses and damage suffered by the poorest countries is not on the table, but what the fund will finance has yet to be decided.

After seven years of observing the politics of climate loss and damage in the UN negotiations, it has become clear to me that the most difficult issues are being sidelined. Important decisions are transferred to poorly funded agencies while the committees are stubbornly divided developing countries and developed countries.

With the Loss and Damages Fund left unanswered as to where the funding will come from, whether it will be even remotely sufficient to address rising costs and who will have access to it.

This is not to say that no progress has been made. Rich countries have pledged to do so $700 million to the Cop28 fund. The fund’s board has chosen the Philippines, a major country on the front lines of climate change, as its host. This will give the board legal personality to enter into partnerships, including with the World Bank, which will host the secretariat responsible for implementing the board’s decisions.

How many? And how will this be paid for?

Even conservative estimates indicate that the total cost of loss and damage could be between 2 and 5 euros 150 and 300 billion dollars (£119-238 billion) per year by 2030.

The question depends somewhat on how loss and damage needs are defined. Developed countries want to focus on projects that address losses due to slow-onset hazards, for example, and avoid the topic of compensation. Developing countries on the board of the fund have said that at least $100 billion per year in aid should be provided by 2030, and while they avoid the word ‘compensation’, they emphasize the importance of public finance – that is, money raised by governments, rather than private financing sector.

Meanwhile, developed countries prefer investments from individuals and companies to fill the gap. But the business case for funding programs to address climate losses – museums to commemorate cultural heritage lost under rising sea levels, or guidance for children dealing with the pain of hurricanes – looks very different from, say, investing in renewable energy.

A certain amount of imagination is required. Civil society organizations have pushed for innovative forms of climate finance, such as a tax on flights or a levy on shipping.

Most public climate finance models provide subsidies for specific projects. This is not so helpful when dealing with loss and damage, which urgently requires funds for repairs and remediation.

A march of women with banners and placards.

A march in favor of climate finance for developing countries in Karachi, Pakistan.
EPA-EFE/Rehan Khan

Senegalese and American banker Ibrahima Cheik Diong was recently appointed executive director of the fund. He led an international agency that bundled insurance for African countries after extreme weather.

Developed countries have long preferred insurance, as opposed to government-funded subsidies, to finance losses and damages. Some observers worry that Diong’s background will boost the fund accordingly. But as climate impacts escalate, some assets, such as homes and businesses in vulnerable coastal cities or farming villages, may no longer be insurable.

Slow but relatively certain changes, such as sea level rise, are also not suitable for insurance-based financing. And then there are the losses related to cultural heritage, physical and mental health and the disappearance of livelihoods, which cannot be compensated by insurance.

Since the money was pledged for the fund in Dubai has not yet been deliveredand the sources, types and means of accessing the fund have yet to be determined, the fate of the fund remains ambiguous.

Next year’s conference marks thirty years of negotiations on climate change. No wonder people wonder if this process works. The loss and damage fund is a microcosm of the broader negotiations. Their success or failure would be an indication of whether these summits are, or ever were, fit for purpose.


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