While Failing to Gain Much Ground at COP 24, Finance for “Loss and Damage” Could Advance in 2019

While Failing to Gain Much Ground at COP 24, Finance for “Loss and Damage” Could Advance in 2019

Commentary

Developing countries achieved some small wins for loss and damage at COP24 in Katowice, but 2019 is when real advances on financing for loss and damage could be made. 

Guiuan woman stands outside of her makeshift shack in the aftermath of Super Typhoon Haiyan. The George Washington Carrier Strike Group supports the 3rd Marine Expeditionary Brigade to assist the Philippine government in Operation Damayan in response to the aftermath of Haiyan in the Republic of the Philippines – Creator: U.S. Navy photo by Mass Communication Specialist Seaman Liam Kennedy/RELEASED (via Defense Imagery Management Operations Center). Public Domain.

COP 24, this year’s global climate summit in Katowice, Poland, was all about agreeing on the rules to implement the Paris Agreement. In the mind of rich countries, and in the official rulebook to be negotiated, this did not formally include loss and damage. However, vulnerable countries did not allow themselves to be railroaded to ignore this crucial issue. To do so would have effectively rewritten the Paris Agreement, which includes three pillars: mitigation reducing emissions to prevent climate change; adaptation —  changing to respond to climate effects to moderate harm; and loss and damage dealing with the climate impacts that go beyond adaptation and cause harm

Pummelled with the increasing severity of climate impacts — stronger hurricanes and cyclones, worst droughts and floods — vulnerable countries, which are already paying the cost of loss and damage from climate change, in Katowice stood up to the rich, polluting countries by demanding action in support of their communities as a matter of climate justice. While they did not win all the battles, they forced rich countries to acknowledge loss and damage as an important issue that requires additional finance. 2019 will be a big year in working out how to deliver that finance, culminating with the review of the Warsaw International Mechanism for Loss and Damage under the international climate regime.

The drumbeat of loss and damage — both the reality of climate impacts being experienced by vulnerable communities, and the corresponding importance of it within the UNFCCC negotiations — have been on the rise for the last few years. In 2013, in the wake of Typhoon Haiyan, at the time the strongest typhoon ever recorded, the Warsaw International Mechanism for Loss and Damage (WIM) was agreed. Since then loss and damage has featured in the critical outcomes at nearly every annual climate summit (COP) thanks to strong collaborative advocacy uniting government representatives from vulnerable developing countries and civil society groups promoting human rights and climate justice.

COP24 was particularly important, as it was the year to agree to the Paris Agreement rulebook, and thus the guidelines to elaborate how countries are to implement their commitments. When the Paris Agreement was negotiated in 2015, loss and damage was included as a separate core element — enshrined in its own Article 8. This was an important win over the up-to-then treatment of the issue, where it had been subsumed as one of several elements “under,” or considered a part of, adaptation (which is Article 7 of the Paris Agreement). Thus, it was formally acknowledged in the Paris Agreement that loss and damage is occurring beyond countries’ ability to adapt to climate change impacts. This distinction is key as the fight over loss and damage in many ways comes down to finance: who will pay for these losses and damages. If it is “under” adaptation, as rich countries would like, then the finance they have agreed to provide for adaptation could also be seen as covering loss and damage. This would be inherently unfair as vulnerable countries suffering already from loss and damage have done vanishingly little to contribute to climate change and have the least resources to be able to deal with the impacts.

This injustice is compounded by another reality, which is that rich countries are already failing to live up to their promises to provide predictable and adequate finance for adaptation. The US$100 billion per year by 2020 agreed as a global collective finance goal in 2009 was promised to be delivered as “balanced” between mitigation and adaptation. Yet of the finance provided only US$23 billion was supporting adaptation in 2016 — and this amount includes loans at face value and projects with relatively little adaptation components. When these deceptive elements are taken into account, real adaptation finance comes in at less than US$10 billion a year. This stands as already woefully inadequate against expected annual needs for adaptation finance of US$140 to US$300 billion by 2030. And loss and damage costs have been estimated to be significantly higher, maybe even twice as high, than annual adaptation costs. Spreading an already inadequate level of finance even further is not the answer.

In fact, the costs of loss and damage are already biting in vulnerable countries and clearly overwhelming their capacities to cope. And, as was heard over and over again at the Suva Expert Dialogue on Loss and Damage, held in May at the UN climate talks in Bonn, insurance is not the solution. A report from the Heinrich Böll Stiftung North America showed that insurance typically provides roughly two percent of the cost of an extreme climate event; for instance when Hurricane Maria hit Dominica and caused US$1.37 billion in loss and damage insurance paid out just US$19.3 million. And when the 2015-16 extreme droughts in Malawi caused loss and damage of US$366 million, insurance paid out just US$8.1 million. The vast majority of the loss and damage was paid for by local communities and the country impacted. These examples clearly demonstrate that a new source of finance is required for loss and damage — over and above contributions and promises already made for adaptation.

So, given all of this, what was agreed at Katowice on loss and damage? While there were some small wins, loss and damage was the element of the Paris Agreement with the least outcome from the COP24 negotiations. Nevertheless, the Katowice Climate Package does at least retain an opening for further discussions and potential improvements.

  • In the Paris Agreement rules around transparency, countries agreed to include information on loss and damage in reporting their activities, but it’s less clear whether rich countries would have to report on loss and damage finance separate to adaptation in their new requirement to forecast climate finance every two years, which is their intended financial contributions under article 9.5 of the Paris Agreement.   
  • Looking further ahead, countries agreed to start negotiating in 2020 a new collective finance goal, which developing countries want to be based on real needs, to replace the contentious and purely politically motivated US$100 billion per year by 2020. The language agreed here leaves open the inclusion of loss and damage in this goal.
  • The supreme finance body under the Convention, the Standing Committee on Finance, was asked to start doing an assessment every four years of how much climate finance is needed for developing countries, a needs assessment that would logically have to include financing for loss and damage. The first of these assessments is to be done in time for the new finance goal discussions to start in 2020.
  • Even further ahead, the ‘global stocktake’ of the Paris Agreement is due to start at the end of 2021 or mid-2022 and run until 2023, with the goal of increasing the ambition of every country. This stocktake will include loss and damage in its considerations.

COP 24 also approved the report by the Executive Committee of the Warsaw International Mechanism for Loss and Damage (WIM), the body established in 2013 at the last Polish COP to address loss and damage, which is to be reviewed in 2019. This already scheduled review might be part of the reason why the issue did not fare better in Katowice. Vulnerable countries are calling for the WIM to be fully operationalized. It was established with the objective to enhance finance for loss and damage, but an objective review of its work to date would show no progress in this area, due to blocking from rich countries. Hence, 2019 will be a very big year to strengthen the WIM’s efforts, starting with submissions due on the 1 February, on the terms of reference for the review.

One of the key areas to push for in 2019 will be to ensure that the review of the WIM sets up a finance arm that has additional and innovative sources of finance plugged in that are fair and at the scale needed. One such proposal is the idea of a Climate Damages Tax, which would make the fossil fuel industry pay for the climate damage that its products cause. How this would work, and how the overall finance arm of the WIM might work, is contained in a new report from the Climate Damages Tax Coalition that was released at Katowice.

2019 offers the promise of making progress on the issue of loss and damage — which the people on the front line of climate impacts desperately need, but only if rich countries show compassion, recognize the need for climate justice and live up to the promises they have made in the past.

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