COP27: Who is Paying For Climate Change Loss And Damage?

Eric Njuguna is angry. The 20-year-old environmental activist is witnessing the devastating changes a warming planet is bringing to Kenya. People are losing their livelihoods, their homes and many, even their lives, to the worst drought the region has seen in the last 40 years. 

"The impacts make us thirsty. It makes us hungry for food. I feel like the anger doesn't come from the knowledge of it, but from the impact of it. And knowing that we did the least to cause this, but that our countries, our communities are bearing the brunt of it," Njuguna told DW from Kenya's capital Nairobi.

Kenya is among those countries in the Global South hardest hit by extreme weather linked to a warming planet. But it is by no means the only one. Drought is bringing millions of people in the Horn of Africa to the brink of starvation, while ever more destructive storms are hitting the Philippines. And this summer, some 1,500 people lost their lives when extreme monsoons flooded large swathes of Pakistan. 

"There is what we can adapt to, but with the increasing severity of the climate crisis, there is what we cannot adapt to," said Njuguna. "This needs to be paid for."

Calls are growing louder for wealthier nations to provide compensation in the form of a dedicated fund to cover the costs of severe damage and losses.

What is loss and damage?

The concept of loss and damage was first introduced by Alliance of Small Island States at international climate negotiations in Geneva in 1991 with the proposal of an insurance scheme against rising sea levels with costs to be covered by industrialized countries. But it was not seriously considered again until 2013 at the COP 19 climate conference in Warsaw, Poland. 

The Warsaw International Mechanism for Loss and Damage was created with the aim of enhancing knowledge of the issue and finding ways to approach it. There has been little movement since then.

At last year's UN climate conference in the Scottish city of Glasgow, negotiators rejected a proposal made by members of the G77 group of over a hundred developing countries and China for a formal loss and damage financial facility. Instead, the Glasgow Dialogue was established to enable further discussion over funding in an "open, inclusive and non-prescriptive manner".

But Zoha Shawoo, an associate scientist researching loss and damage at the Stockholm Environment Institute, says some countries have criticised the dialogue as "an excuse to delay further action."

Rich countries are dragging their feet on financing

While historically, developed countries bear the most responsibility for emissions leading to global temperature rise — between 1751 and 2017, the United States, the EU and the UK were responsible for 47% of cumulative carbon dioxide emissions compared to just 6% from in the entire African and South American continents — they have been slow to make financial contributions to ease the impact on the most affected countries.

In 2010, Global North nations agreed to pledge $100 billion (€101 billion) annually by 2020 to help developing countries adapt to the impacts of climate change, for example, by providing farmers with drought-resistant crops or paying for better flood defences.

But according to the Organization for Economic Cooperation and Development (OECD), which tracks funding, in 2020 wealthy countries pledged just over $83 billion. That was a 4% increase on the previous year, but still falls short of the agreed amount.

Marlene Achoki, global policy co-lead on climate justice at NGO CARE International says rich countries that created the problem should "provide the finance that is needed” because inadequate funding has a destabilizing effect on countries that are already struggling. 

"Instead of addressing issues of poverty and education, they have to take steps to address the issues of climate change," Achoki said. "They have to look for resources, finances to try to build resilience of communities.” 

Losses are not only financial

Fifty-five of the 58 nations included in the Vulnerable 20, a group of developing nations, which includes Kenya, Philippines and Colombia, suffered climate-related economic losses of over half a trillion dollars in the first two decades of this century, according to a report put together by the Loss and Damage Collaboration, a global group of researchers, activists, lawyers and decision makers.

But there have also been non-economic losses, including the disappearance of areas of cultural and traditional significance.

"If you have an area where you perform religious or cultural rituals on a beach or something and that gets flooded and removed, that has a loss associated with it," Shawoo said.  "A lot of the communities that are most vulnerable to climate changes are also Indigenous, local or tribal communities and they are facing the majority of those losses." 

What's the sticking point?

Though developed nations broadly acknowledge the need to address loss and damage, some argue for financing through existing climate funds, insurance schemes and humanitarian aid. The European Union, for example, said in a briefing that it was "open to discussing L&D (loss and damage) as a topic but hesitant about creating a dedicated L&D fund."

"I think there's a fear that if they open up that space of acknowledging the need for additional finance, for loss and damage, it will open them up to liability and compensation claims, which would have a massive cost associated with them," said Shawoo.

If a bridge collapsed because of a flood, or houses were destroyed as a result of a typhoon in a developing country, for example, there is the fear among developed nations that "they would then be held liable to pay for it," she added.

Some countries have decided to go their own way. Earlier this year, Denmark pledged over $13 million in loss and damage compensation to developing countries including Sahel region in northwestern Africa and at the COP 26 climate conference last year Scotland also committed at least $1 million. 

Action by individual nations is a good way to meet the urgency of the losses faced by developing nations, said Shawoo. "It's an easy way for countries to show they are doing something without committing to something that would hold them accountable, like a finance facility."

But with temperatures set to rise and wealthy nations failing to significantly reduce carbon dioxide emissions, the impacts of climate change will continue to affect the poorest communities.

"The window for action is closing. The impacts we are facing with 1.2 degrees of warming are pretty severe and still no serious action is in sight," said Njuguna.

Edited by Tamsin Walker.