COP28 summit approves 'loss and damage' fund to compensate vulnerable countries for climate impacts

The much awaited deal on the "loss and damage" fund has been approved officially at the COP28.

The fund has been long sought by developing countries ravaged by natural disasters caused by climate change.

This is the first decision that the countries agreed on to compensate developing nations for climate impacts at the climate summit. The World Bank will be the interim host of the fund for a period of four years.

All developing countries are eligible to directly access resources from the fund, with a minimum percentage allocation floor for least developed countries and small island developing states. For 30 years, small island states have advocated for a loss and damage fund. 

The establishment of the loss and damage fund, according to delegates and activists, is a big achievement for the COP28 leadership on the first day of the summit. 

The UAE is likely to view this as a big victory for the presidency, as the two-week conference begins amid debate over the presidency's legitimacy in running the negotiations.

The United Nation's Conference of the Parties (COP28) climate conference formally launched on Thursday and will continue till 12 December.

The loss and damage transitional committee reached an agreement on a set of suggestions for the fund after five meetings this year. This is despite differences between developing and wealthy countries on a variety of issues, including the World Bank's role as the fund's governing body and procedures such as direct access.

"We have delivered history today. It is the first time a decision has been delivered on Day 1 of any COP. This is evidence that we can deliver. COP28 can and will deliver," the UAE's COP28 President Sultan Al Jaber told delegates, while saying that his country was committing $100 million to the fund.

The European Union has pledged €250 million, the United Kingdom $40m, United States $17 million, Japan $10 million and £20m will come from other funding arrangements for loss and damage.

Sultan Al Jaber said, "Our task is not only about negotiating text or putting words on paper. It is about improving lives. It is about people. We want a safe and secure future."

It has been agreed that the fund should have "at least" $100bn a year in loss-and-damage funding by 2030. This is considered the "floor" (the minimum) the fund will require.

The developing countries say the actual needs are closer to $400bn per annum.

Loss and damage from climate change will cost about $1.5 trillion ($1,500 billion) in 2022, according to a study published this week by Dr James Rising at the University of Delaware. Countries in the Global South have lost an average of 8.3% of GDP due to the impacts of climate change. 

Harjeet Singh, head of global political strategy at Climate Action Network International told The Business Standard, "Amid the historic decision to operationalise the loss and damage fund within a year of its establishment, addressing underlying concerns becomes critical. 

"On one hand, rich countries have pushed for the World Bank to host this fund under the guise of ensuring a speedy response. Conversely, they have attempted to dilute their financial obligations and resisted defining a clear finance mobilisation scale."

He also said, "The absence of a defined replenishment cycle raises serious questions about the fund's long-term sustainability. Therefore, a robust system, particularly integrated with the global stocktake process and the new climate finance goal, is needed to ensure that COP28 results in a meaningful outcome."

"The responsibility now lies with affluent nations to meet their financial obligations in a manner proportionate to their role in the climate crisis, which has been primarily driven by decades of unrestrained fossil fuel consumption and a lack of adequate climate finance delivered to the Global South," added Harjeet Singh.

Ambassador Pa'olelei Luteru, chair of Alliance of Small Island States, said, "The work is far from over. After the gavel drops at COP28, we cannot rest until this fund is adequately financed and starts to actually alleviate the burden of vulnerable communities. 

"Success starts when the international community can properly support the victims of this climate crisis, with efficient, direct access to the finance they urgently need."

Farhana Yamin, lawyer and coordinator of Climate Justice and Just Transition Collaborative, said, "I hope we can make Saleem Huq, my dear friend and mentor for thirty years, who recently died and who had fought for this fund for decades, proud of COP28. 

"We must, of course, step up and maintain the pressure on this COP to deliver rapid cuts in greenhouse emissions in line with the 1.5 Celsius temperature set out in Paris."