What is Loss and Damage and why does it matter?

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One of the key sticking points in negotiations, and ultimately unresolved issues from the 26th UN Climate Change Conference (COP26) in Glasgow was the issue of payments for loss and damage.

Whilst loss and damage may sound like a dry term used in insurance contracts, finding a solution to this impasse has real and significant consequences for supporting the Global South to achieve the UN’s Sustainable Development Goals, for not locking emerging economies into fossil fuel dependency, and ultimately for global greenhouse gas (GHG) emissions reduction efforts.

Unsurprisingly, for a COP based in Egypt, the focus at COP27 is on the impacts of climate change in African countries, and loss and damage is once again at the forefront of negotiations, but what is it and why does it matter?

What does it mean?

The concentration of GHG emissions in the atmosphere, caused by human-induced activity, has already led to 1.2°C of warming and (in a worst case scenario) is predicted to reach 3.4°C. This is a long way from the Paris Agreement goal of limiting warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels.

The most recent UN Assessment Report found that:

  • Existing global warming is already causing dangerous and widespread loss and damage, leading to disruptions in nature as well as affecting the lives of billions of people, despite people’s efforts to adapt.
  • With future global warming, loss and damage increases and becomes increasingly difficult to avoid, while strongly concentrated amongst the poorest and most vulnerable populations.
  • Adaptation cannot prevent all losses and damages.
  • Particularly in vulnerable developing countries, existing international, national and sub-national approaches to address loss and damage are insufficient.

Therefore, loss and damage describes the serious and largely irreversible impacts that climate change is already causing around the world. This includes extreme weather events like the recent floods in Pakistan, as well as slower onset events such as sea level rise or glacial retreat

The economic impacts of rebuilding infrastructure due to flood damage, or the loss of crops due to drought can be quantified. However, placing a value on non-economic loss and damage can be problematic, for example trauma due to extreme weather, loss of property and displacement of people, loss of biodiversity, or damage to historic sites.  

At climate COPs, debate and negotiation around loss and damage includes a range of issues relating to historically big GHG emitters being held accountable, and paying reparations for loss and damage occurring in poorer regions, who have done the least to cause the problem. The UN states:

The world’s wealthiest 1 per cent emit more than twice the emissions of the poorest half combined. That is why developed nations must step up to make rapid and large-scale emission reduction and support developing countries as they build low-carbon economies and make adequate climate adaptation.

The United Kingdom sits 8th equal (alongside India, Japan and Canada) on the table of historically significant polluters (1850 – 2021) when emissions from fossil fuels, cement, land use and forestry are analysed. The United States, China and Russia lead, however these calculations do not take colonial rule like in India or Indonesia into account.

What are we doing about it?

The concept of loss and damage was introduced by the Alliance of Small Island States at the 1991 conference in Geneva. It was not seriously considered again until Warsaw’s COP19 in 2013, with the importance of “averting, minimizing and addressing loss and damage and the role of sustainable development in reducing the risk of loss and damage” finally enshrined in the Paris Agreement at COP21 in 2015.

At COP26 last year, a proposal made by 135 parties (including developing countries and China) for a formal loss and damage financial facility was rejected, with the UK siding with the EU and USA to block the proposal. As a compromise, the Glasgow Dialogue was established to discuss arrangements for funding activities to “avert, minimize and address loss and damage”.

Many believe that rich countries are “dragging their feet” on financing measures to address climate change, with calls to pay for loss and damage described by the London School of Economics as a “major red line for many of these wealthy nations”. This is due predominantly to concerns about framing discussions as compensation or reparations, which these nations say would lay them open to endless legal liability. When asked to justify why they did not accept the proposal on establishing a financing facility for loss and damage the EU stated that they:

and many other Parties could not accept a last-minute proposal […] to establish a new funding facility for Loss and Damage in Glasgow, on the assumption that Parties could work out the details on what it would do and who would fund it, later on.

Rather than accepting what could have been an empty symbolic gesture, the EU considers that it may better help affected communities by scaling up the work of institutions that they already turn to when facing impacts in the real world.

COP26 President, Alok Sharma MP has defended the UK’s actions and highlighted that the establishment of a “formal dialogue on loss and damage for the first time does demonstrate progress”, he has also stated that:

the UK already funds internationally relevant activities relating to loss and damage, including humanitarian and disaster response support.

And noted the UK’s commitment to doubling International Climate Finance to £11.6 billion between April 2021 and March 2026.

What is Scotland’s role?

During scrutiny of the most recent Climate Change Bill in the Scottish Parliament (now the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019), the then Cabinet Secretary for Environment, Climate Change and Land Reform Roseanna Cunningham recognised that “Scotland was one of the cradles of the industrial revolution”, and that:

[…] our sticky fingers are all over climate change, because right from the get-go we were beneficiaries of [industrialisation].

She went on to highlight that Scotland was one of the “first sub-state contributors to the UN climate justice fund and I know that the UN was very grateful for that, because it was able to use Scotland as an example”.

Over the course of COP26, Scotland’s First Minister announced £2m in climate finance for loss and damage, the first developed nation to do so. Whilst this sum is tiny in comparison to the trillions required, these announcements were widely considered to have “broken the taboo” around the issue, with Scotland’s contribution receiving global recognition, including from the UN General Secretary Antonio Guterres.

The Government of the Belgian region of Wallonia has followed suite with €2m, Denmark has recently committed to a $13m fund, as has New Zealand with a $12m fund.

Scotland’s first £2m of grant funding has been spent in a variety of ways, with priority for supporting non-economic loss and damage, as well as research, whilst liaising with local communities and partners.

At COP27, Scotland has committed to providing a further £5m of grant funding, with the First Minister stating that we don’t have to wait for a consensus decision on funding, and that:

Meaningful action on loss and damage is overdue. It is significantly overdue. And it is an issue now that goes to the heart of faith in the multilateral global process around climate change.

Scottish funding is based around four key principles, which were identified at a conference in Edinburgh in October 2022; namely:

  • Immediate funding because loss and damage is an urgent problem.
  • Financial support for loss and damage should be additional to funding for mitigation and adaptation.
  • Grant funding, not loan funding, as the Global South is already paying the cost of climate change.
  • Many different types of support will be needed to address loss and damage.

What happens now?

Discussions at COP27 are ongoing, and the US climate envoy John Kerry has recently said that his country was “totally supportive” of moves to address loss and damage, and “100% ready” to discuss the issue in detail.

However, the issue remains contentious. The recent launch of the Global Shield insurance initiative, which aims to help low-income and vulnerable countries to rebound in the event of climate change related catastrophes, has attracted criticism, with Action Aid International calling it a distraction, and a “political football being used to undermine the push for a real loss and damage financing facility”. 

Alasdair Reid, Senior Researcher – Energy, Climate Change and Land Reform

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