COP28 adopted a Loss & Damage fund but when will countries get compensation?

On the first day of COP28, the most unprecedented decision was made, adapting the fund for "Loss and Damage" (L&D); a number of countries have promised contributions for the L&D fund. 

Though it appears to be a win that the decision was made to operationalize the fund, some negotiators are concerned that rich countries may cut adaptation funds by replacing the L&D fund. 

This is because since 9 December 2023 only $159 billion was pledged to the adaptation fund against its target of $300 billion though it was highly demanded with additional financing as grants.

Moreover, many issues remain unanswered, which may delay access to the fund for underdeveloped countries for several years. 

The crucial question is when the countries in need will have access to the fund. 

The affluent countries pushed for the World Bank to be the host, claiming that it would be much faster, but the fact is that the World Bank will take at least a year to modify its policy, so it will only be confirmed by COP29.

It is also unclear how developing nations would now receive the money pledged at COP28, which is estimated to be roughly $700 million. 

The questions are when, how and on what basis the vulnerable countries will be able to access the fund. 

Which countries will be compensated, and for how much? Experts and negotiators need time to form a board which will be governed and supervised by an independent secretariat.

However, developing countries opposed the push to have the World Bank act as the middleman; as it gives loans and not grants. 

The negotiators from developing countries have revealed that under significant pressure from developed countries, an agreement was formed to have the World Bank act as an intermediary for four years, with the possibility of the tenure increasing at a later date. 

Activists also opposed the World Bank's new position, calling it ridiculous that they will simultaneously fund fossil fuels while addressing loss and damage from climate change.

Is it a loan or grant?

The fund which is aimed to assist developing countries that are particularly vulnerable to the adverse effects of climate change in responding to economic and non-economic loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events is both grant and loan. 

The World Bank will work as financial intermediary for the fund for an interim period of four years.

The text of the negotiations says it is grant and also highly concessional loans. 

The fund may deploy a range of additional financial instruments such as guarantees, direct budget support and policy-based finance, equity, insurance mechanisms, risk-sharing mechanisms, pre-arranged finance, performance-based programmes and other financial products, as appropriate.

However, civil society is going to put pressure on it to provide predominantly grants, as it is a matter of justice for the countries ravaged by natural disasters caused by climate change.

However, it is yet to be decided how much of the fund will be loans and how much grants. 

It is expected that the L&D board will be set up next year and will work on a number of policies as well as prepare a resources allocation framework that will also determine how money is going to be channelled to the relevant countries. 

On the resources allocation framework and vulnerable countries are going to be prioritised, there is also a mention of a minimum floor for the least developed countries and small island states.

Harjeet Singh, Head of Global Political Strategy, Climate Action Network International said "When people are losing their homes in Bangladesh and Malawi, they can't be expected take loan to rebuild because it is not their fault rich countries and corporations have caused the problems, they must be forced to give the money so that people in developing countries can recover from these climate impacts."

Moreover, the negotiators said that developed countries may show the adaptation fund as the L&D fund.

Mirza Shawkat Ali, director of climate change and international convention at the Department of Environment, Bangladesh, "So far it seems to us they are trying to divert adaptation funds as L&D funds, though we demanded it as new and additional. After six months or one year we will be able to understand comparing developed countries' earlier support."

 How will the country avail the money and what are the gaps?

The criteria on how the countries will receive funds are based on priorities that are still being developed. 

Experts said that there is no doubt that small island countries are most vulnerable, but countries like Guatemala, Columbia and Pakistan also need support. 

The negotiators and the experts said that ranges of criteria are being looked into to set the standard for the affected countries to receive money from the fund. 

The criterias are going to look at how many people are affected by a particular disaster, percentage of GDP, number of people displaced and also the capacity of a country to recover from these impacts. 

They said that some of these criteria must be looked into to make sure that countries can get adequate support to recover.

Harjeet Singh said that it is estimated that developing and small island countries will be needing at least $290-580 billion dollars per year. 

So definitely hundreds of billions of dollars annually.

He also added that the important thing is to also to recognize that this scale of money is needed for addressing climate loss and damage, but it also depends on how soon fossil fuels can be phased out while also providing support for the adaptation process.

He added that "We are seeing that the adaptation discussion is not going well. There has not been sufficient agreement on how to develop a roadmap for doubling adaptation finance which itself is not going to be enough; the new adaptation gap report highlighted that there will be a need for ten to eighteen times more money. So far all these issues are important and that will determine how much money we will require in the future for addressing fossil fuels." 

Harjeet Singh also said that the Loss and Damage finance fight is not only limited to the money that is received on loss and damage. 

It's important to recognize that more fossil fuels equal more loss and damage and less adaptation also means more Loss and Damage. 

A loss and damage fund is not enough to be the sole focus, there needs to be a push to keep worldwide temperatures below the 1.5-degree Celsius warming threshold. 

What Bangladesh needs to do to avail this fund?

Bangladesh has already submitted National Adaptation Plans (NAP) and expects $230 billion dollars for implementing the NAPs. 

Developing countries are demanding doubling adaptation finance as was committed earlier. 

There is agreement for the "New Collective Quantified Goal" on climate finance issues on how much money will be needed for the countries to adapt to it and on the process of assessment.

It is saying that to assess this finance there is a lack of information at the ground level.

According to experts, a broader perspective was formed that Bangladesh is one of the most vulnerable countries, and they require money but lack sufficient scientific studies, research, facts, and figures on loss and damages caused by climate change. 

So, different bodies are making different kinds of assessment on the exact requirement of funding.

"We said that we were vulnerable but did not properly identify where our vulnerability was. We always expose our historical disasters. To avail long-term funds from Loss and Damage Bangladesh needs to quantify all the non-economic loss and damage, needs to establish cases, programs," said Md Shamsuddoha, Chief Executive, Center for Participatory Research and Development.

He said Bangladesh has made its National Adaptation Plan (NAP) which is fully risk focused but the major crisis governance was not addressed at the NAP. 

Bangladesh needs to form a good governance to face all the action and activities due to climate change.  

Mirza Shawkat Ali, director of climate change and international convention at the Department of Environment, Bangladesh, said "We don't know what needs to be done for accessing the fund because it has not been decided yet. I need to be worked out. How they will evaluate and how they will release the fund. It will take couple of years"

"Our understanding is that we have NAPs and NDC, we have risk assessment and do national communications. We are saying to assess the need of finance as much as possible with the existing documents to make an idea of the figure," added Mirza Shawkat.

Experts said that Bangladesh must invest in science and research in order to establish scientific facts and data on the effects of climate change.

"To access these funds we should have some studies and framework. The good news is that before coming to COP28 around a month ago we took on a project to measure our Loss and Damage. We are approaching such types of projects to institutionalise our impacts," added Mirza Shawkat.