Loss and damage still stuck in the mud
Support for financing loss and damage isn’t keeping pace with climate impacts in vulnerable countries.
Published on 21 November 2024 in
ISS Today
By
Dhesigen Naidoo
Research Associate, Climate Risk and Human Security, ISS Pretoria
Climate change is causing many development setbacks and creating a vicious cycle of risks for vulnerable countries. In 2022 alone, developing countries incurred US$109 billion in losses and damages. By 2030, they could require US$200 billion to US$400 billion annually.
These staggering gaps reveal that the global financial architecture is inaccessible to climate-vulnerable countries. Climate inflows to Africa comprise only 3% of worldwide finance and have focused predominantly on small-scale, fragmented projects in middle-income countries that typically exacerbate debt burdens.
The newly formed Loss and Damage Fund promises direct and rapid access that eliminates or reduces historical barriers and acknowledges communities, indigenous peoples and vulnerable groups as priority actors. For Africa, the fund is a test of whether the climate regime will extend or break historical injustices.
Despite the urgent need, countries at the 2024 United Nations Climate Change Conference (COP29) have not agreed on technical assistance or funding. Decisions on loss and damage were closed without resolution after the first week, and deferred to the June 2025 meeting in Bonn.
‘Loss and damage’ refers to slow and sudden climate impacts that cannot be averted through mitigation or minimised through adaptation due to ‘hard’ limits where adaptation is impossible, or ‘soft’ limits where options exist but are unavailable.
Loss refers to permanent economic and non-economic losses that cannot be reversed, like death, loss of culture, home, biodiversity, ecosystems or livelihoods. Damage refers to impacts that can be restored – e.g. property, infrastructure, agriculture, or disruptions to health, education or water.
For Africa, the Loss and Damage Fund is a test of whether the climate regime will extend or break historical injustices
After decades of advocacy by climate-vulnerable countries and civil society, 200 countries agreed to establish the fund at COP27. At COP28, operational details were hammered out, including hosting, a governing instrument and funding arrangements. The European Union and 18 countries pledged $US673 million. By COP29, the fund held $US702 million in pledges.
Some hoped that funds would be disbursed by COP29. Nevertheless, progress has been made, including finalising arrangements for a Financial Intermediary Fund hosted by the World Bank, selecting the Philippines as the host country, and appointing Ibrahima Cheikh Diong as Executive Director. Diong co-hosted a launch and pledge event on COP29’s first day, resulting in one pledge – Sweden’s $US19 million.
In addition to loss and damage funding, developing countries need technical assistance to understand and plan for climate disasters. But the full loss and damage bureaucracy is failing to keep pace.
At COP19, the Warsaw International Mechanism for Loss and Damage was established to address loss and damage in a comprehensive, integrated and coherent manner. At COP25, the mechanism’s second review led to the launch of the Santiago Network for averting, minimising and addressing loss and damage. This connects vulnerable countries with technical assistance providers, knowledge and resources.
Decisions on loss and damage were closed without resolution after the first week of COP29
The third review and joint annual report of the Warsaw Mechanism and Santiago Network should have happened at COP29. But both items ended without a conclusion and were deferred to June 2025. At these events, African countries and blocs such as the G77+China, African Group of Negotiators, and Least Developed Countries focused their interventions on the slow pace of loss and damage progress.
They emphasised the need for coherence and complementarity among the Warsaw Mechanism, Santiago Network and Loss and Damage Fund, which many countries struggle to understand and maximise. They also called for an annual loss and damage gap report.
Parties noted that Warsaw Mechanism technical assistance guides had been translated only into English. Similarly, the Santiago Network is not fully operational and has received only one request for support, from Vanuatu.
Discussions on loss and damage are coinciding with those on the larger New Collective Quantified Goal. For the first time since 2009, parties will negotiate a new global goal to replace the 15-year-old target of US$100 billion annually by 2020 to help developing countries mitigate and adapt to climate change. The Loss and Damage Fund could be included as a dedicated subgoal alongside mitigation and adaptation.
A successful COP29 outcome requires clear mechanisms for effective, timely delivery of climate finance
Little progress was made on the New Collective Quantified Goal in week one of COP29. At the opening of week two, UN Climate Change Executive Secretary Simon Stiell urged parties to move faster, saying the technical phase was over, and only political deliberations would follow.
The New Collective Quantified Goal’s structure, quantum and framework remain unknown, and countries are far apart on core issues such as whether to broaden the contributor base and include three distinct subgoals or one multilayered goal.
African countries are advocating for a US$1.3 trillion goal annually by 2030, including US$220 billion a year for least developed countries, and want to include loss and damage as a core channel. They have insisted that the text uphold the principles of equity and ‘common but differentiated responsibilities’, be a public finance goal, and include a burden-sharing agreement and transparency framework.
Most developed countries want to expand the contributor base to include nations whose economies have grown significantly since 1992, such as China and oil-producing countries. They envisage the New Collective Quantified Goal as a global investment target that includes private sector contributions, and object to including ‘new principles’ such as burden sharing or loss.
African countries are also focusing on financing quality. They want new and additional, predictable, adequate, grant-based funding with concessional terms that don’t deepen debt burdens. They are urging for scaling up foreign exchange risk instruments, debt forgiveness and local currency lending, and oppose non-concessional loans and export credits.
It is unclear whether COP29 will deliver progress on loss and damage. A successful outcome requires clear mechanisms for effective and timely delivery. African countries require rapid access and targeted strategies to deal with specific vulnerabilities. Hopefully, the rest of this week’s multiple consultations will deliver address the significant barriers.
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