Loss and Damage
A deeper dive into the highest issue at COP27
As I noted in my last post, this yr’s conference of the parties to the climate treaties (COP27) became just about a single-issue conference, focused on adaptation and the associated needs for finance – particularly on the urgent need for financial assistance to support adaptation within the Global South, and the lamentable record of unfulfilled guarantees for climate finance. Even inside the broad area of adaptation, the COP mainly focused on the precise issue of “Loss and Damage” (L&D). The decision to determine a separate financial mechanism for L&D, agreed within the last hours of the conference, was the one notable achievement of COP27. On this post, I take a deeper dive into the problem of loss and damage – what it means, its history, the status of debates, and its significance.
L&D has a particular meaning in climate talks that will not be obvious to anyone not immersed in the method: harms attributable to climate change that usually are not avoided by adaptation. Given any particular trajectory of realized climate change (which after all depends upon how briskly emissions are cut), adaptation measures (e.g., more robust infrastructure, recent crop varieties) reduce the resultant harm to people and things they care about. But not all harms will, or can, be avoided through adaptation, particularly for fast or extreme changes. To the extent adaptation falls short – whether because effective adaptation actions aren’t available or because available adaptation actions aren’t taken – the remaining harms are called L&D.
Like all climate-change impacts, L&D can take diverse forms — economic losses or harms to human health and welfare, to environmental characteristics that individuals value, to social or cultural practices – mainly, any harm that matters to affected people and communities. Although L&D is conceptually distinct from adaptation – adaptation reduces realized harms from climate change, while L&D is the remaining residual harm after adaptation – in practice the excellence is blurry, attributable to uncertainty about how you can adapt effectively in each context, how well adaptation shall be done, and limits to feasible adaptation. Although residual damages after adaptation will occur worldwide, the term L&D conventionally refers to such losses and responses to them in developing countries.
L&D has long been present in climate debates, but movement toward concrete motion has been slow. Even before adoption of the 1992 Framework Convention, the Alliance of Small Island States (AOSIS) had proposed an “International Insurance Pool” to pay vulnerable countries based on observed sea level rise. The primary explicit use of the term L&D was within the 2007 Bali Motion Plan, in a bit on enhanced motion for adaptation. After several years of deadlock, parties established a piece program on L&D in 2012 (at COP17 in Durban), further formalized in 2013 because the Warsaw International Mechanism for Loss and Damage (WIM). Within the 2015 Paris Agreement, Article 8 acknowledged the importance of L&D and the accompanying decision 1/CP.21 prolonged the WIM mandate, yet Paragraph 51 of the identical decision stated that Article 8 provided no basis for climate-related liability or compensation. COP 25 established the Santiago Network to supply technical support related to L&D – again with no implementation or funding. Arguments for a separate L&D financial vehicle gained strength in Glasgow (COP26, 2021), but disagreement persevered until the last-minute agreement to determine one at the top of last month’s COP27. This does represent one other step within the direction of concrete motion, despite the fact that all matters of implementation and funding were deferred to future negotiations.
Why is L&D so contentious? Since L&D is in some sense just one other type of North-South finance, it raises familiar disagreements from long-standing debates over climate finance and general development assistance: How much shall be paid, to whom, for what purpose, in what form, from what source, with what conditions, and under what control? There are a few wrinkles that distinguish L&D from these other issues. First, what are the implications of making a separate recent vehicle for L&D: This raises the prominence of the subject and might motivate increases in support, at the fee of more bureaucratic complexity and potential confusion and redundancy between funding vehicles. Second, what is going to the brand new fund be spent on and the way will its scope be defined in practice? Designating a funding mechanism for adaptation, or for that matter for climate, implies certain boundaries for expenditures which can be conceptually clear, even when hard to implement cleanly in practice. But by assumption, L&D finance will not be directed to avoiding harms but to providing financial compensation for harms already incurred, so it’s not clear whether there’ll, or should, be limits on what it’s spent on. These are significant and novel challenges for L&D, but they don’t fundamentally distinguish it from other climate or development finance.
But there may be one other, more basic point of disagreement over L&D that distinguishes it strongly from other climate or development finance: what’s the essential understanding of what L&D payments are, and the explanation for them? There are two distinguished views on this matter: L&D may be considered compensation owed for harm attributable to past actions; or it may be a mechanism to insure shared risks. These two views have been present since early days of climate negotiations, but debate over them has grown increasingly heated since Paris. The stakes could possibly be very high.
If L&D is conceived as compensation owed for harms attributable to past actions, it’s analogized to tort liability. The harm-causing actions to which liability attaches are past emissions, ascribed either to nations or enterprises in proportion to their contribution to the current excess atmospheric burden of greenhouse gases. Assigning responsibility for these is a significant theme in ongoing suits in several jurisdictions attempting to hold fossil producers or emitters answerable for climate damages, but in L&D debates the responsible parties are generally assumed to be national governments. The high-income industrialized countries dominate this accounting based on their cumulative historical emissions since the economic revolution, despite the fact that developing countries have now surpassed industrialized countries in current emissions and can likely achieve this in cumulative emissions inside a few many years. Furthermore, the industrialized countries got wealthy on those emissions with low cost fossil fuels driving their economic growth, while the developing countries are each smaller contributors to current climate change and more vulnerable to impacts. They’re thus entitled to compensation for the resultant harms – past and present, and presumably also future, although shares of responsibility will shift over time with global patterns of current emissions.
There are a number of challenges to this framing of L&D, each conceptual and practical. Does the responsibility attach to the industrialized countries as state actors, or to the enterprises under their jurisdiction that were actually chargeable for past emissions? In effect, how valid is the analogy from claimed liability against fossil producers or emitters for climate damages under domestic legal systems? How far back in time will current and coming climate harms be deemed to have been sufficiently foreseeable to connect liability? How far into the longer term will such liability based on past emissions be prolonged – and the way can this conception of L&D account for changes in emissions shares over time, particularly the dominance of developing and middle-income countries in current emissions? On this regard, it’s price noting China’s statement at COP27 that it supports L&D funding, but as a developing country may have no responsibility to contribute. (Its statement referred back to the lists of nations in Annexes to the unique Framework Convention, which roughly captured the Developed/Developing divide because it stood in 1992).
At the same time as industrialized countries have moved toward cautious support for L&D finance, they’ve fiercely resisted this conception. They even required the language in Paragraph 51 stating that Article 8 doesn’t “involve or provide a basis for any liability of compensation” as a condition of approving Article 8. Their principal reason for this opposition is resisting the associated normative task of fault, together with the doubtless unlimited liability to compensate for future weather and climate-related harms which may follow.
Under the second alternative framing, L&D payments are analogized to not compensation for tort liability, but to an insurance system. Payments could be understood not as compensation for the implications of wrongful acts, but as payouts based on pooling uncertain risks, to those that experience realized harms. Several major practical differences follow from this framing. Payments could be contractually agreed quite than assessed based on an adjudication of responsibility and damages. Terms and conditions for payouts would thus be specified voluntarily prematurely, and their size limited by these negotiated terms. Funds would come from agreed advance contributions, analogous to payment of insurance premiums. Responsibility for these premium payments might be broadly shared, and might shift over time, whether based on changes in shares of cumulative emissions, development status, financial capability, vulnerability, or other measures. But nevertheless the payments are raised and distributed, they carry no attribution of fault.
As you may expect, the developing countries pressing for more attention to L&D have generally favored the liability model, while the industrialized countries – including those that belated yielded to pressure to support an L&D financial facility – strongly favor the insurance model. The insurance model also has limitations. For instance, payments don’t necessarily fully compensate harms. But it surely also has significant benefits, particularly the flexibleness of negotiated terms – including the distribution of responsibility for premium payments and the potential of mixing market-pricing arrangements with various levels of subsidy.
There are several existing models for an insurance-based L&D facility, in current regional pools that insure extreme weather events. Such systems exist within the Caribbean, Africa, Pacific Islands, and Southeast Asia, with variation in precise arrangements similar to what risks are covered, whether participants are states or private parties, payout levels and the source and level of subsidies. There’s also a facility, called InsuResilience, that integrates these systems and provides some extent of reinsurance.
A recent German proposal, called the Global Shield Against Climate Risks, would extend, strengthen, and link these systems with other financial programs for climate adaptation and disaster preparedness and response. Proposed as a significant initiative of Germany’s 2022 Presidency of the G-7, the Global Shield would aim to integrate multiple governmental, intergovernmental, and private-sector financial systems (insurance, loans, grants, designated reserves, etc.), along with preparedness plans and early warning systems, to deal with present gaps and supply more practical, accessible, and timely responses to severe weather and climate-related events. Germany introduced the proposal in March 2022, initially as a pilot partnership with 5 to 10 highly climate-vulnerable countries. The proposal was discussed by G7 development ministers and leaders, and supported n their communiques – the primary time the G7 has recognized the importance of L&D. Subsequent discussions in September between the G7 and the V-20 group of most vulnerable countries also generated broad support for the proposal, although with continuing differences over the necessity for a recent central facility and the power of such a broadly scoped facility to effectively goal L&D, in addition to long-standing concerns about governance and adequacy of economic resources.
Germany continued to advertise the Global Shield proposal at COP27, to mixed reviews. But debates over how you can implement and fund L&D ultimately took back seat to the essential decision whether or not to determine a L&D finance facility in any respect. Having decided to achieve this, Parties deferred all related decisions – what the brand new facility will do, how it should operate, and the way and by whom it should or not it’s funded – to future COPs.
So what happens now? From here on I’m speculating about future events, but listed here are a number of guesses:
- First, this decision doesn’t end the conflicts over L&D. The belated switch of the US and other industrialized countries to support a L&D facility was more a practical response to the perceived must salvage something from this COP than it was a deep change of heart to stronger commitments to compensating the present and future losses of developing countries to climate change. Those future negotiations about implementation and funding shall be slow and difficult, and it’s not even assured that there is not going to be back-sliding on the agreement to determine the separate facility.
- Second, between the 2 basic conceptions of L&D, the industrialized countries are more likely to stick strongly to accepting only the insurance framing. They’re unlikely to simply accept the ascription of blame and unlimited financial exposure implied by the liability and compensation model. For his or her part, the developing countries mainly need the cash, and are likely to simply accept the characterization as insurance if the payments are adequate and the responsibility for contributions appropriately distributed. It’s even possible that delegates may find some solution to finesse the language used to explain the initiative, to pursue some extent of compromise between the 2 conceptions. On this regard, recent proposals to call some or the entire funding “solidarity payments” appear to strike a pleasant balance and may need promise.
- In any case, it’s more urgent to get money flowing, in meaningful amounts, than to proceed fights over the terms of future obligations. I believe it is a point on which all parties are more likely to (eventually) agree, and the German Global Shield proposal is well crafted, flexible, and more likely to facilitate a considerable increase in resources — even when these remain smaller than total losses.
- More broadly, while it’s imperative to greatly increase flows of climate finance — regardless of how the connection between adaptation finance and L&D is characterised — these matters are only weakly linked to the actions needed to really reduce future climate risks. The necessity for concrete progress on rapidly cutting emissions, scaling up atmospheric removals, and developing understanding and capability for engineered climate interventions, stays acute. These are the activities that may reduce the extremity of future climate change to which adaptation efforts must adjust, or for which L&D payments must compensate. The longer these efforts remain weak, the more likely it’s that changes will exceed capability either to adapt or to compensate through L&D payments.
This post relies on work done within the Fall 2022 UCLA Emmett Institute’s Clinic on International Climate Change Law and Policy, with contributions by Veronika Bagi, Karen Meacham, Wietske Merison, and Melissa Rodrigues. I’m chargeable for any interpretations, opinions, or errors.
