Failure to agree on Loss and Damage facility could risk progress at COP28

The fourth meeting of the Transitional Committee on Loss and Damage Fund ended without a clear consensus on operationalising the fund last week, exposing a deep trust deficit among rich and emerging economies over historic responsibility, climate reparations and making money available for compensation.

The committee, comprising 24 members from parties to UNFCCC and Paris Agreement, with 10 members from developed countries and 14 members from developing countries, has now decided to reconvene in Abu Dhabi from November 3 to 5 to try and resolve differences ahead of the key COP28 summit in December.

The collapse of the talks, which could snowball at COP28 if rich and emerging nations are unable to compromise, is particularly significant with an over 99% probability of 2023 ending up as the warmest year on record, according to the US’ National Centers for Environmental Information’s Global Annual Temperature Outlook and data through September.

Talks at the meeting, held from October 17 to 20 in Aswan, Egypt, prolonged till the early hours of October 21, but fell short of delivering the committee’s mandate of coming up with recommendations for the operationalization of the fund.

The Third World Network (TWN), which was tracking the Aswan meeting, said that developed countries held a rigid stance of three issues, the primary one being the location of the fund.

According to TWN, a non-profit international research and advocacy group, developed countries pushed for the fund to be hosted by the World Bank, a demand rejected by developing countries.

“Developing countries consistently rejected the push for the World Bank as the host of the Loss and Damage Fund (LDF) and demanded instead for a new stand-alone Fund, with an independent international legal personality, and an independent dedicated secretariat,” TWN said in a statement.

The two other sticking points that emerged were the sources of funding and financial inputs, and the system of allocation of resources, TWN said.

Developed countries rejected the foundational principle of common-but-differentiated responsibilities and respective capabilities (CBDR&RC) between developed and developing countries, and thus, their lead role in providing finance to developing countries as part of their financial obligations under the United Nations Framework Convention on Climate Change (UNFCCC) and its Paris Agreement.

The countries instead pushed for the phrase “countries in a position to do so” for contributing to the Fund.

They also resisted the reference to as least $100 billion a year by 2030 in terms of the scale of resources needed that were proposed by developing countries, TWN said.

The United States, supported by other developed countries, has been the lead proponent of the fund to be hosted by the World Bank as a Financial Intermediary Fund (FIF), whereby it could play different roles, such as trustee only; trustee and an implementing entity.

The US’s proposal has been to invite the WB Board to establish FIF with a dedicated and independent secretariat, and for the WB to make related arrangements. The US argues that placing the Fund in an existing institution would be quicker.

Following the collapse of the talks, COP28 president Sultan Al Jaber on October 22 said, “I welcome the decision of the Transitional Committee to continue discussion on the Loss and Damage Fund in Abu Dhabi, however it is essential that they find consensus and deliver clear recommendations ahead of COP28…”

Jaber called on the committee to deliver strong recommendations to the Fund can be activated and capitalised as soon as possible.

“To the Committee: the eyes of the world are on you to deliver clear, clean and strong recommendations ahead of COP28 to operationalise the Loss and Damage Fund and funding arrangements, so it can be activated and capitalized soon after. Billions of people, lives and livelihoods who are vulnerable to the effects of climate change depend upon the successful delivery of these recommendations,” he said in a statement.

But the logjam over the basic principles of Loss and Damage could jeopardise the talks at COP28, experts pointed out.

“During the previous Transitional Committee meeting in Aswan, Egypt there was limited time to discuss the draft text, which was only provided in the latter part of the meeting. Governments now face the challenge of proposing solutions to achieve consensus on several contentious issues. Developing countries have put forth reasonable demands regarding the scope, scale, and access to the Loss and Damage Fund. It is essential for developed countries to reconsider pushing the World Bank as the host and to agree on robust measures that ensure new, additional, and predictable finance to assist communities impacted by the devastating effects of climate change,” Harjeet Singh, head of global political strategy for Climate Action Network International, said.

Last year, the UN Climate Conference (COP27), saw polarised debates on responsibility and accountability among the global North and South. But the conference made history with a decision to create a Loss and Damage Fund which will provide support to developing countries in efforts to avert, minimise and address the adverse effects of climate crisis.