After a year of debate, developing countries made significant concessions in their eagerness to pass recommendations that now go to COP28.
With COP28 just weeks away, the committee tasked with making recommendations on the design and operationalisation of the Loss and Damage Fund has reached a conclusion in the nick of time. On 4 November, the negotiators held an extraordinary meeting to agree on key sticking points, including who should pay into the fund and where the fund will be located.
They finally agreed that the fund would be temporarily located within the World Bank, and that no countries would be compelled to contribute. Instead, developed countries are "urged" to support activities to address loss and damage, while developing countries are "encouraged" to do so. The US quibbled over the location of a comma, wanting it made clear that its contributions would voluntary, however the language in the draft was agreed to be sufficiently weak that it didn't need further dilution.
Nonetheless, after blocking the text's adoption several times, US officials told Reuters that they regretted that the final agreement "does not reflect consensus concerning the need for clarity on the voluntary nature of contributions". This hearkens back to long-standing fears that any concessions around finance for loss and damage in official documents will be interpreted as a concession of legal liability for climate impacts and open the floodgates to climate litigation against the US.
The recommendations are equally weak when it comes to making sure the fund has enough money to become operational in its early - and most vulnerable - years. Developed countries are simply "invited" to provide finance to operationalise the fund. There is no roadmap on contributions from individual countries, nor is there agreement on a minimum floor to be provided, something developing countries were hoping to see.
Developing countries also had to compromise on the location of the fund. In what came as a surprise to many earlier this year, the US proposed that the Loss and Damage Fund be hosted within the World Bank, ostensibly because this will hasten its operationalisation. This received strong criticism from developing countries, who raised concerns that the World Bank lacks the organisational culture to administer the fund, and that it was too slow, inefficient, and unaccountable. There have also fears that the World Bank would levy a sizable fee for hosting the fund, eating away at already minimal resources.
The concern around organisational culture is valid, given the Bank's lack of resolve and ambition when it came to climate finance reforms at its annual meeting last month. Moreover, not only is the World Bank's president nominated by the US, but it has only just agreed to include climate change within its broader mandate.
Be that as it may, developing countries wanted to see progress and so agreed that the World Bank could host the fund on an interim basis for four years. The outcome text does, however, include various controls around how the Bank might administer the Loss and Damage Fund. These include measures to ensure the fund's board has autonomy and an option to pull the plug on the World Bank arrangement. If this were to happen, the fund could be turned into an independent institution, which is what developed countries wanted all along.
In contrast to various disappointments, a more equitable compromise was reached on some other design elements. On the question of beneficiaries, developing countries wanted all developing countries to have access, not just least developed countries (LDCs) and small island developing states (SIDS). The outcome text still refers to the fund as being for the benefit of developing countries that are "particularly vulnerable" to climate change, a term that has no specific meaning or measure. However, it also goes to provide for the creation of a future resource allocation system that takes a host of factors into account, including not just vulnerability but also the scale of a climate event and estimated costs, while maintaining a minimum floor amount for SIDS and LDCs. Much of the devil will be in the detail of how this allocation system is designed in the future.
The US proposal to include developing countries who contributed to the fund as board members - widely seen as a backdoor to force the hand of larger developing countries to contribute - was also dropped. Nonetheless, developing countries will now represent the majority of the board.
The text also provides for measures to ensure the fund can be accessed directly through simple procedures and suggests that the key form of finance will be through grants and "highly concessional" lending. Though the language is unclear, this is something debt-laden African countries will be pleased to see.
For many officials, the final text was full of disappointments but it at least gives COP negotiators recommendations to deliberate on. Developing countries in particular were eager to see something passed and, after a year of haggling, were willing to make substantive concessions to do so. Commenting on the outcome text, Alpha Kaloga, chief negotiator at the African Group of Negotiators, said "developing countries have lost one battle but not the fight for climate victims around the world".
Ultimately, the Transitional Committee for the Loss and Damage Fund had an immensely difficult task. They were given just a year to conceptualise the fund, agree on its design, and make recommendations on the wider mosaic of loss and damage finance available. Furthermore, the discussion points within their remit go to the very heart of discontent between developed and developing countries when it comes to climate action. For one, the committee needed to find a middle path between developed countries' frustrations at the rising political and economic profile of some emerging economies and their related emissions profiles, and the long-standing position on equity and common but differentiated responsibilities that developing countries hold dear. The committee also had to grapple with sensitivities around where money will come from when developed countries aren't forthcoming with their climate finance pledges and the role of the private sector. In this context, the perseverance of the committee and the willingness of developing countries to compromise in the spirit of moving forward were crucial.
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The text is not final yet, a point the US has made abundantly clear. With enough pressure and scrutiny by delegations, civil society, and the media, we might yet see the needle move at COP28 to see a more robust and equitable arrangement.
A version of this piece was originally published at African Climate Wire.
Olivia Rumble is a climate change policy and legal specialist and a Director at Climate Legal. She writes for African Climate Wire, an independent news resource, collating and commenting on global climate change current affairs relevant to Africa.
