Developed Countries are Dodging Responsibility on Global Fund for Climate Justice

November 17, 2023

Under the UN guidance, a transitional committee on loss and damage due to climate emergency has clinched an agreement of recommendations on operationalising a global fund for vulnerable countries and communities on November 4, 2023, in Abu Dhabi (UAE). Despite a formal objection from the US and reservations from other members in the 24-member transitional committee (TC), the final approval is set for the 28th Conference of Parties (COP28) to the UNFCCC that will be held from November 30 - December 12 at the Expo City, Dubai (UAE).  If the USD 100 billion pledge for the Green Climate Fund headquartered in Seoul is still a distant mirage, will the Loss and Damage (L&D) Fund, again on a voluntary basis, be a resilient source for billions of deprived communities and hundreds of countries?

Agreement on the operationalisation of loss and damage fund is a diversion from the commitment of financial responsibility of historical obligations of developed countries. 

The next battleground for the L&D Fund is COP28 in Dubai. Meanwhile, in its fifth meeting, the transitional committee (TC)- 14 developing and ten developed countries, uncomfortably gathered a consensus on the text on the operationalisation of the L&D Fund. Since March this year, the talks witnessed deep divisions, discomfort and disquiet among the TC members throughout the five meetings and two workshops.  The US has submitted a formal objection to the deal, which is being sent to COP28 for further deliberations before the operationalisation of the fund. In a statement to the media, the US negotiator to the TC regretted that the consensus reached among negotiators about voluntary donations to the fund is not reflected in the final agreement. Is this the financial commitment for the historical obligation for climate change as the most significant greenhouse gas (GHG) emitter? While developing countries called for an annual $100 billion for the Fund, both the UK and Australia argued against any scale to be mentioned. A 2023 analysis found that, between 2000 and 2019, the world suffered at least $2.8 trillion in loss and damage from climate change – costing around $16 million per hour. The projected cost of L&D by 2030 alone has been estimated to be USD 400 billion a year. By 2050, it is estimated to be between USD 1 and 1.8 trillion.

In the meantime, the UAE, the host of COP28, welcomed the agreement as clear and strong recommendations for the L&D Fund. What are the recommendations adopted in the text? The source of the fund is not mandatorily collected from only developed countries that are responsible for climate change due to GHG emissions. The fund, as in the adopted text, 'is able to receive contributions from a wide variety of sources of funding, including grants and concessional loans from public, private and innovative sources, as appropriate'. The recommendation only urged developed countries to continue supporting and encouraging other nations (like China, India, Russia, Saudi Arabia, etc) to provide voluntary support for activities to address loss and damage. Thus, the fund has no financial obligations and is voluntary. The developed countries have taken away the pursuit of climate justice by not being committed to the L&D Fund and rejecting references to liability, reparations, equity, and common but differentiated responsibility in the funding facility in the agreed text. Lacking a clear framework for scale and sources of financing, including who will contribute and how much and the eligibility criteria, the negotiations at COP28 remain potentially high to activate the L&D Fund in 2024.

While there is indeed no consensus on the source of funding from developed countries, the developing countries in the TC have cajoled to compromise that the World Bank will host the fund temporarily. Since the talks on the L&D Fund, developed countries have been demanding to host the fund by the World Bank. Why do wealthy nations demand that the Bank administer the L&D Fund? With the largest shareholdings and corresponding voting powers, the developed countries would decide the allocation of funds. There is a high probability of co-financing the World Bank's stand-alone climate-related projects with the L&D Fund projects to ease the commitment of developed countries' climate obligations. Last but not least, employing the knowledge and experience from developed countries as consultants in such World Bank-administered projects.  

Many representatives of vulnerable communities, civil society organisations (CSOs), and international environmental NGOs consider the World Bank to be a non-reliable host as the Bank funds fossil fuel projects that exacerbate climate change. It is argued that the World Bank would provide loans, not grants and charge servicing fees. If the World Bank hosts the Fund at its Washington DC headquarter, it must pay the salary to the staff who would oversee the L&D Fund. Somewhat, the servicing fees are not logical as well. However, there is an example of the Global Environment Facility (GEF), which has been stationed at the World Bank since the 1992 Earth Summit to provide small grants for environmental protection, conservation, and management.   Why can't the L&D Fund be hosted at the Green Climate Fund (GCF), managed by the COP of UNFCCC? Since 2015, the GCF, established in 2010 under the supervision of COP, has approved 243 projects in 129 developing countries, amounting to 13.5 billion USD in climate mitigation and adaptation. Even the GCF funds are not easily and timely accessible by the most affected countries and communities.

Similarly, another example of governance of the L&D fund discussed in the third TC meeting was the Climate Investment Fund (CIF) of the World Bank. In CIF, the World Bank plays three functions: a host, a trustee and the implementing agency. Hosting the L&D Fund by the World Bank is a result of the Delhi G20 outcome. In the reforming Multilateral Development Banks (MDBs), the G20-appointed panel recommended that the World Bank must accelerate and expand the climate portfolio.      

During COP 27 in Egypt last year, the hard-own deal on the L&D Fund for climate disasters for most vulnerable developing countries was the turning point in climate justice. For the first time in three decades of climate negotiations, developed countries agreed to provide finance towards the recovery and rebuilding of the most vulnerable countries and severely impacted developing countries tormented by climate-related disasters.

Developed countries with few emerging economies are able to divert the focus from a grand financial requirement to address climate change to the urgency of financial need for the most vulnerable and poorest countries.  It's a loss for the collective action against climate change. Are we staring at the removal of words like 'liability' and 'reparation' from the Climate Justice lexicon during COP talks at UNFCCC?

Author Note
Avilash Roul (PhD) is a Senior Fellow at the Society for the Study of Peace and Conflict, New Delhi, and a Principal Scientist at Periurban Initiative.