An aerial view of a coastal town devastated by super Typhoon Haiyan in Samar province, Philippines
‘Hell storm’: typhoon damage to a Philippine coastal town © Erik De Castro/Reuters

It is often hard to predict what will happen at the huge annual UN talks that, since 1995, have been held to thrash out global climate change agreements.

But not this year. Much of the November COP27 meeting in the Egyptian resort city of Sharm el-Sheikh will be consumed by one of the most protracted, divisive and confusing issues ever to arise in these negotiations: “loss and damage”.

With luck, the COP27 conference will finally start to resolve this festering problem. Actually, make that: with a lot of luck.

The idea of climate loss and damage first emerged more than 30 years ago in small island countries — the places where lives and livelihoods were most at risk from rising sea levels and vicious storms. In the early 1990s, these nations began to call for measures, such as an international insurance system or a global fund, bankrolled by richer countries, to help cover such losses.

However, the UN climate talks ended up producing two different types of funding. “Adaptation” financing was supposed to help countries adapt to the effects of climate change, by funding projects such as flood barriers or hurricane early warning systems. “Mitigation” funds were aimed at helping poorer countries decarbonise by building, say, electric bus services or solar farms.

The idea of directing money towards irrecoverable losses and costly damages did not take off. Instead, it became a flashpoint in talks that have long divided countries: those that grew rich by burning fossil fuels on one side; and, on the other, poor nations that did almost nothing to warm the planet yet suffer some of the worst effects of climate change.

“For many small island countries and developing nations, loss and damage is a euphemism for liability and compensation — one way to extract money and support from wealthy countries most responsible for climate change,” says Lisa Vanhala, a political-science professor at University College London who has spent years researching loss and damage.

“But the US, European Union and many other countries have been correspondingly nervous about legally admitting liability for climate damages or opening themselves up to potentially bottomless compensation claims.”

This stalemate continued, even as the physical evidence of climate change became harder to ignore, until 2013. More than 6,000 people died that year when Typhoon Haiyan, one of the most powerful tropical cyclones on record, tore through the Philippines — just a year after Typhoon Bopha claimed more than 1,000 lives in the same country. Adaptation money was no match for such destruction.

At the 2013 COP19 climate conference in Warsaw, Poland — where the Philippines’ chief negotiator wept as he spoke of the “hell storm” battering his country — loss and damage finally received institutional recognition.

In the clunky words of the UN, a “Warsaw International Mechanism” was set up to expand understanding of the loss and damage concept and boost efforts to address it. But progress was glacial. Successive COPs produced more promises of dialogue and study, but rich countries continued to resist demands for concrete loss and damage funding.

Meanwhile, researchers estimated developing countries could face up to $580bn in annual climate damages by 2030, and more than $1tn by 2050.

Anger over this stand-off has reached a critical stage in the run-up to COP27. Many negotiators will arrive from developing countries battling food, fuel and debt crises as they struggle to recover from the pandemic.

Some, like Pakistan, also embody loss and damage: it suffered horrific floods this year that killed more than 1,400 people and caused an estimated $40bn of damages and a 2.2 per cent hit to GDP.

Pakistan is the current chair of “the G77 and China”, a powerful coalition of more than 100 developing countries that often negotiate as a unit at the UN talks.

That group is expected to back a plan that has long been advocated by another negotiating group, the Alliance of Small Island States, or AOSIS, to set up a dedicated loss and damage response fund.

Michai Robertson, lead negotiator on climate finance for AOSIS, says the fund would in no way amount to climate reparations or open-ended compensation. “Funding would be mobilised primarily from voluntary sources, and allocated specifically for activities to respond to climate losses and damage,” he says.

Where would the money come from? A range of ideas have been raised, including taxes on the super-rich, or fossil fuel companies and flights. Some wealthy countries now recognise the need for more concrete action. Denmark this year became the first nation to offer loss and damage funding, with a pledge of around $13mn.

But other rich nations are backing alternative plans, such as subsidised insurance systems, which they argue would deliver funding faster to countries most in need. That is important, says Robertson.

They do not, however, begin to address non-economic damage such as the permanent loss of territory, culture and ecosystems. Also, he says, as climate impacts become more frequent and intense, many assets will become uninsurable.

Can a compromise be reached in Sharm el-Sheikh? If history is a guide, it’s a long shot. But so is the idea that some sort of loss and damage funding can again be pushed down the road for yet another year.

Pilita Clark is an FT business columnist

Copyright The Financial Times Limited 2024. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article