Loss and Damage

20 Mar Loss and Damage

This article covers “Daily Current Affairs” and the Topic of Loss and Damage.

SYLLABUS MAPPING:

GS-3- Environment- Loss and Damage

FOR PRELIMS

What is the Loss and Damage Fund, and why was it established?

FOR MAINS

What are the major challenges in defining and implementing a global framework for loss and damage under the UN climate process?

Why in the news?

The issue of “Loss and Damage” has gained global attention, especially after the operationalization of the Loss and Damage Fund at COP28 in Dubai (2023). With rising climate disasters such as extreme heatwaves, floods, and droughts, vulnerable nations are demanding financial and technical support from wealthier countries responsible for historical emissions. However, current climate finance remains insufficient, making this a key topic in international climate negotiations as countries debate equity, responsibility, and urgent action to address irreversible climate impacts.

What is loss and damage? 

“Loss and damage” is a general term used in UN climate negotiations to refer to the consequences of climate change that go beyond what people can adapt to; for example, the loss of coastal heritage sites due to rising sea levels or the loss of homes and lives during extreme floods. This also includes situations where adaptation options exist, but a community doesn’t have the resources to access or utilize them. To date, there is no official definition of loss and damage under the UN. Loss and damage are harming and will continue to harm vulnerable communities the most, meaning that addressing the issue is an urgent matter of climate justice. But the Subject has historically been fraught with contention both inside and outside of UN climate negotiations. In particular, countries have struggled to reach an agreement on how much money developed countries should supply to address loss and damage in developing nations, which have contributed the least to the climate crisis but are often hit hardest by its impacts.

Difference Between Mitigation, Adaptation and Addressing Loss and Damage

History of Loss and Damage in UN Climate Negotiations

The issue of loss and damage has been debated for over three decades in UN climate negotiations. In 1991, Vanuatu proposed an insurance scheme for climate-impacted nations, but it was rejected, and the final UNFCCC (1992) did not mention loss and damage.
The Concept formally emerged in the Bali Action Plan (2007) and gained traction in 2013 with the creation of the Warsaw International Mechanism (WIM) to enhance knowledge-sharing and coordination. However, no funding mechanism was established.
Key Milestones:
Paris Agreement (2015): Article 8 included loss and damage but excluded financial liability.
COP26 (2021): A proposed finance facility was rejected, leading to the Glasgow Dialogue and funding for the Santiago Network on Loss and Damage (SNLD).
COP27 (2022): A breakthrough agreement established a loss and damage fund.
COP28 (2023): The fund was officially launched as the Fund for Responding to Loss and Damage (FRLD), hosted by the World Bank. Countries pledged $700 million, and the SNLD was operationalized.
Next Steps for COP29 (2024):
Mobilizing more finance for FRLD & SNLD.
Including loss and damage in the new climate finance goal.
Ensuring the fund delivers aid quickly and effectively to vulnerable nations.

Importance of loss  and damage fund 

The Fund for Responding to Loss and Damage (FRLD) is essential for climate-vulnerable nations facing irreversible impacts. While mitigation and adaptation help reduce risks, some losses—like sea level rise, extreme weather, and biodiversity loss—are unavoidable, requiring financial support for recovery.
Key Benefits:
1. Supports Vulnerable Nations: Helps developing countries recover and rebuild after climate disasters.
2. Addresses Unavoidable Losses: Provides aid where adaptation is no longer possible.
3. Delivers Timely Relief: Funds emergency response, reconstruction, and displaced communities.
4. Ensures Climate Justice: Developed nations contribute to those most affected by climate change.
5. Strengthens Climate Action: Makes loss and damage a core climate priority, alongside mitigation and adaptation.
Established at COP28, the FRLD is a major step forward, but funding must scale to meet growing climate challenges. COP29 will be critical in ensuring swift, sufficient, and equitable financial support.

Issues in Climate financing

1. Funding Shortfall: Current climate finance is far below what’s needed, with loss and damage alone projected to cost $580B annually by 2030.
2. Unequal Access: Small island states and least developed countries (LDCs) struggle with complex processes to access funds, while middle-income nations receive most financing.
3. Debt Burden: Most funds are loans, not grants, forcing climate-vulnerable nations into deeper debt.
4. Lack of Transparency: No clear tracking of how much money is delivered or used, and some nations over-report contributions.
5. Low Private Investment: Businesses hesitate to fund adaptation projects due to uncertain profits, leaving public finance to fill the gap.
6. Fragmented System: Multiple climate funds exist (GCF, Adaptation Fund, FRLD, etc.) but lack coordination, making access difficult for developing nations.

Way to address climate financing  

1. Increase & Fulfill Commitments: Developed nations must meet and exceed climate finance pledges, ensuring new and additional funding.
2. Implify Access: Streamline fund applications, ensuring direct, fast access for vulnerable nations.
3. Shift from Loans to Grants: Prioritize grants over loans to prevent debt burdens and explore climate debt relief options.
4. Enhance Transparency: Establish robust tracking to monitor fund allocation and prevent overreporting.
5. Boost Private Investment: Use blended finance, green bonds, and risk-sharing mechanisms to attract private capital.
6. Diversify Funding Sources: Explore fossil fuel levies, carbon pricing, financial transaction taxes, and climate insurance.
7. Improve Coordination: Align funds like GCF, Adaptation Fund, and FRLD for efficiency and impact.

Conclusion

The establishment of the Loss and Damage Fund (FRLD) is a significant milestone in global climate action, recognizing the irreversible impacts of climate change on vulnerable nations. While progress has been made, climate finance remains insufficient, with funding gaps, accessibility issues, and reliance on loans instead of grants. To effectively address loss and damage, wealthy nations must fulfil commitments, streamline access to funds, increase transparency, and leverage private sector investment. At COP29, ensuring the fund’s rapid, equitable, and scalable implementation will be critical in achieving climate justice and resilience for frontline communities.

Download Plutus IAS Current Affairs (Eng) 20th March 2025

Prelims Questions