Who bears the costs of climate damage?

The South American "Pantanal" is one of the largest inland wetlands in the world. Since the beginning of 2020, it has been facing the most catastrophic fires in its history.
Political article
“Treat the (climate) crisis as the emergency that it is” – this was the call made at this year’s Adaptation Summit by John Kerry, the new US Administration’s Climate Envoy. But those noble words were followed by scant financial commitments.

The Global Commission on Adaptation (GCA) convened the Climate Adaptation Summit in the closing week of January. Jointly with UN Secretary-General António Guterres, the Dutch Government launched the Adaptation Action Agenda 2030 and called for the Decade of Climate Action.

Resuming an active presence in the international climate arena after an absence of four years, the USA promised to “do everything in our power to make up for it” and to work to protect the most vulnerable. John Kerry, who had already participated on behalf of the Obama Administration in working out the Paris climate agreement, warned that there is no adapting to a 3C or 4C world “except for the very richest and most privileged.”

With these words the new US Administration’s Special Presidential Envoy for Climate addressed a key dilemma of the Paris Agreement – that of urgent support from the responsible countries in the global North for developing countries worst hit by loss and damage (L&D). Five years on, this is still the subject of wrangling over climate-appropriate solutions. Already in 2015 the Warsaw International Mechanism had in fact been charged with working out support options. Funding for specific assistance in the event of climate disasters was categorically ruled out at Paris, however.

Funding still unresolved

A modicum of progress was achieved at the latest Climate Summit in Madrid in late 2019: loss and damage was anchored in the UNFCCC financial architecture for the first time. But the fact is that, for fear of compensation claims, the industrialised countries are continuing to shun funding commitments like the plague.

On the one hand, however, the creation of the Santiago Network for Loss and Damage gave the WIM an additional operational arm for promoting technical support in particularly vulnerable developing countries. On the other, and until the next-but-one climate conference (COP 27) set to be held on the African continent, an expert group will be exploring options for developing countries through which already existing funds can be mobilised for L&D. An initial study showed that under the mandate of the Green Climate Fund (GCF) it is already possible, through adaptation measures, not just to prevent or mitigate climate loss and damage, but also to cover the costs of damage. – But with what financial resources?

L&D funding cannot be integrated into the existing climate funding architecture without a substantial replenishment of funds. This is because currently existing funds are not enough even to prevent avoidable climate loss and damage; in other words, for adaptation (see Box 1: “Scant investment in resilience and climate adaptation”).

Avoiding “hit-and-run” behaviour

The new Santiago Network must therefore clearly prioritise the mobilisation of additional financial resources between now and COP27 a year-and-a-half from now. It would be akin to hit-and-run behaviour if the costs of the climate disaster caused by rich countries like Switzerland were to be offloaded on to developing countries. Even innovative approaches such as climate damage insurance harbour the danger that it is the victims rather than the perpetrators who will be made to bear the costs indirectly through the premiums.

At the next Climate Summit in early November in Glasgow (COP 26), a breakthrough will be needed in the prevention and coverage of loss and damage in developing countries. For one thing, the adaptation allocation component of the collective target of 100 billion US dollars annually for climate funding must be increased fourfold. It should also take the form of direct assistance and be provided in addition to development funding. For another, countries must now begin putting down markers for fundraising on a polluter-pays basis to pay for unavoidable climate-related loss and damage that is already occurring. Ideas in this regard range from a global air travel and shipping tax, to an at-source “climate damage tax” on fossil fuels, to a tax on carbon offset certificates.