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COP28 Starts Out with a Bang by Creating a Fund Aimed at Helping Vulnerable Countries

On the first day of the two-week United Nations Climate Change Conference of the Parties, more commonly referred to as COP28, delegates reached a landmark agreement to formerly create a Loss and Damage Fund, a rescue and rehabilitation effort to support especially vulnerable countries dealing with the irreversible and costly effects of climate change.

First suggested in 1991 by the small island nation of Vanuatu, the fund is aimed at encouraging the wealthy and major polluting nations to assist poorer states harmed by the unavoidable impacts of climate change despite contributing the least to the climate crisis. Though first suggested 32 years ago, development of this fund has been slow going, as wealthier countries raised concerns about establishing a precedent for compensation, which in their view is tantamount to an admission of climate liability.

Common examples cited for the need of such a fund include the horrendous floods that crippled Pakistan in 2022 and the drought sweeping through Africa. A Loss and Damage Fund is viewed as a way for the wealthier countries (which are typically the biggest polluters) to repair and pay for that damage. Essentially, the idea behind the fund is to recognize that the nations contributing least to greenhouse gas emissions are also the least equipped to deal with the resulting droughts, rises in sea levels, and other climate-change related disasters.

Despite the slow going to this agreement, progress was made at last year’s COP27 in Egypt, when the attending parties agreed to create in principle a collection of money in a Loss and Damage Fund. Since then, a Transitional Committee worked to get input from parties and create a recommendation as to how the fund would work, who would contribute towards it, and which nations would be eligible to draw from it. All of these negotiations resulted in the landmark agreement being formalized on day one of COP28 last week.

“Today’s news on loss and damage gives this UN climate conference a running start. All governments and negotiators must use this momentum to deliver ambitious outcomes here in Dubai,” Simon Stiell, the executive secretary for the United Nations Framework Convention on Climate Change (UNFCCC), said at a press conference, according to UN News.

The agreement was also welcomed by U.N. Secretary-General Antonio Guterres on X (formerly Twitter) and called it essential tool to delivery climate justice. He called for wealthy nation leaders to support the fund.

So, how does the fund work?

It will initially be administered by the World Bank and will be funded by industrialized nations to support poorer nations. The United States, in particular, pushed for the World Bank’s administration of the fund, arguing that it provides a ready-made framework to allow for the cash to be collected and get dispersed as quickly as possible.

Ultimately, the World Bank was selected and has already been pledged around $656 million from several nations including $100 million pledged by Germany and the UAE, $10 million from Japan, and a surprisingly slim $17.5 million from the United States. The UK, in contrast, announced GBP 60 million, and the European Union committed another $245.39 million.

The United States’s relatively small contribution did not go without criticism. Mohamed Adow, director of Power Shift Africa, was one of several critics of the United States. “The initial funding pledges are clearly inadequate and will be a drop in the ocean compared to the scale of the need they are to address,” Adow said in a statement. “In particular, the amount announced by the US is embarrassing for President Biden and (US Climate Envoy) John Kerry. It just shows how this must be just the start.”

While many of the developing nations, who pushed for this fund, expressed optimism over the formalization of this fund, they also urged the wealthier nations to continue to add cash to it to fill the adaption finance gap of $194-366 billion. Some estimates suggest the costs of clime-related harms have already passed $400 billion annually for developing nations. In addition, participants at COP28 rightly point out the several key remaining questions surround the ‘loss and damage’ fund.

These questions include:

  • How does the fund get replenished after the initial contributions are collected? Details regarding replenishment are currently lacking in the agreement agreed in the November 30 agreement.
  • Also unclear in the agreement is how developing nations go about requesting funds and how those requests will be handled by the World Bank.
  • Finally, it’s also still not clear how the cash put into the fund actually gets dispersed to the requesting nations. The agreement is strangely silent on this point, especially considering comments from some nation delegates about the importance of insurance and pre-arranged finance.

In response to the announcement, leading African think-tank representative Mohamad Adhow noted there were “no hard deadlines, no targets, and countries are not obligated to pay into it, despite the whole point being for rich, high-polluting nations to support vulnerable communities who have suffered from climate impacts”.

While there is clearly still much work to be done to bring turn this agreement into practical effect, the fund is a good step in recognizing the inequality at the center of the causes and effects of climate change. We will continue to monitor how the initial capitalization round of this fund is put into action.

In the meantime, COP28 will continue holding meetings and events through December 12 at the Expo City campus in Dubai. This year’s conference is expected to draw over 70,000 participants, ranging from nation delegates, climate scientists, environmental activist groups, and youth and climate negotiators.