Greenpeace COP27 briefing on Loss and Damage

Summary:

Developing nations are suffering rising losses and damages from the worsening impacts of climate-induced disasters driven largely by the historical greenhouse gas emissions of wealthy economies and the fossil fuel industry.
The number of extreme climate and weather-related events that developing countries experience has more than doubled since 1991, affecting on average, 189 million people every year.
By 2030 losses from climate change (excluding non-economic losses such as cultural loss, biodiversity loss, etc) in developing countries are estimated to be between $290 billion and $580 billion per year. By 2050, they could exceed $1tn every year as the impacts of climate change intensify.
COP27 is an opportunity to reach a global agreement on the creation of a Loss and Damage Finance Facility that would raise and distribute funds compensating Global South countries for the unavoidable impacts of climate change. Loss and damage finance should also be agreed as a third pillar, alongside mitigation and adaptation, under the new Collective Quantified Goal on Climate Finance.
At COP27, countries must commit to strengthening and properly resourcing The Santiago Network for Loss and Damage, the mechanism best placed to provide proper technical assistance and expertise to a Loss and Damage Finance Facility.
Developed countries have historically blocked discussions around loss and damage finance. They should contribute new funding to such a financial facility according to the principle of ‘Polluter Pays’.
Taxes or levies on the bumper profits being made by fossil fuel companies are one example of an effective way to raise funds for a Loss and Damage Finance Facility.

Quote: Yeb Saño, Greenpeace’s COP27 Head of Delegation and Executive Director of Greenpeace Southeast Asia, said:

“There’s a glaring injustice at the heart of the climate crisis – countries that have done the least to cause it are being hit hardest by it. Wealthy nations and polluting industries are maxing out the planetary overdraft, leaving the Global South to pay for the deficit. If we don’t tackle this fundamental unfairness head-on, we risk breaking up the mutual trust and unity of purpose needed to underpin any global effort to avert a climate catastrophe. It is absolutely crucial that world leaders agree a new finance facility that can collect and distribute money to compensate the worst-hit countries coping with the unavoidable impacts of the climate crisis. Governments of richer nations have dragged their feet on tackling this injustice for far too long, putting the whole enterprise at risk. World leaders must not leave Sharm El-Sheikh without a deal that delivers on the loss and damage demands of Global South nations.”

What is Loss and Damage?

‘Loss and damage’ (L&D) refers to the consequences of climate impacts or disasters, which cannot be or have not been avoided through mitigation or adaptation efforts. It can be measured in economic terms, such as crop losses and structural damage but also in non-economic terms e.g. lost livelihoods where adaptation is no longer possible, cultural losses and the loss and damage to ecosystems.

Why do we need action on Loss and Damage?

Greenpeace believes action on loss and damage is central to achieving climate justice. For 30 years, wealthier nations have blocked discussions on this issue.
Richer economies and fossil fuel companies have contributed most to the climate crisis and have a moral responsibility to support less developed and climate vulnerable countries who are suffering the worst climate impacts through very little fault of their own.
Current climate financing under UNFCCC only covers funding for mitigation and adaptation. The creation of a dedicated Loss and Damage Finance Facility is the fairest and most effective way to deliver proper financial support to countries in urgent need.

What political progress has been made to address Loss and Damage under UNFCCC?

In 1991, Vanuatu, on behalf of the Alliance of Small Island States (AOSIS) first proposed a mechanism to address L&D, yet 26 COPs later, there has been very little progress on the issue.
At COP19, The Santiago Network was established, as a mechanism to avert, minimise and address loss and damage and to catalyse technical assistance in developing countries.
Article 8 of the Paris Agreement (COP21), created more solid political legitimacy for the call for L&D finance but momentum only increased significantly at COP26 in Glasgow when the G77 and China, supported by activists and civil society, proposed a dedicated Loss and Damage Finance Facility.
The proposal was rejected in favour of ‘The Glasgow Dialogue’ – a diplomatic compromise that, unless it is accompanied by the establishment of a L&D finance facility at COP27, is likely to result in a three-year talking shop with little real progress on making L&D funds available to developing countries who need them now.
There is now increasing hope that a Loss and Damage Finance Facility could be established at COP27, working alongside The Santiago Network. The Climate Vulnerable Forum is calling for a Loss and Damage Finance Facility, the EU Council now accepts the need for discussions about funding for action to address L&D, and the EU Parliament has explicitly voted in support of exploring options for a Loss and Damage Finance Facility.

What is Greenpeace hoping for at COP27?

Greenpeace wants to see the topic of a Loss and Damage Finance Facility firmly on the formal agenda at COP27, with countries reaching an agreement on its establishment.
Loss and damage should be created as a third pillar, next to mitigation and adaptation as the other two pillars, under the New Collective Quantified Goal on Climate Finance.
All nations should actively support the establishment of a robust, fit-for-purpose and resourced Santiago Network, as a mechanism for providing technical support for Loss and Damage, to be governed by an inclusive Advisory Body.

Richer, historically polluting countries should bring forward additional financial contributions towards a Loss and Damage Finance Facility, building on the commitments already made by Denmark, Scotland and Wallonia.
Developed countries should think outside of the box and investigate innovative sources of funding to finance loss and damage, including through significantly ramping up taxes on the enormous windfalls of fossil fuel polluters.

Where do different countries stand on the issue of Loss and Damage Finance?

So far, only Denmark, Scotland and the region of Wallonia in Belgium have made financial pledges to L&D finance.
Some richer nations have repeatedly blocked, stalled and delayed progress on the issue of loss and damage finance within climate negotiations, often due to concerns around potential legal liabilities surrounding the impacts of their historical emissions.
It is estimated that the United States alone has inflicted more than $1.9 trillion in damage to other countries from the effects of its greenhouse gas emissions.

The EU and US have been major blockers on the issue of loss and damage finance, arguing that their focus is on providing climate finance for adaptation and mitigation (promises which have also not been fully delivered on). Rather than supporting a dedicated finance facility, they may tend towards focusing more on providing insurance support, humanitarian aid, risk reduction programmes and support for building back better. All of these may have an important role in some contexts, but do not supersede the need for new and additional forms of finance for loss and damage.

What happens if progress isn’t made towards a Loss and Damage Finance Facility?

Escalating climate impacts will continue to disproportionately hit developing countries, and without a dedicated Loss and Damage Finance Facility it will increase global inequalities. Loss and damages will have wide-ranging impacts – reversing development gains, fuelling debt, political instability and conflict and driving mass migration.
Without appropriate funding, the burden of debt on the most vulnerable countries will significantly increase. Sub-Saharan African countries were estimated to need to take on an additional $1 trillion in debt in the next 10 years, a 50% increase in current debt levels as a percentage of GDP.
A new institution is needed, in order to become an established pillar of the UNFCCC and to have the mandate to deliver its full programme of work. None of the existing institutions are appropriate for delivering dedicated loss and damage finance.
A Loss and Damage Finance facility is critical for building trust and credibility in the UN climate negotiations. Continued inaction on L&D will only serve to erode the trust of the Global South in international cooperation on climate change.

How would a Loss and Damage Finance Facility function?

A Loss and Damage Finance Facility would be a centrally administered global fund, transparently governed by an independent body under the UNFCCC.
National governments would need to make submissions to the finance facility for a range of different economic and non-economic losses. These may broadly fall into 3 categories: relief and rehabilitation; recovery and reconstruction; and disaster risk reduction.
Suggested areas for L&D financing include; relocation costs for coastal communities threatened by sea-level rise; rebuilding homes and infrastructure following extreme weather events; safety net programmes for the most vulnerable members of society; emergency funds that can be tapped into when needed; comprehensive risk management programmes, particularly at the local level; technology cooperation and technology transfer, including tools to measure the extent of loss and damage.
When distributing the funds, The Santiago Network would help ensure the right actors are involved e.g. government agencies, NGOs, humanitarian groups, local community groups etc.

Beyond COP27, the Glasgow Dialogue process could be very useful to help thrash out further details of the facility’s design. The fact that the Glasgow Dialogue process on loss and damage is in train should therefore be seen as complementary to agreeing to establish a finance facility at COP27 – as opposed to a reason to delay.

What concerns does Greenpeace have regarding discussions around Loss and Damage at COP27?

Greenpeace is concerned that richer nations may try to steer discussions away from the idea of establishing a dedicated finance facility in favour of merging L&D funds with adaptation/ mitigation finance or related financial facilities, or subsuming them under existing aid/ humanitarian budgets.
Some countries may also deliberately use procedural issues to bog down or delay the negotiations – such as raising concerns about how discussions around a loss and damage finance facility would link to the Glasgow Dialogue process.
G7 nations may also try to push their Global Shield insurance proposal as an alternative to the Loss and Damage Finance Facility. While this could potentially be useful in some very limited circumstances, overall the Global Shield proposal risks being a significant distraction from the most pressing issues on L&D at COP27.
Greenpeace will work with Global South negotiators, activists and communities to amplify their demands on loss and damage, including agreeing to establish a Loss and Damage Finance Facility at COP27. Greenpeace will also seek to expose any blocking tactics of developed countries on this issue.
Greenpeace will push back against efforts by oil and gas lobbyists pushing for more fossil fuel extraction in response to the global energy crisis caused by the war in Ukraine. This cannot be used by Global North leaders to justify further inaction on climate finance.

Who should foot the bill for Loss and Damage?

The Paris Agreement and UNFCCC clearly state that developed countries who are more responsible for historic emissions have a particular responsibility.
The citizens of China and India are associated with 9.2% of all global emissions, while North American and European citizens account for 24.5% of all current global emissions.
L&D finance should be based on the principle of polluter pays, taking into account the historical emissions of developed countries and major fossil fuel companies, together with the network of businesses and financial institutions that continue to invest in them and underwrite carbon pollution. Options should also be explored to ensure industries like aviation and shipping contribute funds.
It has been estimated that the fossil fuel industry made enough super-profits between 2000 and 2019 to cover the costs of climate-induced economic losses in 55 of the most climate-vulnerable countries nearly 60 times over.

What kinds of instruments could be used to mobilise finance for a Loss and Damage Finance Facility?

There are a whole host of innovative funding mechanisms that developed countries could explore as a way to help finance their loss and damage obligations. Designing tax systems based on the polluter pays principle, and with the objective of supporting cross-societal equality (i.e. ensuring richer people & businesses are taxed more) would be a great way to start and could harness billions more than what governments currently allow for.
Governments could impose windfall taxes on the profits of fossil fuel companies, to both support households domestically who are struggling to pay their energy bills, and to fund action to address L&D in climate-vulnerable countries. For every $1 billion drained from the 20 most climate-vulnerable countries due to climate-induced loss and damage between 2000 and 2019, fossil fuel companies have made profits of almost $60 billion.
Scrapping fossil fuel subsidies could also unleash significant funds. A 4% reduction in fossil fuel subsidies in the G20 countries could source US$ 245 billion from now until 2030.
Other funding options could include financial transaction taxes, forms of debt cancellation for developing countries, and redirection of military budgets (the military budgets of the 27 European NATO countries were already around 427 billion euros in 2019).