Loss and damage

Loss and damage
In the context of the UN Framework Convention on Climate Change (UNFCCC) process, loss and damage is the harm caused by anthropogenic (human-generated) climate change.
The appropriate response to loss and damage has been disputed since the UNFCCC's adoption. Establishing liability and compensation for loss and damage has been a long-standing goal for vulnerable and developing countries in the Alliance of Small Island States (AOSIS) and the Least Developed Countries Group in negotiations. However, developed countries have resisted this. The present UNFCCC loss and damage mechanism, the Warsaw International Mechanism for Loss and Damage, focuses on research and dialogue rather than liability or compensation. The COP27 climate conference in Sharm El-Sheikh in 2022 resolved to set up a global fund to compensate low and middle-income countries for loss and damage from climate change impacts. The idea behind that fund is that high emitters of greenhouse gases have historically contributed the most to the causes of climate change and have economically benefitted from them. Low and middle-income countries are on the receiving end of many of the impacts of climate change but also have the lowest coping capacity to deal with climate change impacts such as crop failures or rising sea levels. At previous COP events, industrialised nations blocked attempts by low and middle-income countries asking for financial support with their climate adaptation plans. However, at COP27, the agreement to compensate countries for loss and damage from climate change was signed, and that was seen by many as a major breakthrough.
Definition
The UNFCCC has defined loss and damage to include harms resulting from sudden-onset events (climate disasters, such as cyclones) as well as slow-onset processes (such as sea level rise). It includes the damages (and the risks of future damages) beyond those addressed by climate adaptation actions. These losses and damages are sometimes referred to as 'residual' impacts or risks.
Loss and damage can occur in human systems (such as livelihoods) as well as natural systems (such as biodiversity), though the emphasis in research and policy is on human impacts. Within the realm of loss and damage to human systems, a distinction is made between economic losses and non-economic losses. Economic losses and damage affect resources, goods and services that are commonly traded in the market. Non-economic losses and damage contain loss of family members and disappearance of cultures. The main difference between the two is that non-economic losses involve things that are not commonly traded in markets.
Climate reparations are loss and damage payments which are based on the concept of reparations. Climate reparations are a form of climate justice, in which compensation is necessary to hold countries accountable for loss and damage resulting from historical emissions, and is an ethical and moral obligation.
A Bangladeshi consultant remarked at COP26, "The term 'loss and damage' is a euphemism for terms we're not allowed to use, which are 'liability and compensation' ... 'Reparations' is even worse."
Despite the increasing dialogue and attention to the topic, it is also noted that there is ‘not one definition of L&D’. In fact, the UN distinguishes between L&D (Loss and Damage) as the dialogue under the negotiations for the UNFCCC and 'losses and damages' as the impacts seen and researched. As well as its connection to finance and support, including liability, compensation and litigation, loss and damage is connected closely to the area of climate change adaptation.
Understanding Loss and Damage
Loss and damage refers to the adverse effects of climate-related stressors on natural and human systems that cannot be, or have not been, avoided through mitigation or managed through adaptation efforts’. Loss and damage include impacts from extreme weather events and slow-onset events such as rising sea-levels and glacial retreat. With the rapid increase in the manifestation and awareness of climate-related risks and impacts from climate change worldwide, the world has realised that climate mitigation and adaptation may not be enough to manage the effects of anthropogenic climate change. The Warsaw International Mechanism on Loss and Damage was set up in 2013 as a climate policy mechanism to deal with climate-related effects in highly vulnerable countries and was endorsed in 2015 by the Paris Agreement. Yet, as described in the book on the topic published in 2019, the concepts, methods, tools, and directions for policy and implementation of loss and damage have remained contested and vague.
Loss can be understood as irreversible harm caused by climate change, for example, through the complete destruction or permanent reduction in the functioning of assets, infrastructure, or resources, the complete submergence of small island nations due to sea-level rise, the irreversible extinction of a species, or the permanent loss of cultural heritage sites due erosion caused by extreme weather events. Damage refers to harmful effects and costs associated with climate change that can be quantified and potentially compensated (including economic, social, and environmental costs). Damage can be temporary or partially reversible, and it often involves repair, restoration, or compensation, for example, the destruction of infrastructure by hurricanes, economic losses due to crop failure caused by drought, or the costs of relocating coastal communities due to erosion and rising sea levels.
Early negotiations
As the UNFCCC was being drafted in 1991, the AOSIS proposed the creation of an international insurance pool to "compensate the most vulnerable small island and low-lying coastal developing countries for loss and damage arising from sea level rise". In the proposal, the amount to be contributed by each country to this pool would be determined by their relative contribution to global emissions and their relative share of global gross national product, a formula "modelled on the 1963 Brussels Supplementary Convention on Third Party Liability in the field of Nuclear Energy". This proposal was rejected, and when the UNFCCC was adopted in 1992 it contained no mention of loss or damage.
Loss and damage was first referred to in a formally-negotiated UN text in the 2007 Bali Action Plan, which called for "Disaster reduction strategies and means to address loss and damage associated with climate change impacts in developing countries that are particularly vulnerable to the adverse effects of climate change".
Warsaw International Mechanism for Loss and Damage
The Warsaw International Mechanism for Loss and Damage, created in 2013, acknowledges that "loss and damage associated with the adverse effects of climate change includes, and in some cases involves more than, that which can be reduced by adaptation". Its mandate includes "enhancing knowledge and understanding", "strengthening dialogue, coordination, coherence and synergies among relevant stakeholders", and "enhancing action and support, including finance, technology and capacity-building, to address loss and damage associated with the adverse effects of climate change". However, it makes no provisions for liability or compensation for loss and damage. The only reason loss and damage was even discussed in Warsaw was because the entire delegation of developing countries staged a walkout at negotiations.
The Paris Agreement provides for the continuation of the Warsaw International Mechanism but explicitly states that its inclusion "does not involve or provide a basis for any liability or compensation". The inclusion of this clause was the condition on which developed countries, particularly the United States, agreed to include a reference to loss and damage.
In reports of the Intergovernmental Panel on Climate Change
The 5th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), published in 2013-2014 had no separate chapter on loss and damage, but Working Group II: Impacts, Adaptation and Vulnerability (WG2) Chapter 16 about adaptation limits and constraints, is very relevant for people interested in loss and damage. A qualitative data analysis of what the IPCC 5th Assessment Report has to say about loss and damage surprisingly showed that the term was used much more often in statements about Annex 1 countries (e.g. US, Australia or European countries) than in text about non-Annex 1 countries (most countries in Africa, Asia Latin America and the Pacific), which tend to be more vulnerable to impacts of climate change.
An IPCC assessment of Loss and Damage in 2018 found that residual risks (risks beyond those addressed by adaptation actions) will rise with further warming. This may lead to impacts beyond adaptation limits. The IPCC 6th Assessment Report included a section on Loss and Damage. Some of the main topics of UNFCCC negotiation texts and of scientific research in this area are risk finance (for residual risks), finance sources and options for losses and damages, and transformative finance. Examples for transformative finance include financing relocation and retreat of assets and communities, or for switching livelihoods when current ones become unfeasible.
COP 27: Loss and Damage accepted, Santiago Network to establish framework
After three decades of pushing for compensation for 'Loss and Damage' caused by climate change, the 27th Conference of Parties adopted the proposal. The parties agree to utilise the Santiago Network, established at COP25, to provide technical assistance in averting, minimizing, and addressing loss and damage.
This means that rich countries have agreed to compensate poor countries for the damages that have been already caused, such as the 2022 Pakistan floods. Pakistani climate change minister Sherry Rehman, who pushed hard for this at the conference in Sharm el Sheikh, described this as a "down payment on climate justice".
Paris climate finance summit
Before the Paris climate finance summit more than 100 leading economists signed a letter calling for an establishment of an extreme wealth tax as a loss and damage mechanism as the 1% of richest people is responsible for twice as many emissions as the poorest 50% (2% tax can generate around 2.5 trillion). If compare the emissions of high income countries with the damage caused to low income by climate change, the result is that rich countries have a debt of around 6 trillion to the low income per year.
The idea was not accepted in the summit, even though some advance was achieved: the World Bank allowed to low income countries temporarily stop paying debts if they are hit by climate disaster (most of financial help to climate vulnerable countries is coming in the form of debts, what often worsens the situation as those countries are overburdened with debts). Around 300 billion dollars was pledged as financial help in the next years, but trillions are needed to really solve the problem.
References
Effects of climate change
Economics and climate change