COP28 achieves global nod for ‘loss and damage’ fund to counter effects of climate change

The COP28 announcement is a welcome and significant breakthrough. There are many clarifications that are required as regards the fund. Some of the big questions include the fund's size, its relationship to other funds, how it will be administered over the long term and what its funding priorities would be

The very first day of COP28 climate summit in Dubai saw a major breakthrough by way of an agreement on a “loss and damage” fund to compensate poor states to counter the effects of climate change. This means that wealthy states and major polluters will put millions of dollars towards a fund that will in turn be distributed to poor states harmed by climate change. The fund, with the initial commitments touching $430 million, will be administered by the World Bank.

It will come as a huge relief to the United Arab Emirates, the summit's host. The country was under pressure even before talks began about its fossil fuel expansion plans and the fact that the president of the climate talks is the chief executive of a national oil company. This undoubtedly featured in the UAE's decision to commit $100 million to the fund.

Other countries making initial commitments include the United Kingdom ($75 million), the United States ($24.5 million), Japan ($10 million) and Germany ($100 million). Pressure will now build on other wealthy countries, including Australia, to outline their own commitments to the fund.

What's the history of the fund? The Loss and Damage Fund was first suggested by Vanuatu in 1991. At the heart of the push for this fund is an acknowledgement that those countries likely to be most affected by climate change are the least responsible for the problem itself. The fund would ensure that those who created the problem of climate change – developed states and major emitters – would compensate those bearing the brunt of its devastating effects. With global warming now locked in and effects already being felt, from natural disasters to rising sea levels, the fund also indicates that the world has failed to prevent climate change from happening. A commitment to establish such a fund was one of the most important outcomes of last year's climate talks in Egypt. Since then, a series of meetings have taken place for securing international agreement about how the fund would work, who would commit to it and who would be eligible to receive funds. These meetings have been characterised by significant disagreement over each of these points.

In that sense, the COP28 announcement is a welcome and significant breakthrough.

Questions remain: There are many clarifications that are required as regards the fund. Some of the big questions include the fund's size, its relationship to other funds, how it will be administered over the long term, and what its funding priorities would be.

In response to the announcement, leading African think-tank representative Mohamad Adhow noted that 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”.

There is also concern about the World Bank's role in overseeing the fund in the first instance. Developing countries expressed opposition to this idea in the run-up to COP28, questioning the World Bank's environmental credentials and the transparency of its operations.

While initial funding may seem generous, most analysts would also agree that this fund is a long way from covering the full range of effects. Some estimates suggest the costs of climate-related harms are already at $400 billion annually for developing states: roughly 1,000 times the amount initially pledged.

Finally, we should not assume that pledges would actually translate to countries putting their hands in their pocket. The Green Climate Fund announced in 2009 – designed to help developing states with their transition away from fossil fuels and to help with adaptation initiatives – included a commitment for developed states to provide $100 billion per year by 2020. They fell short of this goal.

The legacy: An agreement on this fund is a good thing in recognising the inequality at the heart of the causes and effects of climate change, and may ultimately be one of the key outcomes of these talks. Early agreement also means that it cannot be used as a bargaining chip over other crucial parts of these negotiations.

Now talks can focus on the assessment of progress towards meeting commitments to the Paris Agreement, which aims to hold warming to 1.5°C to limit further dangerous levels of climate change. Whether or not the UAE organisers and the rest of the world take up this challenge will determine the effectiveness of these talks, and quite possibly the fate of the planet.

(The writer is Associate Professor of International Relations, The University of Queensland)