Loss and Damage: Three words that have dominated climate finance for a year. With COP28 underway, is funding for developing nations finally sorted?

With plans to operationalise the Loss and Damage fund agreed, challenges remain in terms of the scale of funding and in decisions over who should receive it.
December 12, 2023

Loss and Damage fund approved at COP28

Source: COP28

A significant turning point in global climate change policy has been reached with the draft resolution on a Loss and Damage fund. It is the result of thirty years of work by low- and middle-income nations to get high-income nations to compensate for the damage that climate change has inflicted. More than $400 million in commitments were made for a fund that would supply vital support to nations most affected by climate change, after the proposal was unveiled on 30th November at the opening of the 28th United Nations Climate Change Conference (COP28) in Dubai.[i]

Once the new mechanism is operational, a significant increase in funding will be required to support the benefits it will provide to developing economies. A wide array of contributions are intended to be made to the fund such as grants and low-interest loans from the public and commercial sectors, as well as what has been described as "innovative sources". Despite significant opposition from developing nations regarding the organisation's engagement, the World Bank is scheduled to serve as its inaugural host for four years. Initially, developing nations had opposed the financial institutions involvement, citing concerns about the organization's high costs, cumbersome processes, and perceived US influence. Wealthy countries made some effort, but not much progress, to increase the number of contributors expected to give. While other countries are simply "encouraged" to contribute financially "on a voluntary basis," wealthy countries are "urged" to do so by the language of the official text. According to EU climate head Wopke Hoekstra, petrostates such as the UAE, Saudi Arabia, and Qatar, as well as China, ought to contribute to the fund.[ii]

Announcing the passing of the motion, COP28 president Sultan Al-Jaber said "We have delivered history today,".[iii] He added:

“The hard work of many people over many years, has been delivered in Dubai.” “the speed at which the world came together, to get this fund operationalized within one year since Parties agreed to it in Sharm El Sheikh is unprecedented.”[iv]

UN climate chief Simon Stiell echoed the COP28 president’s optimism saying:

“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,”[v]

Such optimism is understandable, certainly given this took place at the outset of negotiations during the world’s most important climate summit. However, good feeling was not the only response to the announcement with some voicing the need for the fund to go further, faster, and highlighting that this step must be seen only as the beginning.

Where next for Loss and Damage?

Shannon Gibson, Associate Professor of International Relations and Environmental Studies at USC wrote an article for ‘The Conversation’ outlining what she described as the ‘devil in the details’. Gibson highlighted that the fund doesn't specify size, financial goals, or funding sources. Rather, the resolution merely “invites” wealthy countries to “take the lead” in lending funds. It is also important that the official text contains no eligibility criteria for recipients.[vi] On the topic of eligibility, the BBC has reported on conflict over the position of India and China in respect of the Loss and Damage fund. Opinion is divided as to whether these major developing economies should be recipients of, or pay into the fund.

Arguing that these nations should not have to contribute to the fund Liane Schalatek, Associate Director at Heinrich Boll Stiftung said:

"The massive losses and damages we are seeing right now are the result of 30 years of largely foot-dragging by developed countries on reducing their emissions faster and providing climate finance to developing countries,"
"To ask developing countries to contribute to the new fund on an equal footing with developed countries is morally wrong and disingenuous,"[vii]

Conversely, major economies such as China and India, according to senior negotiator for the Alliance of Small Island States, Michai Robertson, have a "moral responsibility to engage with the fund".

Robertson adds:

"Having the words 'encourage other parties to provide fund' in the recommendation is an acknowledgement by the entire committee (including developed and developing countries) that we need beyond developed countries as well and other parties to be involved too."[viii]

The phrasing of the agreement as ‘encourage’ is clearly important as it has been raised by experts on all sides of the debate. What this does show that ambiguity in this sense has led to diversity of interpretation and may only lead to further stagnation of making Loss and Damage work.


[i] Nature- First cash pledged for countries devastated by climate change: COP28 starts with historic decision

[ii] Euractiv- New ‘loss and damage’ climate disaster relief fund launched at COP28

[iii] BBC News- Poor countries win fight for climate cash at COP28

[iv] COP28- COP28 Presidency unites the world on Loss and Damage

[v] United Nations- COP28 talks open in Dubai with breakthrough deal on loss and damage fund

[vi] The Conversation- Don’t applaud the climate summit’s loss and damage fund deal just yet – it might not warrant that standing ovation

[vii] BBC News- COP28: Should India and China benefit from a climate damage fund?

[viii] Ibid

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Oscar Pusey
Research Analyst

Oscar is a recent graduate with a background in earth science. He is currently studying an MSc focussing on disaster responses, emergency planning and community resilience. His postgraduate research project will assess the link between climate crisis risk perception and attitudes to green energy projects. “Adapting to the climate crisis through the pursuit of net zero requires community engagement and understanding. Zero Carbon Academy’s goals closely align with this approach and I’m excited to have the opportunity to research and communicate a variety of topics relating to our environment and sustainability”.

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