United Nations agrees on loss and damage fund to settle climate damages

Photo courtesy of UNclimatechange via Flickr. A loss and damage fund would direct funding towards countries most affected by climate change.

By Sarah Grinnell ’26

Staff Writer

The 2022 United Nations Climate Change Conference in Egypt, Conference of the Parties 27, was met with mixed reactions, as many experts termed the annual climate conference a “failure,” according to The Conversation. However, despite what BNN Bloomberg cites as weak commitments regarding the reduction of carbon emissions and fossil fuel phase-outs, the summit found its greatest success in a last-minute proposal of a loss and damage fund. According to Reuters, if implemented, the fund would help ensure a more equitable stabilization of the global climate. According to Climate Home News, a plan for the fund has been drafted by the Alliance of Small Island States.

The fund would require that the countries most responsible for climate change pay billions of dollars in damages to smaller, lower-income countries which hold minimal responsibility for increasing global temperatures yet experience the greatest consequences, The Scotsman explained. As a result, the creation of the loss and damage fund is expected to greatly alleviate the burdens placed on these vulnerable countries.

“COP,” which stands for Conference of the Parties, is the United Nations’ yearly global climate summit. Now in its 27th year, discussions around climate compensation have finally seen a major step forward with the passing of a loss and damage pact, the United Nations Environment Programme said.

According to Reuters, the fund’s proposal comes as a result of increasingly prevalent and devastating climate disasters, which, just limited to the past year, include the deadly Pakistan floods, as well as extreme droughts in China, Africa and the Western United States. These global-warming-induced disasters have put significant financial strains on the affected nations, as Fox News cites that flooding in Pakistan has caused an estimated $30 billion in economic losses.

An opinion article in The Scotsman points out that this proposal is groundbreaking given the historical resistance that rich countries, namely the United States and the United Kingdom, have shown in regard to passing climate compensation agreements and, by proxy, admitting their liability in the climate crisis. As Fox News reported, just last year at COP26 in Glasgow, the United States and the EU “blocked a proposal to establish a loss and damage financing body.”

However, both nations finally gave in to political pressures at this year’s conference. According to Reuters, “developing and emerging economies” are now united in the demand for a loss and damage fund. BNN Bloomberg points out the revolutionary nature of this pact as it is a historic “acknowledgment that richer nations are responsible to the developing world for the harm caused by rising temperatures.”

Despite the initiative’s ambitious goals, many of the technical details remain to be established, according to BNN Bloomberg. Reuters points out that there is still a lack of cohesion around a definition for “loss and damage.” The method of funding allocation is also uncertain. As Reuters described, some diplomats have proposed a “mosaic” model of financial resources from existing international funds, which would collect money from several different sources, as opposed to a central pool. According to The Scotsman, a “transitional committee” will be created to oversee the fund, bringing more concrete recommendations for its adoption and operation at COP28 in Dubai in 2023.

The very fact that these funds will no longer come through private channels — which have historically been very ineffective — but instead through international finance has better positioned the U.N. to tackle “the real financing battle” of the climate crisis, as argued by Tom Athanasiou in Common Dreams. While BNN Bloomberg cites that the conclusion of the overall summit left many with deflated hopes for several larger and more “thorny” climate-related issues — as The Scotsman mentions, there was a lack of clarity on the fight to keep temperatures below 1.5 degrees compared to pre-industrial levels, as well as vague commitments to lowering emissions and renewable energy — the promise of a loss and damage fund has at least provided a glimmer of hope for future climate reparations. As Athanasiou writes, “Because of COP27, national fair shares are now on the agenda, if only as the background to an inevitable debate about pragmatic ways forward” regarding larger realms of climate policy.