With COP27 officially underway, all attention has turned to Egypt and whilst several topics are set for discussion, climate financing is primed to take the spotlight.
Otherwise known as “loss and damage”, the subject concerns itself over who pays for the costs of climate change, in recognition of the insignificant role developing nations have played in fuelling global warming, yet the disproportionate impacts they will face as a result. Africa, for example, accounts for less than 4% of global emissions while the G20 accounts for over 80%. An extension of the universally recognised ‘polluter pays’ principle, it calls for developed countries to compensate affected developing nations.
The idea is not new. Acknowledgment of differentiated responsibility for global emissions first appeared in the UN Framework Convention on Climate Change in 1992, and formal recognition of the need to compensate developing countries was provided in the 2013 Warsaw International Mechanism. Though the latter did much to strengthen dialogue, any efforts to establish a formal monetary agreement have so far fallen short. The 2009 pledge to funnel $100bn of climate aid a year to developing countries has not materialised, whilst a proposal at COP26 to create a new loss and damage fund was blocked by the US and EU.
It’s not hard to understand why developed nations have been so resistant to the idea. Claims of loss and damage can easily spiral into billions of dollars. However, COP27 follows a year of climate-related disasters, including floods in Pakistan and Nigeria that have killed 1,700 and 600 people respectively, making demand for action harder to ignore.
We expect conversation at COP27 to focus on the creation of a dedicated loss and damage facility. Nations will need to agree on what should count as “loss and damage” in climate disasters. This is no mean feat given the practical difficulties in assessing how much a country has suffered due to the actions of others. Consider a flooding event; climate change may be responsible for heavy precipitation, but the impacts may be significantly worsened by poor urban planning, such as the absence of drainage. And then there are the more contentious questions around which countries should pay? How much should they pay? And which countries should receive funding? With this in mind, even if COP27 yields a deal to form a loss and damage facility, it could take years before we see any monetary outflows.
On top of this, the subject comes to the table at a time of heighted geopolitical tensions. Amid energy security concerns and rising inflation, there is a strong possibility that developed nations will choose to prioritise their own domestic affairs before considering any form of international aid.
So, will climate financing make the most of its time in the spotlight? Not in our opinion. Discussion may occur, but it’s unlikely to yield any concrete loss and damage funding. One thing it may invoke, however, is greater awareness of the need for climate adaptation. Attention to date has largely focused on reducing emissions, yet with the world still on track for 2.4°C of warming, adaptation is increasingly vital if we want to minimise climatic impacts. COP27 may signal the start of this shift.