Delegates arrive at the COP27 climate conference in Egypt’s Red Sea resort city of Sharm el-Sheikh on November 7, 2022Developed nations agreed to set up a “loss and damage” fund to compensate vulnerable nations for climate change-related disasters on November 20 at COP27 in Sharm el-Sheikh, Egypt. Will the new initiative fly, unlike the broken $100-billion Copenhagen promise of climate finance?”There are quite a few environmentalists celebrating victory on the loss and damage fund. But I think tough questions must be asked,” Dr. Patrick Bond, professor at the University of Johannesburg’s Department of Sociology, political ecologist and scholar of social mobilization, told Sputnik.”If we’re not careful, loss and damage funding will fit tightly inside climate finance, an industry that is full of the kinds of disreputable characters we’ve come to know from the most volatile sector of the world economy: international banking. The climfin [climate finance – Sputnik] professionals began practicing their sport nearly twenty years ago, through the corruption-riddled EU Emissions Trading Scheme (and ill-fated Chicago Climate Exchange), the Clean Development Mechanism, and other offset gimmicks, and accounting tricks needed to hide stranded fossil assets,” the professor continued.The loss and damage concept first emerged during the global climate negotiations in 1991. It looked to describe the impact of developed nations, which have emitted most of the carbon dioxide historically fuelling climate change, on poorer nations, which have not contributed significantly to the problem, but suffer greatly from it.The Sunday decision to set up a loss and damage fund has been called “historic” and a “breakthrough” by the mainstream western press, which acknowledged that industrialized nations had long blocked the idea of “compensation” for polluting the environment. Still, there is not much clarity about who exactly will pay for the fund and how it will operate.”At this time, it’s not clear how quickly or how this fund will support vulnerable countries,” said Dr. Nisha Krishnan, director for climate resilience at the World Resources Institute, Africa. “[T]he fund will be designed over the next year or so, with recommendations to be presented at COP28 in Dubai next year. The fund also currently has no resources allocated to it yet.”NJ Ayuk, executive chairman of the African Energy Chamber, cautiously welcomed the deal on the loss and damage fund.”The real issue here will be the details,” he noted. “We are also concerned that it should not be like the other climate promises that have been broken by western nations. A big part will be clarity on what is considered as future loss and damage aid.”WorldCOP27 Strikes Historic Deal to Fund Poorer Nations’ Climate ‘Loss & Damage’ Yesterday, 05:42 GMT
Specter of Failed Copenhagen Pledge
The newly reached agreement says developed nations cannot be held legally liable for not paying their fair share.”It’s been made clear that these resources are not ‘reparations’ – particularly as the decision to establish this fund has clearly said this is not compensation of any kind,” Krishnan explained.The absence of any legal leverage to hold industrialized nations accountable for not paying to the fund means there are no guarantees that they will indeed deposit money into the new endeavor. This evokes strong memories of the COP15 climate summit in 2009, during which developed nations committed to collectively provide $100 billion a year for climate reparations to developing states by 2020, but substantially missed the target. For its part, the US provided only $7.6 billion (or 19% of its fair share) in 2020, with Canada, Australia, and the UK giving just 37%, 38%, and 76% of their fair share, respectively, according to Carbon Brief, a UK-based investigative journalism website. In previous years, the $100 billion goal had likewise been repeatedly missed, according to Nature, a British weekly scientific journal.What’s more, the $100-billion pledge is minuscule compared with the investment required to tackle the disastrous impact of climate change. It is estimated that the economic cost of loss and damage in developing countries will be between $1-1.8 trillion by 2050, according to the World Economic Forum (WEF).
"Of course, $100 billion a year was already inadequate, then and now… but what, concretely, have climfin watchdogs done to get the missing $75 billion/year onto the public agenda, south and north? As far as I can tell, just a few placard demos every November," said Bond. "Meanwhile, the people who really need massive foreign debt cancellations and the West/BRICS climate debt to be paid are butting their heads against the wall, with little or no recognition from the climfin-advocacy technocrats in the climate NGOs scene."
In addition, there are no guarantee that the US, one of the most polluting nations, won’t unilaterally withdraw from the loss and damage initiative one day, the professor noted, citing President Donald Trump’s pulling out of all such United Nations Framework Convention on Climate Change (UNFCCC) obligations between 2017 and 2020. Even though Trump’s successor, Joe Biden, re-entered the UNFCCC in January 2021, the new administration still avoids any sort of legal accountability, according to Bond.”While climate-denialism was Trump’s philosophy, climate-debt-denialism remains the central pillar of the Biden team’s climate finance policy,” he remarked.IndiaCOP27:India Accuses Rich Countries of ‘Enormous Failure’ Over Climate Finance for Developing Nations14 November, 16:11 GMT
Controversy Surrounding International Climate Funds
Meanwhile, some previously established international climate funds have a rather controversial record, not only in terms of underfunding but also in terms of accountability, accessibility, and transparency, according to the professor, who referred to the Green Climate Fund (GCF) to illustrate his point.Bond noted, citing climate-finance scholars, that since its inception in 2014, three key barriers have prevented GCF from meeting its objectives and delivering finance to the local level. First, GCF lacks a unified framework for identifying and defining the local level, local actors, and local adaptation processes. Second, the fund demonstrates limited transparency and accountability about how approved funding for adaptation is spent. Third, some accredited entities have limited experience and capacity for designing and implementing projects that deliver finance to the local level, because the local delivery of finance is not prioritized by GCF during the accreditation of entities.As a result, even though industrialized nations pledged billions for GCF, developing countries complained that accessing money has been too difficult, and faced bottlenecks, with a minuscule part paid out, according to the professor. Bond does not rule out that the newly established loss and damage fund will suffer the same fate, especially given that all major climate endeavors are operated by the same “bureaucrats.””Is there any reform within multilateralism (UNFCCC, IFIs, and WTO) on the horizon, when the same people within the COPs (and in South Africa, the main financial establishment characters) are still the ones making the rules?” the professor asked rhetorically.EconomyTop Economies Face Real Risk of Recession, WTO Warns 16 November, 09:39 GMT
Inflation & Recession Engulfing Developed World
To complicate matters further, the new loss and damage fund has been set “in the shadow of macroeconomic instability and energy price crisis,” according to Vaibhav Chaturvedi, a research fellow at the Council on Energy Environment and Water, India.”Such macroeconomic challenges complicate the issue of climate finance as it leads to less fiscal room for the developed world to loosen their purse strings,” he said. “This larger backdrop would have definitely been playing in the mind of developed country negotiators.”The major industrialized states have been fighting with growing inflation and an unfolding recession, which adds to skepticism related to the newly established loss and damage initiative, especially given that the developed world had not been very generous even during the fat years.EU nations in Central and Eastern Europe saw an economic slowdown in the third quarter of this year, with the Euro area annual inflation reaching 10.6 % in October 2022, up from 9.9 % in September 2022. The European Commission expects that most EU countries will be engulfed by a recession in the last quarter of 2022. The US Federal Reserve is continuing to raise interest rates to tame inflation, at the same time triggering concerns about the future “safe landing” and the already unfolding technical recession.”While the new funding arrangement for supporting developing countries on the issue of loss and damage is welcome, who will pay for it drowned into the choppy water of definitions, mechanisms, and most importantly ‘developed countries versus major economies’,” Chaturvedi concluded.