Explained: What is 'loss and damage' fund, what is India's take on it

Agreement on financing one of the most significant steps in UN climate talks in 30 years

On November 20, nations decided to establish a "loss and damage" fund to assist poor countries hit by a warming planet. It is one of the most significant progress governments have made since the UN climate talks began 30 years ago. 

The idea of establishing the fund comes from an understanding that the poor countries are the most impacted by extreme weather events like floods, heat waves. Developed nations have contributed the most, (nearly 92 per cent) to greenhouse emissions blamed for the climate crisis and are therefore liable to help countries vulnerable to climate-induced changes, it is argued.

“Clearly this will not be enough, but it is a much-needed political signal to rebuild broken trust,” the UN chief Antonio Guterres underscored in his address, stressing that the UN system will support the effort every step of the way.  

Calling the loss and damage fund a step towards justice, Guterres reminded the countries to prioritise climate action, including the target to reduce global greenhouse gas emissions and keep alive the Paris Agreement’s 1.5 degree Celsius limit.

What is loss and damage? 

It is a measure of 'loss and damage' arising from the adverse impacts of climate crisis, especially the extreme weather events and slow onset events, like sea level rise, increasing temperatures, ocean acidification, glacial retreat and related impacts, salinization, land and forest degradation, loss of biodiversity and desertification.

COP 19 had established the Warsaw International Mechanism for Loss and Damage, acknowledging that 'loss and damage' includes, and in some cases involves more than, that which can be reduced by only adaptation.

The idea of loss and damage came up first in 1991, when the Alliance of Small Island States (AOSIS) made the demand. Thirty-one years, finally the COP27 session brought this one into realisation.

In 2013, the United Nations had agreed to set up a formal financial mechanism to tackle 'loss and damage'. But, until now it remained mostly donations-based and not much progress was made to formalise it.

At the opening of COP 27, Guterres and Pakistan president Shehbaz Sharif, said in a joint statement: “If there is any doubt about loss and damage, go to Pakistan, the loss is there."

Guterres had then asked for "a clear roadmap, including the creation of an institutional framework and financing to compensate the country."

Who will contribute to the fund?

The fund will initially receive contributions from the developed countries and other private and public sources. 

Other major economies can also join in to fund the initiative. The developed countries had for long pushed the agenda of adding contributions from the high polluting developing countries. 

However, there still is a lack of clarity on which countries will be eligible to receive funds through the financing facility that will become operational in 2023. The method to categorise the countries is still a work in progress, and stakeholders are sceptical about the devil that will creep up in the details.

Is it the solution?

After the fund for loss and damage was formally accepted at the COP27, Guterres reminded nations that the fund is not an answer if the climate crisis washes a small island State off the map – or turns an entire African country into a desert. And called for "just energy transition partnerships" to speed up the phasing out of coal and scaling up renewables.

India's take 

Even though India welcomed the decision, it said that rather than contributing, it will be claiming from the fund. 

"We note that we are establishing a four-year work programme on climate action in agriculture security...Agriculture, the mainstay of livelihood of millions of smallholder farmers will be hard-hit from climate change. So, we should not burden them with mitigation responsibility." Bhupendra Yadav, Union Cabinet Minister for Environment, Forest & Climate Change said in his statement post the COP27 agreement.