Opinion: Making a loss and damage fund work for the African continent

The historical decision to establish a loss and damage, or L&D, fund was a major breakthrough of COP 27, last year’s U.N. climate summit. But when the committee in charge of the particulars of who pays who, how, where, and what failed to reach an agreement in Egypt just a few weeks before COP 28, many feared its implementation would hit another brick wall and derail any further progress on climate change altogether. Fortunately, a deal was struck in Abu Dhabi on Nov. 3-5, but the clearly visible tensions exacerbated the profound divisions that have been reinforcing the injustices of the climate crisis between high-income and low-income nations since the genesis of L&D negotiations in the 1990s. Needless to say, failing to deliver on the long-awaited loss and damage fund would have had disastrous consequences for climate justice, economic development, and international diplomacy. Low-income countries, especially African countries, are at risk of not benefitting from just and equitable compensation for the actions of high-income countries that have contributed to the climate crisis. The African continent is confronted with some of the most severe effects of climate change despite contributing only 4% of global emissions, which is why the concept of climate justice resonates louder here than anywhere. In addition, African nations have the least capacity and financial resources to mitigate or adapt to climate disasters. Now, African nations need to make sure that the continent’s agenda and considerations are taken into proper consideration when designing the way the L&D fund actually operates. In collaboration with Finance for Development Lab, we recently published an assessment of the scope of L&D financing, with recommendations to ensure the L&D fund is inclusive, equitable, sustainable, and responsive to the most pressing needs of African nations and lower-income countries. These next steps will be key in ensuring the L&D fund works for African countries: 1. What kind of losses and damages should be eligible for compensation? African countries need to drive the development of a global framework and a standardized evaluation guideline for losses incurred for implementation once the L&D fund is operational. The guidelines should cover both economic and noneconomic losses, considering the latter often outweigh economic losses, making them a central pillar of climate change policy. Assessing the economic costs of loss and damage has been relatively straightforward and traditionally calculated as the sum of adaptation costs and macroeconomic damage. On the other hand, determining noneconomic costs has been more contentious as they refer to non tradeable losses that reflect on individuals, society, and the environment, and market values cannot be easily assigned, e.g., loss of life, health, human mobility, cultural heritage, Indigenous knowledge, biodiversity, psychological impacts, education, tradition and religion, ecosystem services, and territories. Although climate disasters vary by country, sector, and impact, reconstruction costs captured in most datasets do not feature noneconomic losses, making this a lost opportunity for negotiating countries. 2. Who should benefit? The gender dynamics that come with climate change are crucial and must be factored in L&D negotiations. For instance, the double burden of climate change and gender inequality renders women more vulnerable because they are less likely to access financial and social assets despite being responsible for 80% of food production. The ongoing drought in the Horn of Africa, which the United Nations deems one of the most severe experiences in the region in decades, has caused entire families to migrate away from health facilities. This has resulted in a decreased rate of skilled birth attendance that will likely increase the risk of maternal mortality, which consequently affects school dropouts among children. Designing gender-responsive interventions is therefore critical and government institutions in Africa need to collect gender-disaggregated data to inform targeted interventions to help women cope with and adapt to the effects of climate change. 3. On which basis should compensation be awarded? Defining clear criteria to award compensation and designing effective disbursement mechanisms are essential to ensure fair and efficient distribution of funds. Presently, the U.N. Framework Convention on Climate Change lacks an officially binding definition of L&D. As a result, this issue remains open to interpretation, susceptible to politicization, and subject to varied understanding of the parameters encompassing L&D. Making sure the money effectively reaches those in need requires the establishment of clearly defined transparent selection criteria and guidelines to ensure fairness, effective use of resources, and use of the fund for causes consistent with its objectives and policies. The criteria can cover issues like the determination of the percentage of losses and damage covered by the fund in a scenario where the fund does not cover all losses and damage following a climate event. The criteria should also establish how to quantify noneconomic losses and damages. To ensure consistency and fairness in disbursement, common valuation methodologies between countries should be adopted. Other factors that can be considered in developing a criterion for the award are capacity to cope; type of L&D; vulnerability; risk, or the frequency of recurrence and severity; and needs assessment to ensure the fund is well targeted. A united African front for L&D finance mechanisms Citizens of African nations, now more than ever, expect their governments to play an active and informed role in the establishment and implementation of the L&D fund. While L&D financing is one of the instruments that allows nations that experience a climate disaster to recover, it is expected that the L&D fund will not cover all losses and damages. This requires nations to ensure the fund is timely and able to cover a percentage of the losses where the fund does not cover all losses and damage following a climate event. Further, it is difficult to critique current L&D finance mechanisms in isolation, and therefore, a broader review of the current climate finance mechanism could provide potential considerations for the development of an adequate L&D finance mechanism. Finally, it is important to note that the lack of a burden-sharing framework for high-income countries has posed a challenge to holding these countries accountable. A significant hurdle remains the relatively limited capacity of lower-income countries to quantify costs. Without adequate and credible data, it becomes difficult for nations to negotiate for compensation, which is why African nations should maintain a united front and invest in building a solid base of data on the impacts and costs of climate change, which will be critical when negotiating. As nations work together to implement the new L&D fund, ensuring that promises from COP 27 were not just another empty box, the time has come to elevate the debate above mere political considerations and power struggles. African countries need to come together to better advocate their vision and make sure their interests are at the heart of all decisions.