Loss and Damage funding and the call for fair climate financing at COP29

If someone starts burning trash and the fire spreads and destroys your house, how much should they compensate you? You would most likely say that it depends on the amount of damage caused, and the cost to relocate whether temporarily or permanently, and your lawyer, if you hire one, would no doubt make a case for the trauma and emotional distress you endured as a result of this ordeal.

While some things can’t be measured in dollars, this is the exhausting task world leaders face at COP29 in Baku, Azerbaijan – putting a value on climate damage to support those affected. The outcome of those discussions won’t reverse what happened to your home but the monies they commit to giving your government, would reduce the risk of your home being burnt again and get you back up on your feet to provide for your family again. 

The Loss and Damage Fund, set up at COP27 in 2022 was created to help developing nations tackle the impacts of climate change. The fund is supposed to bring in at least $1 billion annually, and just recently, it began accepting contributions, with plans to start funding projects in 2025. So far, it’s raised $720 million, including a $19 million pledge from Sweden. While every dollar counts, experts agree that it’s still nowhere near enough to address the urgent needs of nations like Antigua & Barbuda, which are facing severe climate-related losses.

Loss and damage isn’t just about emergency help; it’s also about reparations and human rights. Many groups agree that they go hand-in-hand. Groups like the UN and various NGOs believe that communities directly impacted by climate change should have a say in how the funds are used. 

Elisa Morghera, the UN Special Rapporteur on climate change and human rights, echoed this at COP29, emphasizing that the system should prioritize the needs of the affected people. “And within those countries that have been affected, particularly children, women, persons with disabilities, migrants, those that have been displaced by climate change have faced much higher burdens, much higher risks, much higher in some cases violation of their human rights,” she said.

Lien Vandamme from the Center for International Environmental Law pointed out that the Fund has some issues, mainly that contributions are voluntary, not mandatory. Although the Fund is a step forward, it’s still underfunded and lacks the required contributions, leaving vulnerable communities without enough support. The way the Fund is set up, with the World Bank managing it, raises questions about how well it can deliver real help. “A very recent study by the UN Secretary-General that he prepared for the Human Rights Council confirms that UNFCC loss and damage mechanisms are at this moment not designed to provide a remedy for or to uphold the right to remedy for those affected by the climate,” she outlined. 

The Paris Agreement tackles loss and damage with the aim of “averting, minimizing, and addressing” it, but what that means in practice is still up for debate..For different groups, the amount of finances is different based on the experienced and predicted impacts of natural disasters and changing weather patterns in each country.

The Prime Minister of Antigua & Barbuda made it clear: loans just make things worse. He warned that if there’s no real progress, these countries might turn to international courts to hold the biggest polluters accountable. “If the promises aren’t kept, we’ll have to rely on international law to get justice. It’s not an option anymore—it’s a must.”

UN Secretary-General António Guterres is pushing for more financial support, suggesting new funding ideas like taxes on high-emission industries such as shipping and aviation. He called the $700 million in the fund a win for developing countries and justice, but pointed out that it’s not nearly enough to fix the harm done to vulnerable people. “$700 million is about what the world’s top ten footballers earn in a year,” he said during a high-level meeting.

With the loss and damage fund now in motion, the international community will have to work diligently to finalize the details of new funding arrangements and to mobilize finance at scale. Developing countries and communities on the front lines of climate impacts are counting on them.

How much can the Loss & Damage Fund help to actualise new goals?

In addition to the Loss and Damage Fund, COP29 leaders are negotiating the New Collective Quantified Goal (NCQG) on climate finance. Set to replace the $100 billion target established in the Paris Agreement, the NCQG aims for a needs-based, transparent, and balanced financial commitment.

More than 80% of climate finance in Latin America and the Caribbean (LAC) is as credits and loans which is creating further debts for Small Island Developing States (SIDS). 

The latest OECD (2023) report, shows that Small Island Developing States (SIDS) received an average of USD 3 billion in climate finance annually from 2016 to 2021, accounting for approximately 3% of the total climate finance mobilized by developed countries. This funding share for SIDS gradually increased, growing from 2% in 2016 to 4% in 2021.

Source: OECD (2023), Climate Finance Provided and Mobilised by Developed Countries in 2013-2021: Aggregate Trends and Opportunities for Scaling Up Adaptation and Mobilised Private Finance, Climate Finance and the USD 100 Billion Goal, OECD Publishing, Paris.

According to the report by 2025, developing countries are estimated to need around USD$1 trillion annually for climate investments, rising to roughly USD$2.4 trillion each year between 2026 and 2030. To close this investment and financing gap, they will need to harness a range of financial sources across public, private, domestic, and international finance.

Differences of Opinions

“Oil and gas are a gift from God.” 

No, it’s not a quote from the bible but a statement made by Azerbaijan’s President Ilham Aliyev, the president of COP29’s host country while defending Azerbaijan’s high use of fossil fuels and its plans to expand gas production by up to a third over the next decade.

Statements like his, reflect the tensions at COP29, where big fossil fuel producers are struggling with a new draft text on climate finance. According to Article 9.1 of the Paris Agreement, developed countries are supposed to help fund climate efforts in developing countries. But on Day 2 of COP, countries like the G77 and China rejected the text, saying it didn’t reflect their concerns. By Day 3, however, they agreed to use it as a starting point for talks.

NCQG negotiations, which began in 2022, have been tough. Developing countries want more funding based on their needs, while developed countries are looking to bring in private sector money. While negotiators from developed countries talk about trillions of dollars in climate finance, they’re hesitant to use public funds and are looking to private finance instead. But critics argue that governments could free up public money by cutting fossil fuel subsidies, reducing military spending, or reforming taxes. 

There is also a lot of debate about standardizing climate finance definitions and reporting to avoid confusion since past numbers have been inconsistent.

The Prime Minister of Antigua and Barbuda warned about relying on “illusory private capital” that “complicates” discussions on the New Collective Quantified Goal and called for more direct government action, like a global carbon tax on high-polluting industries.

Catherine Pettengell from CAN UK also pointed out that the wealthy could contribute more through fair taxes, which could generate significant funding for climate action. She argued that there’s plenty of public money—it’s just being spent on things like oil subsidies and tax breaks for big companies, instead of tackling climate change.

“We just don’t buy the story that there’s not enough public finance for climate action. There’s public finance going to subsidies, there’s public finance going to tax breaks for oil companies, this is the funding that needs to be going to the solutions, not the problems.” 

The final decision on the NCQG at COP29 will shape climate finance post-2025, and those most affected by climate change are watching closely, hoping for a commitment that matches the scale of the crisis.

—
This story was originally published by Island Press Box, with the support of Climate Tracker’s COP29 Caribbean Climate Justice Journalism Fellowship.