What next after COP27 L&D fund?

Nepal has a key role in ensuring that the loss and damage fund agreed at COP27 is paid out and properly spent

Since the climate change conference at Sharm El-Sheikh in Egypt, the media has been inundated with news of the ‘loss and damage fund’ set up to support developing countries as they face the impact of climate breakdown.

The fact that the fund was actually passed by governments was quite an achievement given how stagnated the conversation around loss and damage funding for climate-induced harm has been for the past decades.

It took 30 years of lobbying by countries like Nepal that are vulnerable to the climate crisis for the 198 nations that are party to the UN Framework Convention on Climate Change (UNFCCC) to agree to establish the new fund in Sharm El-Sheikh.

What is loss and damage?

The concept of loss and damage goes beyond just adapting to or mitigating climate change. It addresses the kind of destruction like massive floods, severe droughts, ocean expansion that countries and communities cannot adapt to.

While adaptation deals with the projected risks of climate change, loss and damage tackles the aftermath once impact have already materialised.

The notable failure to agree to a way forward on loss and damage funding at the Glasgow Climate Pact at COP26 last year set the stage for the negotiations in Sharm El-Sheikh. It gave loss and damage funding a new prominence it did not have before, and built the momentum for talks.

Yet, it is important to remember we went into the conference centre for the first time in Sharm El-Sheikh without loss and damage funding even on the agenda for the negotiations. COPs mostly begin with an agenda fight, but the all nighter to get loss and damage funding a formal space during the negotiation was a good indicator of the marathon that was to come.

The vulnerable countries refused to go back from the summit without an outcome on this issue. Our persistence succeeded in the establishment of a fund that developing countries had been asking for since the early nineties.

It bought us a step closer to getting vital resources to those on the frontlines of the climate crisis. It was also a timely reminder of how multilateralism can deliver for those who are most in need.

The loss and damage agreement is a big deal for Nepal, a Himalayan country exposed to high risk from climate breakdown. A 2020 study by Climate Analytics shows that all seven provinces in Nepal are at risk from the effects of climate change, and that these risks will become more pronounced at 2°C and 3°C rise above pre-industrial levels.

Currently global average temperatures are 1.1°C above pre-industrial levels, and scientists are urging the government to cut back emissions so it will be limited to 1.5°C by the end of the century.

This risk is not only a manifestation of Nepal’s fragile climate-sensitive topography, but also the lack of planned development and weak socio-economic systems that leads to higher vulnerability.

Lubra Village is under constant threat from flash floods. Photo: RONAN WALLACE

Data from the BIPAD portal, the central disaster information management system of the Nepal government, shows that compared to other forms of natural disasters, climate-related floods and landslides have been steadily increasing in Nepal causing economic losses as well as loss of lives.

Other forms of extreme- and slow-onset climate impacts such as glacier melt and outburst floods, forest fires, droughts and cold waves are also on the rise. The increasing frequency and severity of various hazards indicates that climate change impact in the country is growing.

A 2014 ICIMOD study shows that Nepal’s glacier area decreased by 24% between 1977-2010 and another 2019 study shows that even if global warming is limited to 1.5°C increase, the mountains in the region will warm by 2°C degrees and the glaciers will lose a third of their volume. This will have a significant impact on the nearly two billion people living in the region and downstream, including in Nepal.

It is estimated that Nepal will experience on average a 13% reduction in its GDP by 2050 and a 33% reduction by 2100 due to climate impact even in the 1.5°C scenario. This will increase on average to around 20% reduction by 2050 and 65% reduction by 2100 under current climate policies.

These are conservative estimates that do not take into account all forms of climate impacts, and are in addition to the non-economic loss and damage the country will face.

The loss and damage fund agreed at COP27 is huge given that to date no finance had been made available through existing processes within the UNFCCC to address it.

While a fund was established building on the momentum from Glasgow, the specifics of what the fund looks like, where it will be placed, how it will be sourced and how it will function remains to be decided. The way forward to design and operationalise the fund is important.

A transitional committee tasked to work on the design of the fund will meet three times next year to deliberate on these matters, and will present recommendations for the consideration of countries at COP28 in UAE next year so it will be operational by end 2023.

The process has begun to nominate members of the transitional committee, which will comprise 14 members from developing countries and 10 members from developed countries. Under the developing countries category, three members will be nominated from the Asia and the Pacific region and two from the Least Developed Countries LDCs.

It is vital that the new loss and damage fund sits in parallel with existing funds like the Global Environment Facility (GEF) and the Green Climate Fund (GCF) as an operating entity under the UNFCCC and Paris Agreement. It should expedite and have flexible disbursement of resources to ensure support immediately in the aftermath of a climate event. This would not be possible if the fund were to sit under the GEF and the GCF which follow a program-based approach.

At COP27, LDCs negotiated on loss and damage as a part of the Group of 77 and China — the negotiating bloc comprising 134 developing countries. There is a view from the developed countries that the funding arrangements to respond to loss and damage should include other loss and damage financing initiatives outside of the UNFCCC as well.

While the LDC Group welcomes any support on loss and damage, proposals outside of the UNFCCC are seen as falling outside of the mandate of the climate negotiations, and the governments that take part in them. They are, therefore, seen as not being not pertinent to the negotiations ongoing under the Convention and Paris Agreement.

Nepal's role

Nepal needs to work on further strengthening its institutions and policies to better document and respond to climate impacts, and coordinate with agencies already engaged on disaster- and humanitarian-related support.

Currently the BIPAD portal tracks both climate-related and other disasters together. Now more thought needs to be given on how the data can be disaggregated to demonstrate climate change impact. Furthermore, establishing climate linkage and collecting information and data on slow onset events remains key.

Nepal has a special role to play in the design of the loss and damage fund in the coming year. We are best positioned to amplify voices on the accelerated impacts of climate change in the highlands.

It will also be important to continue to build on Nepal’s expertise on climate change to maintain leadership at both the national and international levels and to steward the negotiations so the loss and damage fund can  respond effectively to the urgent needs of the world’s most vulnerable.

Manjeet Dhakal is Head of LDC Support Team at Climate Analytics (CA) and Director for Climate Analytics South Asia office. Sneha Pandey is Sneha Pandey is a loss and damage expert with the LDC Support Team at Climate Analytics.