By Joe Thwaites and Vyoma Jha

Change happens slowly, then all at once. For thirty years, developing countries, particularly those most vulnerable to the adverse effects of climate change, have voiced the need for funding to help them deal with the worst impacts of climate change. Both sudden disasters like hurricanes and flooding, and slow onset events like sea level rise and desertification are causing loss and damage to lives, livelihoods, and property.

This is significant because the UAE does not have a formal obligation to provide financial support under the UN’s foundational climate treaty, the Framework Convention on Climate Change. The fact that the UAE led the way in pledges suggests we may be heading into a new era where the “nouveau riche” countries that have become extremely wealthy from fossil fuel exports are facing up to their responsibility for the climate crisis and joining the “old wealth” Western nations as climate finance contributors under the international climate regime.

With over $650 million in pledges, the Fund now has momentum through this rapid establishment and start-up capitalisation, which is encouraging. However, countries cannot be complacent and must ensure they operate quickly to deliver critical support to vulnerable communities. Studies show that the loss and damage bill already runs into the hundreds of billions per year. The new Fund will need much more money to deliver on its ambition. It is set up to accept contributions from three sources: public funding from governments, private finance, and new and innovative finance mechanisms. All three must play a role.

More nations need to step up and pledge to the Fund, particularly developed countries such as Austria, Belgium, and Sweden which have yet to announce contributions. Many developed countries pledged only modest amounts and should work to increase their contributions in the coming months and years. The UAE’s leadership paves the way for other rich petrostates, such as Saudi Arabia, Qatar and Kuwait, to make significant contributions. Large Asian economies, such as South Korea, Singapore and China, would also be lauded if they stepped up with contributions.

India, although not required to contribute, could provide technical assistance and share knowledge from its own experience dealing with climate disasters.Private sources of financing will be key to the Fund’s success. Companies, philanthropic foundations and other non-state actors can all contribute to the Fund. Highly polluting companies—such as those in fossil fuels, shipping and aviation—would be wise to voluntarily contribute to help address the loss and damage they cause, in line with the “polluter pays principle,” the bedrock of environmental law. If they don’t, governments could explore ways to compel them to.

This is where new and innovative sources of financing will play an important role. A new task force on international taxation, led by one of the key architects of the Paris Agreement, Laurence Tubiana, will consider several proposals in the coming months, such as taxes on fossil fuel industry profits ($4 trillion last year); a levy on the emissions of the shipping industry; and surcharges on business and first-class flights. Some of these ideas are already being used for non-climate purposes. Several European countries imposed windfall taxes on fossil fuel companies last year.

Major oil importers pay into an international fund that would provide compensation for oil spills. France and South Korea put a levy on airline tickets to help fund contributions to a global health fund. With several innovative mechanisms for financing in the works, India could consider joining existing efforts and adding its voice on how these sources could be scaled up and directed for loss and damage.

As the world finally begins to rally to help the most vulnerable deal with the adverse effects of climate change, we cannot lose sight of the fact that reducing greenhouse gas emissions and increasing resilience to climate impacts are key to reducing loss and damage, and remaining priorities at the climate talks. While the new fund set the tone at the start of COP28 for money to flow to the worst affected, the close of COP28 must also yield progress on scaling up emissions reductions, establishing goals for measuring progress on adaptation, and, crucially, the financing to achieve all of these priorities.

The authors are senior advocates in the International Program at Natural Resources Defense Council (NRDC)

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