Vaibhav Chaturvedi, Jhalak Aggarwal

India witnessed a 24% increase in the frequency and intensity of climatic extremes over the past 20 years compared to the previous 30. It shows why emission reduction isn’t enough, and why countries bearing the brunt of such events, like India, have been demanding dedicated funds to support recovery from loss and damage (L&D) due to such high-impact climate events. Therefore, one of the highlights of COP28 was the adoption of the long-awaited Loss and Damage fund on the very first day. But the fine print may not be as celebration-worthy yet.

The first question is who pays for loss and damage? The draft text unequivocally emphasises that the funding arrangements, including a fund, do not involve liability or compensation. In addition, the text also has no mention of historical responsibility of developed countries. These two, together, effectively imply that there is no responsibility or obligation for the developed world to pay for the L&D fund. That is, the fund would provide support for recovery from climate disasters, rather than compensation, to vulnerable developing economies. This framing, supported by the developed world, is critical because it will determine if historical responsibility will have a role to play in who eventually pays. Currently, the text lets historical polluters off the hook by highlighting that countries with current economic might should support recovery in vulnerable developing economies.

The second question will essentially answer many others—what is the decision-making structure of the L&D fund? There are three key issues to be resolved: the size of the fund, who will get the support, and in what form will the fund be provided in the event of a climate-related disaster? Detailed criteria and methodologies for the same will be proposed, negotiated, and hopefully agreed upon sooner than later. However, the decision-making structure of the L&D fund will determine the fate of the money.

To this effect, the L&D fund will have a Board that ‘will have the responsibility for setting the strategic direction of the Fund and for the Fund’s governance and operational modalities, policies, frameworks and work programme, including relevant funding decisions.’ Essentially, apart from the question of who contributes to the fund, all other matters will be determined by the Board. Decisions of the Board will also supersede those of the World Bank in case of conflict. Therefore, the composition of the Board becomes critical—the Board will comprise 26 members, and 12 will be from developed countries. The other 14 will the developing world (from Asia, Africa, small island states, and least-developed countries). The Board will ultimately decide to whom and through what process the funds will flow, and which countries are the ‘most vulnerable developing countries’.

In all likelihood, this decision-making process would be based on the majority principle, because giving veto power to board members will scuttle progress. The developed countries will only need the support of two countries from the developing bloc to pass decisions in their favour. Given the history of multilateral negotiations, be it on climate, the ozone layer, or trade, it is evident that getting one or two countries on the Board on their side will not be a big deal. There is a larger geopolitical backdrop within which such power politics plays out. Helping a member of sub-Saharan Africa or small island states through bilateral aid in millions will preempt a payout of trillions that the L&D fund envisages. It is a pretty good deal for the developed world.

Finally, what should India be pushing for to ensure the L&D Fund truly meets the needs of the Global South? India’s interventions could ensure its leadership on a few critical aspects—the decision-making architecture, co-development of attribution science with the Global South, and being the most prominent voice of vulnerable developing economies. India should collaborate with other Asian countries to ensure that it is in the room for the first three terms (nine years), the maximum allowed, to shape the operational modalities in the formative years. Second, it could ensure that the developing country Board members stay together and there are no fissures. This will be critical for the developing world to have a real say in the L&D fund. Third, India must garner support from the developing as well as the developed world to ensure that the finance delivered is new, additional, predictable, and mostly in the form of grants and unconditional transfers—not as highly concessional loans to avoid exacerbating the debt crisis in many developing countries. Finally, India should promote the development of attribution science within developing economies, because at some point this information would become crucial to estimate the quantum of support needed every year. It could develop a Global South-led consortium to enhance technical capacity to assess the extent of the impact of climate change on disasters. When the gavel comes down on the final decisions on L&D at COP28, loopholes shouldn’t be the reason why losses aren’t accounted for.

(The authors are respectively, fellow, and research analyst, CEEW. Views are personal.)