19 December 2023
Business World
Op-eds
The real test lies in closing
this gap through the implementation of key decisions and assessing whether they
go far enough
Reflecting
on the historic 2023 United Nations Climate Change Conference (COP28), leaves
me in two minds. While it is satisfying to see global unity for a cause that
truly demands collective action, there exists a gap between nations fighting to
meet their climate goals. With increasing geopolitical risks, the COVID-19
pandemic, and the rising income inequalities individual priorities of nations
have overtaken the collaboration required to achieve the global goals
collectively.
Hence, the real test lies in
closing this gap through the implementation of key decisions and assessing
whether they go far enough.
The
loss and damage fund: A drop in the ocean
A slight sliver on the brighter
side was to see the long-awaited operationalization of the Loss and Damage
Fund. A little history for some perspective. The Loss and Damage Fund first
came into discussion, three decades ago in 1991, when a small island nation
Vanuatu, suffering from rising sea levels, raised a simple question: Who should
pay for the cost of environmental degradation? Since then, after 30 years of
deliberations and a growing demand for compensating developing nations for
their losses, the approval of the Loss and Damage fund at COP27 in Egypt was a
key outcome. This fund aims to aid developing nations facing losses from
extreme weather events. These comprise of non-economic factors including displacement,
loss of culture, and loss of biodiversity. The definition is quite inclusive.
While the operationalization of
the fund at COP28 is a pivotal moment, it comes along with challenges that need
to be addressed.
The climate emergency is widely
acknowledged to be contributed by various nations, including those classified
as developed under the 1992 Rio Convention. The total voluntary pledge to the
Loss and Damage Fund, including from countries with robust economies that
account for half of the world’s GPD, of just over $700 million (£556 million)
is grossly inadequate. According to the loss and damage fund collaboration, the
least amount required to be mobilized to address the adverse climatic
consequences is $400 billion annually. The contributions to the Loss and Damage
Fund constitute less than 0.2 per cent of the economic and non-economic losses
countries face from global warming. A drop in the ocean.
It also deviates from the UNFCCC
principle of accountability and justice. The fund relies on the generosity and
goodwill of the donors rather than on the accountability and justice of the
polluters. Replenishment of the fund is another big question. It is not clear
whether the committed amounts will be replenished to meet the growing demands
of climate adaptation and mitigation needs.
I would go a step further and
ensure that the source of funding is diversified to include carbon taxes,
levies on fossil fuels, aviation and maritime transport, and debt relief, among
others.
The
way forward
The Loss and Damage fund must be
distributed among the developing countries in a just manner. A key question
here would be to define what makes a nation ‘developing’? If one goes by the
1992 UNFCCC definition, certain countries with very high per capita incomes
would be eligible to receive these funds, at the cost of countries that are in
genuine need of such incentives.
Another key factor which can
unlock the potential of the Loss and Damage fund is the engagement of the
private sector. We need to see the private sector, particularly financial
institutions, innovate, take lead and help developing nations transition to
low-carbon and resilient economies. The governments should facilitate access to
finance and insurance products, enhancing the viability of climate-related investments.
Financial instruments like green bonds, subsidies, sovereign guarantees, and
blended finance can make climate financing more attractive for the private
sector. The financial resources, coupled with innovation and technology of the
private sector, will propel this transition.
The private sector must also be
nudged to align its strategies with key climate commitments such as the Paris
Agreement or the 2030 Agenda, as well as carbon pricing, standards, incentives,
and disclosure requirements. Government intervention is needed here as well to
create conditions and incentives that can mobilize and leverage private-sector
resources for climate action. By developing regulatory frameworks, we can go a
long way toward ensuring that resources such as the Loss and Damage fund can
truly be our arsenal to battle climate change.
Finally, accessibility is
paramount. The Loss and Damage fund's success and impact hinges on its ease of
access. It is crucial to make the fund accessible without any bureaucracy or
hurdles in ways that are ethical and transparent. To do this, the approach must
be adaptive and participatory. Establishing a transparent governance structure
with clear accountability mechanisms will ensure that the fund is used
effectively as per its original objectives.
This
effort would need to be at every level, be it global or local. This is a war
worth fighting for and winning. In the words of the Secretary-General of the
United Nations, António Guterres, “The climate emergency is a race we are
losing, but it is a race we can win.” Let us come together to win this one.
The author is Co-founder,
ReNew, Chairperson of Sustainability
Urji Calculator