What Is "Loss and Damage" from Climate Change? 6 Key Questions, Answered
The planet has already warmed by 1.1 degrees C (2 degrees F) due to human-induced climate change, and millions of people are today facing the real-life consequences of higher temperatures, rising seas, fiercer storms and unpredictable rainfall. Rapidly reducing emissions is essential to limit temperature rise and secure a safer future for us all, as is making major investments to protect communities from severe impacts that will continue to worsen over time.
Yet collective efforts to curb greenhouse gas emissions and adapt are currently not enough to tackle the speed and scale of climate impacts, meaning that some losses and damages from climate change are inevitable.
“Loss and damage” is a general term used in UN climate negotiations to refer to the consequences of climate change that go beyond what people can adapt to, or when options exist but a community doesn’t have the resources to access or utilize them. Loss and damage is and will continue to harm vulnerable communities the most, making addressing the issue a matter of climate justice.
Since the formation of the UN Framework Convention on Climate Change (UNFCCC) in the early 1990s, vulnerable nations have been calling on developed countries to provide financial assistance that can help them address loss and damage. But their proposals have been rebuffed.
However, momentum for providing funding to address loss and damage finally gained steam during the COP26 climate summit in Glasgow in 2021 and continued at the Bonn UN climate negotiations in Germany in June 2022. So far, a handful of developed countries have signaled some level of support for loss and damage financing including Canada, Denmark, Germany, New Zealand, Scotland and the Belgian province of Wallonia. At the COP27 summit in Egypt this coming November, countries will have a chance to finally establish a mechanism to address this critical need. (Read more about what climate action vulnerable nations need at COP27 with ACT2025’s Call for Enhanced Implementation.)
Here’s what you should know about loss and damage:
What are some examples of loss and damage?
While the UNFCCC has not precisely defined loss and damage, it’s generally understood to result from both extreme weather events likes cyclones, droughts and heatwaves, and slow-onset changes — such as sea level rise, desertification, glacial retreat, land degradation, ocean acidification and salinization. In some cases, damages may permanently alter some places; for example, rising seas encroaching on low-lying islands, or drought shrinking freshwater resources and turning once-productive farmland into barren land.
Communities that are highly vulnerable to climate impacts are particularly prone to experiencing loss and damage when they experience climate impacts beyond what they can adapt to, whether due to lack of access to finance to implement adaptation measures or because there are no measures that are feasible to implement (more on this in the next section).
The damages from these effects of climate change can be divided into economic losses and non-economic losses, though there is overlap between the two.
Economic losses and damages are those affecting resources, goods and services that are commonly traded in markets. In other words, economic losses and damages involve climate impacts that negatively affect sectors such as agriculture, forestry, fisheries and tourism, or that damage critical infrastructure, property and disrupt supply chains.
For example, in coastal Bangladesh, salt farming is a major source of employment. Yet, in recent years frequent cyclones, tidal surges and heavy rainfall have hampered salt production, eroding the country’s self-sufficiency and forcing it to import salt to manage the market shortfall.
Non-economic losses can be the most devastating — such as the incalculable toll of losing family members, the disappearance of cultures and ways of living, or the trauma of being forced to migrate from your ancestral home.
Take the communities in Kosrae, Micronesia, for example, that have lost burial grounds due to coastal erosion caused by sea level rise. And the loss of sea ice in the Arctic has affected the cultural identity and hunting practices among Inuit communities.
While harder to quantify and monetize, non-economic losses have severe and detrimental effects on the well-being of affected communities.
What is the difference between mitigation, adaptation and addressing loss and damage?
Under the Paris Climate Agreement, countries recognized the importance of “averting, minimizing and addressing” loss and damage. Loss and damage can be “averted” and “minimized” by curbing greenhouse gas emissions (mitigation) and taking preemptive action to protect communities from the consequences of climate change (adaptation).
“Addressing” loss and damage is the crucial third pillar of climate action: helping people after they have experienced climate-related impacts.
Climate adaptation measures include protecting communities from sea level rise by helping them move to higher ground, preparing for extreme weather disasters by investing in early warning systems, protecting food supplies, switching to drought-resistant crops and much more. Loss and damage happens when efforts to reduce emissions are not ambitious enough and when adaptation efforts are unsuccessful or impossible to implement, sometimes due to limited resources that communities have available.
The second installment of the IPCC’s 6th Assessment Report, published in February 2022, acknowledges that as the magnitude of climate change increases, so does the likelihood of exceeding adaptation limits. It differentiates between “soft” limits when adaptation options exist but communities don’t have the financial resources needed to pursue them and “hard” limits where “there are no reasonable prospects for avoiding intolerable risks.” These limits are particularly acute in vulnerable communities that lack the resources needed to implement effective adaptation options.
Coral reefs offer a good example of where adaptation is likely to reach its limits. The IPCC found that 70 to 90% of tropical coral reefs will die by mid-century even if temperature rise is limited to 1.5 degrees C (and nearly total loss under the 2-degrees-C scenario). This will lead to irreversible losses of biodiversity and have a major impact on coastal communities that eat and sell fish that live along the reefs.
While further research is needed to fully understand the limits of climate adaptation, it’s clear that losses and damages are already happening and many communities lack the resources to deal with them. Climate plans and policies should account for loss and damage alongside mitigation and adaptation.
What actions has the international community taken to address loss and damage?
When the UNFCCC was being drafted in 1991, Vanuatu (on behalf of the Alliance of Small Island States) proposed creating an insurance scheme to provide financial resources to countries impacted by sea level rise to which each country would contribute based on their relative contribution to global emissions and their share of the global gross national product.
However, the proposal was rejected, and the issue of loss and damage was not mentioned when the text of the Framework Convention was adopted in 1992.
Loss and damage first appeared in the negotiated outcome of the UN climate talks in 2007 as part of the Bali Action Plan. It wasn’t until 2013 that the issue gained real traction in the UN climate negotiations when parties formed the Warsaw International Mechanism on Loss and Damage (WIM) to avert, minimize and address loss and damage. The WIM was mandated to share knowledge, strengthen dialogues among stakeholders and mobilize expertise to enhance action and support to address loss and damage. But neither the WIM nor any other established mechanism delivers funding to help countries manage loss and damage.
Developing nations successfully pressed to include a goal to limit global warming to 1.5 degrees C in the Paris Agreement, and an article – Article 8 of the Agreement – on loss and damage. However the latter faced some limitations in that the Agreement doesn’t refer to finance related to loss and damage, and developed countries secured language in the accompanying COP decision explicitly stating that loss and damage “does not involve or provide a basis for any liability or compensation.” The conversation around loss and damage now centers around climate justice, although some developed countries still maintain this argument around liability and compensation (more on this below).
At COP26, a large coalition of climate-vulnerable countries advocated for creating a new finance facility or fund dedicated to loss and damage. Their urgent plea was born out of frustration with the world’s inadequate response to the climate crisis including the lack of sufficiently ambitious new commitments to limit temperature rise to 1.5 degrees C, insufficient implementation of existing commitments, limited and inaccessible finance for adaptation, and the increasing threats and impacts felt by vulnerable countries. This proposal for loss and damage financing was once again rejected by developed nations.
Instead, at COP26 countries established a two-year Glasgow Dialogue to discuss possible arrangements for loss and damage funding and agreed to operationalize and fund the Santiago Network on Loss and Damage (SNLD), which aims to provide developing countries with technical assistance to address loss and damage.
The first session of the Glasgow Dialogue took place at the Bonn UN climate negotiations in June 2022 with subsequent sessions to be held at each intersessional negotiating session, usually held in June, through 2024. At Bonn, developing countries once again elevated the urgent need for funding to help countries ravaged by climate-induced losses and damages and called for immediate solutions. While developed nations acknowledged the need to deal with such issues, they failed to clarify what steps they would be willing to take to address the problem. Developing nations also expressed concerns that the Dialogue was disconnected from the formal negotiations and worried it would only amount to a “talk-shop” without demonstrable progress by 2024.
Similarly, the Bonn UN negotiations in June 2022 also saw limited progress on how to design the SNLD. The biggest dispute is on balancing a governance structure that avoids bureaucratic burden without sacrificing the ability of the SNLD to advance implementation and have maximum impact.
Following the overall lack of progress at Bonn, loss and damage will again take center stage at COP27. The world will be watching whether developed countries use this opportunity to demonstrate solidarity with vulnerable countries by finally agreeing to establish a mechanism for high-quality finance for addressing loss and damage. (Read ACT2025’s call to action on addressing loss and damage.)
Is loss and damage an issue of liability and compensation?
One reason why loss and damage has been contentious is due to the concern from developed countries that compensating for losses and damages caused by adverse climate impacts may be construed as an admission of legal liability, triggering litigation and compensation claims on a major scale. As such, developed countries fought to include language in the Paris Agreement to prevent them from being legally on the hook to provide compensation.
However, finance for loss and damage should not be held back by a debate over questions of liability and compensation. Developed countries should provide these funds not because of legal liability but because supporting vulnerable countries that are facing unavoidable and existential threats from climate change is the right thing to do. In a recent interview, Dr. Saleemul Huq from the International Centre for Climate Change and Development and an ACT2025 partner said that what developing countries are asking for is “finance for loss and damage in the spirit of solidarity.”
At COP27, it will be important for negotiators to find a workable pathway and start helping communities that are already suffering and have no mechanism for financial support.
How much funding currently goes toward addressing loss and damage, and how much is needed?
There’s limited research evaluating the scale of financing needed to address global losses and damages, and increased knowledge and leadership in this area will be necessary. However, one paper estimates that that the economic costs in developing countries from residual damages that go beyond adaptation will increase from $116-435 billion in 2020 to $290-580 billion in 2030, and could reach between $1-1.8 trillion by 2050.
Funding for mitigation and adaptation helps avert and minimize losses and damages, but there is no clear mechanism to deal with the third component: addressing loss and damage once a climate catastrophe (including a slow-onset one) hits.
Some developed countries point to humanitarian aid, disaster-risk management, and insurance as types of funding that are already helping fulfill this global need for assistance after disasters strike. But while these types of financing are clearly crucial, they don’t come close to addressing the full scale and scope of the problem. For example, Palau is concerned that tuna will migrate out of its fishing areas as the ocean water warms. Without the ability to fish for tuna, some Pacific island nations could lose income averaging 37% of government revenue – but humanitarian aid is not poised nor mandated to address this problem, which will get worse over time.
In addition, it turns out that even when humanitarian aid is appropriate, the global community has not adequately responded to the scale of the need. Recent Oxfam research found that funding appeals linked to extreme weather events are eight times higher than they were 20 years ago, and over the past five years nearly half of appeals have gone unmet. This has led to a funding shortfall of up to $33 billion over the period.
Despite the recent mention in the IPCC WGII report that about 24%of the Green Climate Fund’s approved projects refer to loss and damage, while a subset representing 16% of all approved projects explicitly mention loss and damage linked to their main activities, it’s difficult to definitively and clearly identify the amount of funding available for loss and damage. The lack of an agreed definition makes it hard to tag projects that could be considered loss and damage and obscures its relation to adaptation and mitigation.
The first time funds were set aside to tackle this issue head on came from Scotland and Wallonia (Belgium) during the COP26 climate summit in Glasgow, providing £2 million (around $2.6 million) and EUR 1 million (around $1.1 million), respectively (a group of philanthropies came forward with a similar commitment). Although these contributions are relatively small amounts, they were warmly welcomed by vulnerable countries, seen as a way to seed the ground for countries to rally behind creating a mechanism under UNFCCC negotiations to provide much more funding going forward. (Read more on the current state of play on financing loss and damage.)
How could this funding directly help people facing losses and damages from climate change?
Addressing loss and damage could span a range of activities and should be shaped by the communities that are experiencing them. Examples include weather-indexed crop insurance for farmers or proactively setting aside funds to rebuild critical infrastructure when disaster strikes.
It could also entail providing immediate humanitarian assistance after an extreme weather event, offering relief and rehabilitation to victims through provision of basic amenities, enabling social protection systems to provide emergency cash transfer to the poor, and enhancing microcredit institutions to provide financing for livelihood restoration.
Such funding could also be used to help people rebuild when their homes are destroyed. For example, while early warning systems in Bangladesh have helped radically reduce fatalities from extreme weather events, people leave the storm shelters to find their homes and livelihoods destroyed, and have thus unquestionably experienced loss and damage.
Finally, when necessary, funding for loss and damage can assist with migration and relocation of people who are permanently displaced and or help diversify skills if their original livelihoods are no longer available.
Onward to COP27
The central measure for success at the COP27 summit is whether the world stands with the over 3billion people who live in countries that are highly vulnerable to climate impacts. A recent IPCC report shows that climate impacts are already causing widespread disruptions, and no continent is more in jeopardy than Africa, where crop productivity has shrunk by a third since the 1960s due to climate change.
It is only fitting that developed countries use this UN climate summit, hosted in Africa by Egypt, to show solidarity with vulnerable countries by rallying behind them with more financial support to both adapt to climate impacts to lessen their severity and finally help manage the devastating losses and damages that they are experiencing already — both of which are essential to building resilience to climate change impacts that will continue to worsen.
This article was updated on August 9, 2022.