Towards a funding mechanism for loss and damage from climate change impacts

• Published in: Climate risk management 2022, Vol.35, p.100391, Article 100391
• Main Author: Pill, Melanie
• Format: Article
• Language: English
• Subjects: Climate change; Climate finance; Loss and damage; Polluter Pays Principle; Small Island developing states
• ISSN: 2212-0963; 2212-0963
• DOI: 10.1016/j.crm.2021.100391

•There is potential to de-politicize certain areas of the debate of L&D funding.•There are areas of agreement between developed and developing countries in regards to L&D finance.•Compensation for L&D is largely considered impracticable by developing countries.•The ‘polluter pays principle’ should be applied to private industries and major polluting countries. Finance for loss and damage from human-induced climate change impacts as it is recognised in the Paris Agreement is contentiously discussed in international negotiations, so far without any resolution. Based on 43 interviews with elite stakeholders working on loss and damage (L&D), this paper explores what components a funding mechanism requires to avert, minimise and address L&D, how funds are best mobilised and how they should be administered or distributed. Interviewees included actors in the United Nations Framework Convention on Climate Change negotiations, small island developing states (SIDS) and developing country representatives, non-governmental organisations (NGO), Executive Committee members of the Warsaw International Mechanism for Loss and Damage (WIM), multilateral organisations, environmental actors in the private sector, and developed countries. Through analysis of responses, diverse perspectives are presented and distilled into one potential mechanism. The paper offers insights into where opinions of interviewees align or misalign and inform a way forward for L&D funding in a politically sensitive environment. The majority of interviewees believed that L&D funds should be mobilised through the ‘polluter pays principle’ to finance components of a L&D mechanism that relate to a) adaptation and disaster risk reduction, b) insurance and c) solidarity. The Green Climate Fund or the Warsaw International Mechanism for Loss and Damage have the potential to play an administrative role in a L&D finance mechanism. Compensation payments are overall considered impractical, not desired by developing countries and rejected by developed nations. Unexpected responses were related to investments into gender equality to reduce L&D, establishment of sovereign funds and usage of philanthropic organisations as a funding source for L&D.