The 27th meeting of the Conference of the Parties (COP27) to the United Nations Framework Convention on Climate Change (UNFCCC) was held in the month of November in Egypt. The need for countries to take decisions that address the urgent needs on climate impacts and take action that provides solutions to those most vulnerable to climate change is now more important than ever. In responding to this need, it is important that countries can mobilise climate finance to address the losses and damages inflicted through climate risks and facilitate the implementation of much-needed climate solutions.
Climate finance
Climate finance could be referred to as the local, national, or transnational financing of activities aimed at addressing climate change, including risks, impacts, and other relevant aspects. While the conversation on climate finance has been focused on climate change mitigation (the reduction of greenhouse gas emissions) and adaptation, climate finance for addressing climate-induced loss and damage has become another key focus area. This is due to the urgent need to address the sudden- and slow-onset disasters and processes that are exacerbated by the climate change as well as to ensure that those most vulnerable to climate risks and impacts can access climate finance in a manner that is rapid and efficient.
Climate finance focuses on the principle of common but differentiated responsibility and the respective capabilities of different countries, which could be explained as the need for countries to be considered based on their capacity to address climate change as well as the responsibility to take action due to the differing circumstances of countries regarding their use of natural resources and their contribution to the increase of greenhouse gas emissions. This includes a responsibility on the part of the developed countries, termed Annex I countries, to provide financial support, technical support, and means of implementation to developing countries.
Loss and damage finance
Loss and damage finance can be loosely described as the funds needed to address climate-induced losses and damages. This could include funding provided as relief in the context of a disaster, investments to manage climate risks, compensation in the case of loss and damage, as well as investments for capacity-building on how different entities could address the needs related to losses and damages.
COP27 negotiations played a significant role in pushing for a finance facility that could support and accelerate action related to addressing climate-induced losses and damages. The negotiators of developing countries have been highlighting the need for such a facility to ensure that finance for loss and damage will be additional to the climate finance allocated to mitigation- and adaptation-related activities. The negotiations on this topic at COP27 in Egypt have supported the framing for climate finance in the future and send an important signal on the urgent need to support those who are vulnerable to climate impacts.
Public climate finance
In discussing climate finance, the discussion remains focused on the climate finance contributions of developed countries. However, there are developing countries that are carrying the burden of building resilience to climate impacts and addressing climate-induced loss and damage. For example, Sri Lanka invests a significant amount of public finance to address the impacts of climate and climate-induced losses and damages through risk management instruments such as the agriculture and agrarian crop insurance scheme and other climate and disaster risk transfer options available in the country. A large majority of this funding is allocated from the national budget.
It is important for countries like Sri Lanka to highlight these investments for finding solutions in-country through domestic finance. Countries such as the Republic of Vanuatu have committed through their climate policies to allocate 15% of the national budget to be allocated to address climate-induced impacts.
Evidence on country’s needs and assessments related to addressing climate-induced loss and damage would form baselines for building the need to mobilise climate finance for actions focused on averting and minimising climate impacts. And partnerships and evidence-based and participatory processes could contribute to ensuring that the needs of the most vulnerable communities to climate change are addressed in an efficient and inclusive manner.
Note: This article builds on an article published on The Morning as part of the author’s weekly column.
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