In a significant move at COP28 in Dubai, the operationalization of the “Loss and Damage” fund has been declared, marking a crucial step in addressing economic losses caused by climate change. The fund aims to aid developing nations grappling with climate crises, supporting vulnerable populations.
Understanding “Loss and Damage”
The term encompasses estimated economic, non-economic, and ecological losses resulting from the ongoing and future impacts of climate change. This includes damages from extreme weather events like floods and tropical cyclones, as well as gradual changes such as sea-level rise and drought.
Global Economic Impact
A report from the University of Delaware indicates that the world is now $1.5 trillion poorer due to climate change. Low and middle-income countries bear the brunt, experiencing $2.1 trillion in produced capital losses. The Centre for Science and Environment estimates that by 2030, developing countries could face total losses between $290 billion and $580 billion, potentially rising to $1-1.8 trillion by 2050.
Rising Economic Losses
Recent reports highlight a significant increase in annual economic losses globally from climate and weather-related disasters since the 2000s. The World Meteorological Organization (WMO) emphasizes that losses to human lives, livelihoods, infrastructure, and more will continue to escalate with the growing frequency and intensity of these events.
GDP Loss and Climate Change
A study by the University of Delaware reveals a consistent correlation between incremental temperature increases and GDP losses. Since 1970, a nearly linear rise in global temperatures by 1°C has led to a corresponding reduction in global GDP by approximately 6.3%. Notably, low and middle-income countries have suffered a total loss of $21 trillion since 1992.
Global Inequalities Exacerbated
The economic impacts of climate change accentuate existing global inequalities. While high-income countries see net gains, with an average increase of 4.7% in European countries’ GDP, the global population-weighted GDP loss due to climate change in 2022 is substantial at 6.3%.
COP28 Funding Initiatives
The “Loss and Damage” fund receives initial pledges exceeding $400 million from nations, including the UAE, Germany, the UK, Japan, the US, the European Union, Italy, and the Netherlands. Although falling short of the $100 billion demanded by developing nations, more pledges are anticipated.
This formal establishment of the fund, a long-awaited achievement, sets a positive tone at COP28, where discussions on fossil fuel phasing out reveal sharp divisions. The fund, agreed upon during COP27, became operational on November 30, offering hope for climate-vulnerable nations.
