TWN Info Service on Climate Change (Apr23/01)
4 April 2023
Third World Network

Transitional Committee on Loss and Damage Fund launches work

Luxor, 4 April (Indrajit Bose and Meena Raman) — The first meeting of the UNFCCC’s Transitional Committee (TC) on the operationalization of the new funding arrangements for responding to loss and damage and the associated fund, convened in Luxor, Egypt from 27-29 March.

In its historic meeting, the TC adopted its working arrangements and workplan during the meeting, and elected Richard Sherman (South Africa) and Outi Honkatukia (Finland) as its co-chairs for the duration of its mandate.

At the UNFCCC’s COP 27 held last year, agreement to establish a fund for responding to loss and damage whose mandate includes a focus on addressing loss and damage was heralded as a big win for developing countries.

Discussions during the TC meeting were not smooth, with differences of views across developing and developed country members on what should be discussed first, viz. the funding arrangements or the establishment of the fund.

Developing country members wanted to focus on the operationalisation of the new fund for loss and damage, whereas developed country members wanted to focus on matters that would inform the funding arrangements and the fund, saying that more information was needed on the current landscape and institutions that are funding activities related to loss and damage and the gaps within the current landscape prior to establishing the institutional arrangements, modalities, structure and governance of the fund.

Developing country members provided concrete recommendations on the scope of the work, and highlighted that the fund should be under the Convention and be guided by its principles of equity and common but differentiated responsibilities (CBDR).

The committee members eventually agreed that the TC would deliver on the entirety of its mandate, which relates to both the establishment of a fund and new funding arrangements (see highlights of exchange below).

During the discussions, contentious issues also emerged in relation to the eligibility of countries to receive funding, as well as the need to broaden the donor base to the fund, beyond just developed countries.

(At COP 27 and the fourth meeting of Parties to the Paris Agreement [CMA 4], Parties agreed to establish new funding arrangements and a fund for assisting developing countries that are particularly vulnerable to the adverse effects of climate change, in responding to loss and damage. The fund includes a focus on addressing loss and damage. The TC was established to operationalise the new funding arrangements and the fund, and to make recommendations for the consideration and adoption by Parties at COP28 and CMA 5. 

Under paragraph 5 of the decision adopted, it was agreed that the recommendations to operationalize the funding arrangements and the fund…shall consider, inter alia:

(a) Establishing institutional arrangements, modalities, structure, governance and terms of reference for the fund;

(b) Defining the elements of the new funding arrangements;

(c) Identifying and expanding sources of funding;

(d) Ensuring coordination and complementarity with existing funding arrangements

Under paragraph 6 of the decision, it was decided that the TC would be informed by, inter alia:

(a) The current landscape of institutions, including global, regional and national, that are funding activities related to addressing loss and damage, and ways in which coherence, coordination and synergies among them can be enhanced;

(b) The gaps within that current landscape, including the types of gap, such as relating to speed, eligibility, adequacy and access to finance, noting that these may vary depending on the challenge, such as climate-related emergencies, sea level rise, displacement, relocation, migration, insufficient climate information and data, or the need for climate-resilient reconstruction and recovery;

(c) The priority gaps for which solutions should be explored;

(d) The most effective ways in which to address the gaps, especially for the most vulnerable populations and the ecosystems on which they depend;

(e) Potential sources of funding, recognizing the need for support from a wide variety of sources, including innovative sources.)

Developing country committee members kept stressing that the mandate of the TC is contained in paragraph 5, while under paragraph 6, the TC is to be informed by the matters thereunder.

Mohammad Nasr (Egypt) (who is also a member of the COP 27 team), said the committee should not fall in the trap of first discussing all the gaps (under paragraph 6) and then discussing paragraph 5. He suggested the work happen in parallel on all the issues since the committee has only one year to operationalize the fund. He further stressed not to lose sight of the fact that Parties were creating something under the Convention. Responding to comments by developed countries that the fund should not duplicate ongoing work, he stressed that there is bound to be some duplication and they need to think through how the fund can be complementary to the work that is ongoing. Nasr also said the fund should be additional and not just repackage existing humanitarian work as loss and damage. He also said the fund should provide funding quickly, based on triggers and should be non-discriminatory. He added that if a government decides it is in need, that has to be respected and that there should be no expectation for developing countries to contribute to the fund’s replenishment.

Kunal Satyarthi (India) said the fund needs to have new, additional, predictable and adequate resources and these should guide the discussions, and suggested discussions focus on paragraph 5 of the decision. On the scope of work, he said the fund must focus on recovery, reconstruction, rehabilitation, resettlement and resilience and referred to these “5-Rs” working together as addressing loss and damage, which is the mandate from the COP.

Ren Yan (China) stressed that the new fund and funding arrangements need to follow the principles of equity, CBDR and must be Party-driven, where decisions are agreed by consensus. She also said the fund must follow guidance of the COP and said that developed countries are urged to provide enhanced and additional support for loss and damage. She also said the TC must follow the mandate and focus on addressing loss and damage.

Adao Soares Barbosa (Timor Leste) said the discussion’s focus appeared to be more on paragraph 6 of the decision when operationalizing the fund is the single most important discussion to have. He said the scope of the fund needs to consider that the funding is new, additional and predictable and is to respond to addressing real loss and damage in terms of extreme events and slow onset events, and economic and non-economic losses. He also said that the fund needs to be under the COP and CMA and be accountable to the COP. In order to ensure sustainability, Barbosa stressed on public financial resources as the main channel of resources. On the modalities to deliver, he said that the fund needs to have a governing body in the form of a Board, and that there is no need to have a very long bureaucracy.

“We need a body that will be quickly delivering for the most vulnerable countries,” he said, adding further that the Board could decide what would be the key innovative resources for the fund. Barbosa also stressed on “rapid response” being a key feature of the fund, and cautioned about insurance being considered as an innovative source, since developing countries would have difficulties paying premiums, which would be an additional burden to them. On coordination and complementarity, he said that it would be useful for transparency arrangements to know who is contributing what and how much, which would be part of the accountability to the COP.

Milagros De Camps (Dominican Republic) said loss and damage is much more than humanitarian response and there has to be a parallel discussion on addressing loss and damage and the fund. She further said the Adaptation Fund and the Green Climate Fund for instance had no mandate on loss and damage and did not report on it to the COP. She said they must focus on securing new, additional and predictable resources and explore the structure of the fund and instruments of funding, which should ideally be grants. She also said that they need to define the sources of funding and added that Latin America is a highly indebted region and that they cannot take loans for addressing losses and damages.

Sumaya Zakieldeen (Sudan) also suggested while work on both the fund the funding arrangements should happen in parallel, the TC needs to give space to the fund and its terms of reference. She said the new fund must be under the Convention and be guided by its principles and the funding arrangements would guide on linkages between institutions inside and outside the Paris Agreement. Zakieldeen also added that the Fund should not increase the indebtedness of developing countries. She suggested they work closely with the UNFCCC’s Warsaw International Mechanism on Loss and Damage (WIM) and the Santiago Network on Loss and Damage.

Sonam Phuntsho Wangdi (Bhutan) said that there are very high expectations of the fund, which would change people’s lives and suggested they avoid a discussion on sequencing and work in parallel on both the fund and the funding arrangements.

Khadeeja Naseem (Maldives) said the Fund should be trigger and needs-based, with short-, medium- and long-term planning, and that they should connect and work with humanitarian agencies. She said the TC needs to discuss the functions of the fund and the funding arrangements and the scope; what functions will be part of the new fund, as opposed to enhancing the existing funding arrangements; what sources are available; explore options for a coordination mechanism, among others.

Diann Black-Layne (Antigua and Barbuda) suggested that the TC should first discuss the institutional arrangements, modalities, structure, governance and terms of reference for the fund. She also said that developing countries were already paying a lot in terms of being affected by the losses and damages due to climate change and rebuilding, and the scope of arrangements should capture and respect the contribution of Small Island Developing States as contributing to the solution. She also said the idea is to create something new and innovative.

Hana Al Hashimi (United Arab Emirates) (as a representative of the incoming COP 28 Presidency) said the TC should finalise recommendations by its third meeting and could provide options and scenarios for the COP to decide. Responding to Ireland’s comment (see below) that the focus must solely be on particularly vulnerable countries, Hashimi said that “developing countries that are particularly vulnerable” is not the same as “particularly vulnerable countries”.

Christina Chan (United States) said the intent is to deliver funding arrangements, including the fund, at COP 28. She said that the TC should deliver on its mandate and come up with recommendations on all the four elements (fund, funding arrangements, sources and coordination and complementarity) in paragraph 5 of the Sharm el-Sheikh decision.

Chan further said that there is a need to be clear about the “what and scope” of funding arrangements, including the fund and suggested the need to discuss humanitarian assistance and emergency response, reconstruction and recovery, issues related to displacement, and measures to address slow onset events and non-economic losses. She also said that questions with respect to the fund would take time. She said there needs to be discussion on scope, speed, eligibility, access as well as gaps they would like addressed through the funding arrangements and what would the fund cover.

On the scope of the work, Chan said the fund should be targeted, specific and not duplicative. She further suggested that the fund could become a specialized place to galvanize the expertise, technical capacity to “understand, plan for and implement measures for slow onset events”, since there seems to be a clear gap there and it could be a “dedicated fund for slow onset events”.

To Satyarthi’s comment on the 5-Rs, she said there is no clear definition of the 5-Rs and how the fund should address them.

Sinead Walsh (Ireland) said that it is important to clarify the “what” of the new fund before discussions on the governance of the fund and it needs to do in areas that are not being tackled by existing funding arrangements. She further suggested to look at the existing landscape, strengthen what is needed to be strengthened and when the fund is set up to look at the priority gaps it would really address. She highlighted the importance of engaging the private sector and added that “form follows function”, as regards the fund. “What do we want this fund to do? The answer cannot be everything,” she said. Walsh also said that the “vulnerability” discussion is key. “It won’t be a straightforward discussion. The decision says we have to focus on particularly vulnerable countries and you cannot focus on all countries. ‘Particularly’ and ‘all’ don’t mean the same thing. We need to define what that means,” said Walsh. On sources, she added that there is a role for public, grant-based finance in this fund, but coming back to the scale of the needs, there is a need to go beyond this and “broaden the contributor base”.

Jean-Christophe Donnellier (France) spoke to paragraph 6 and said that information on speed, eligibility, adequacy and access to finance must be made available as soon as possible to identify gaps. Donnellier further added that the fund could be a driving force in sending messages, being able to coordinate with the other institutions involved and to also exert some kind of convening power.

Debbie Palmer (United Kingdom) said it is imperative to maximise the funding arrangements and learn lessons and there is a need to look beyond public finance and get into innovative sources. On the fund, Palmer said that it must be targeted and not be duplicative and act as a coordinating body.

Steven Kuhn (Canada) said several organisations have the mandate and expertise to develop certain aspects of loss and damage. He suggested that the easiest and efficient thing for governments to do is to make adjustments to those entities.  He also said that while there will be gaps, it will make sense for the fund to tackle some gaps and the funding arrangements to tackle others. He also said the decisions on sufficiency of funding gaps will not be made in silos but in the context of which institutions can deliver results.

Jun Yamazaki (Japan) said there is a need to address countries that are particularly vulnerable and they should be focusing on “priority gaps”. Yamazaki also said that in addition to funding from developed countries, there is a need to obtain funding “from major economies and private sector”.

Georg Børsting (Norway) said the fund must be focused and dedicated to complement but not duplicate existing funding arrangements, adding that a single fund cannot deliver everything for everyone. He also said that new funding mechanism did not necessarily mean new institutions.

Co-Chair Sherman (South Africa) agreed there needs to be a discussion on vulnerability and the language in the decision on loss and damage funding arrangements and the fund at Sharm el-Sheikh used the same language in use for the past 15 years in the process, and which did not translate into how Ireland interpreted the language.

(The issue of eligibility was hugely contentious during the discussions at COP 27/CMA 4 in Sharm el-Sheikh, with developed countries singularly focusing on not making all developing countries eligible for funding for loss and damage. Following lengthy discussions, the compromise was to go back to the language agreed in previous decisions of “developing countries that are particularly vulnerable to the adverse effects of climate change”. See related TWN Update.)

During the TC meeting, presentations were given by select organisations on aspects related to loss and damage, including funding landscape and how the organisations were supporting loss and damage related activities. Presentations were made by the World Bank, UN Office for the Coordination of Humanitarian Affairs, Adaptation Fund, Green Climate Fund, Global Environment Facility, World Food Programme, International Federation of Red Cross and Red Crescent Societies, International Organization for Migration, United Nations Office for Disaster Risk Reduction, and UN Environment Programme’s Finance Initiative.

Some of these organisations are also part of the technical support unit for the TC.

Responding to the presentations, Nasr (Egypt) cautioned not to repackage existing work as addressing loss and damage, which was the mandate of the decision from COP 27 and CMA 4. He further said that the institutions are limited by mandates and they were providing what they could provide but they were not addressing loss and damage. “It is an important component of the bigger picture but not the core component”, said Nasr further.

Satyarthi (India) also said that the presentations were “somehow” related to loss and damage, but the mandate of the TC is to work on “addressing loss and damage”, which the presentations did not provide information on.

Civil society organization representatives also engaged with the TC and highlighted the need for a fund for loss and damage. The TC decided that observers could make written submissions and further modalities for their engagement will be discussed at the next TC meeting, scheduled from 24-27 May 2023.

The first workshop is scheduled from 29-30 April in Bonn, Germany.

(The Sharm el-Sheikh decision had requested the secretariat to “conduct two workshops in 2023, with the participation of a diversity of institutions, relevant to addressing loss and damage associated with climate change impacts”).

According to the workplan agreed, TC members, Parties and observers have been invited to make submissions for the second TC meeting by 25 April and suggestions for case studies by 10 April 2023.