Loss and Damage

By Adam Curry

Loss and damage is “the actual and/or potential manifestation of impacts associated with climate change in developing countries that negatively affect human and natural systems” (ICCCAD, 2015). It was propelled to the forefront of international political and economic discussions in the 1992 United Nations Framework on Climate Change. Now, nearly 30 years later, we are finally starting to address this controversial topic with real solutions. At the COP27 climate summit it was agreed among developed nations to create a fund to help solve this issue.

What is Loss and Damage?

Climate change has a multiplicity of effects across the globe, affecting things such as weather, sea levels and biodiversity. The damages caused by these changes are what is meant by the term loss and damage It refers to both negative impacts on human societies as well as the natural world, encasing both economic and noneconomic impacts

Examples of Loss and Damage

Some recent examples of loss and damage can be found in Pakistan where in early 2022 extreme flooding swept across the region causing $15bn in economic losses (World Bank, 2022). Studies into this rainfall concluded It was 75% greater due to the 1.2 degrees increase in temperatures in the region, caused by climate change (World Weather Attribution, 2022). Furthermore, the intensity of rainfall also increased by 50% due to climate changes, strongly contributing to flash flooding and increased loss and damage. Moreover, long term impacts are also prevalent, a pivotal example being in the Maldives. Sea level rise caused by climate change is predicted to leave the island chain underwater by the year 2100 (World Bank, 2010). With the potential of a whole country being wiped out in the near future, this highlights the need for immediate actions and solutions in this area

Additionally, there is also the risk of moral hazard associated with loss and damage Moral hazard is an economic principal where there is a lack of incentive to guard against a risk, as the economic agent is shielded from its consequences.

Loss and damage is textbook moral hazard as developed nations use more fossil fuels and consume more goods and services, hence producing more carbon emissions and driving climate change. As these impact lesser developed nations at the same or worse levels than developed nations are protected from the consequences of their actions, thus causing overproduction of carbon emissions.

What are the solutions?

This topic is especially prevalent due to the first ever solutions being agreed upon to try and tackle this issue at the COP27 climate summit. It was agreed upon to create a fund, in which less developed nations can draw from to help mitigate the negative impacts from loss and damage. However, many people aren’t content with this solution, although it is the first small step in the right direction.

The most obvious solutions would involve policies stopping climate change; however, many people argue that is unattainable without major economic damage. Others argue that payment after the damage is too little, too late, many people point towards investment in mitigating technologies as a better solution to aid developing nations.

Below is a graph from Byrnes and Surminski (2019), highlighting all the approaches which may aid in this area.

Here we can see the different levels at which solutions can be implemented, highlighting the fact that this is a solvable issue. This also highlights the fact that there isn’t a singular defined approach, and that experimentation and variation of strategies may be needed to tackle loss and damage

Another broadly agreed upon principle which can be utilised to solve the issue of loss and damage is insurance In developed nations 50% of all negative outcomes are covered by insurance in comparison to only 15% in less developed nations. Increasing access and affordability of insurance may be a better way to help protect these vulnerable nations from the worst economic impacts of climate change. Although loss and damage is a complex topic, this demonstrates that there are many avenues which policymakers may attempt, which at least theoretically can mitigate some of the damages of climate change on developing nations, and it will be interesting to watch the results of the fist actions agreed upon in COP27 play out in the near future.

References:

World Bank (2022) - https://www.worldbank.org/en/news/press-release/2022/10/28/pakistan-flood-damages-and-economic-lossesover-usd-30-billion-and-reconstruction-needs-over-usd-16-billion-newassessme#:~:text=The%20assessment%20estimates%20total%20damages,reach%20about%20USD%2015.2%20billion World Weather Attribution (2022) - https://www.worldweatherattribution.org/wp-content/uploads/Pakistan-floods-scientificreport.pdf

Byrnes and Surminski (2019) - https://www.lse.ac.uk/granthaminstitute/publication/addressing-the-impacts-of-climate-changethrough-an-effective-warsaw-international-mechanism-on-loss-and-damage/ ICCCAD (2015) - http://icccad.net/wp-content/uploads/2015/08/Defininglossanddamage-Final.pdf

World Bank (2010) - https://www worldbank org/en/news/feature/2010/04/06/climate-change-in-the-maldives