The new climate fund for loss and damage of the Paris Agreement: discussions on financing and climate justice

Abstract

Discussions on losses and damages caused by climate change have gained momentum with the creation of a dedicated fund at COP 27. This article, based on literature review and analysis of UNFCCC documents, traces the trajectory of these discussions in the multilateral climate change regime, from 1992 to the operationalization of the fund at COP 28. The research analyzes key challenges for the first year of the fund’s board and the growing importance of climate justice in the international agenda. Despite the significant progress, there are still critical gaps to be filled, such as defining clear criteria for climate vulnerability and resource mobilization.

climate finance; climate justice; loss and damage; COPs 27 and 28

Introduction

One of the main outcomes of the 27th and 28th editions of the Conference of the Parties to the United Nations Framework Convention on Climate Change (hereafter UNFCCC or the Convention) was the approval of decisions establishing and operationalizing new funding arrangements and a fund to help developing countries that are particularly vulnerable to the adverse effects of climate change response to losses and damages. The fund proposal, spearheaded by the Alliance of Small Island States (AOSIS), gained strong traction from the G-77 and China negotiating group, made up of developing countries, in light of the pressing need to increase the mobilization of international financial resources for that group of countries and the severe impacts caused by the floods in Pakistan in 2022 (Kamboh et al. 2024; Toussaint 2024).

Behind the Sharm el-Sheikh and Dubai decisions lie at least thirty years of negotiations on how to increase funding to alleviate the losses and damages caused by the adverse effects of short- and long-term disasters caused by climate change (Toussaint 2024; Ruiz-Campillo 2024). The backdrop to this discussion is the still inconsistent notion of climate justice within the framework of the Paris Agreement, the main international instrument promoting multilateral action against global warming (Uri et al. 2024). The Sharm el-Sheikh decisions, meanwhile, represent an arduous, technical and, above all, political process to establish a new fund in the context of the international climate finance architecture.

The current understanding is that the decisions to create and operationalize a new fund for loss and damage represent significant advances, but there are critical gaps as to how these funds will be implemented and managed. In particular, there are still uncertainties about the clear definition of climate vulnerability, the specific mechanisms for mobilizing and distributing resources, and how the principle of climate justice will be operationalized in the context of this new fund (Zuhra and Sabirin 2024).

This article seeks to answer the following research question: How do decisions taken at COP 27 and COP 28 contribute to the advancement of climate finance for loss and damage, and what are the challenges and priorities for developing countries in implementing the new fund? The aim is to analyze the main discussions on loss and damage finance at COP 28, considering its historical process and the decisions taken at COP 27 in Egypt. It also aims to analyze three priority issues for developing countries in the first year of work of the new fund’s executive board.

To this end, the article is structured in five sections. The first briefly discusses the methods used. The second section reviews the international literature on climate justice and its application in the Paris Agreement in its preambular and operative provisions. The third section analyzes the history of discussions on climate finance for loss and damage, indicating the main milestones in its evolution and identifying the critical factors that led to the adoption of decisions to create new financial arrangements, including the fund established at COP 27 in Egypt. The fourth section explores the main technical and political challenges faced by the Transition Committee, which was tasked with submitting proposals for the operationalization of the new fund to COP 28. The fifth section deals with the priority work topics of the new loss and damage fund’s executive board, focusing on (i) the definition of climate vulnerability; (ii) the fund’s programmatic model; and (iii) the modalities for mobilizing resources.

Methodology

This article builds upon two analytical frameworks of climate multilateral negotiations, namely Political Economy Analysis (PEA) through the work of Raymond Clémençon (2008), and Critical Discourse Analysis (CDA) as in the writings of Calliari et al. (2019).

Raymond Clémençon examines the outcomes and challenges of COP 13, in Bali, culminating in the Copenhagen COP in 2009. Through the employment of PEA, the author underlines how economic inequalities, geopolitical rivalries, and institutional power structures shaped international climate negotiations. According to him, the Bali conference, a landmark of the post-Kyoto climate regime, highlighted profound divides among countries on main issues such as mitigation and financing.

Looking more attentively to the negotiations on loss and damage, Calliari et al. (2019) analyzed the COP decisions and reconstructed the core diplomatic positions of developed and developing countries in light of an updated structure of the CDA outlined by Fairclough (1995). CDA is a tool that allows for exploring how power politics and language interacted to shape international norms and dynamics. Through the employment of the CDA, the authors were able to understand the main outcomes on loss and damage under the UNFCCC, focusing specifically on the ability of less powerful groups to shape the results of negotiations (Beylier 2024).

Based on these qualitative analytical tools, a non-systematic and non-exhaustive bibliographic review of articles retrieved from the Web of Science and Google Scholar databases was carried out. Keywords were used in combination with Boolean operators: (“Climate justice”) AND (“Climate finance”) AND (“loss”) AND (“Damage”) AND “(“COP27”) OR (“COP28”). The period analyzed was until August 2024, with initial interval defined from the entry into force of the UNFCCC in March 1993. A content analysis of submissions from Member States to the Convention to the process of establishing the loss and damage fund and UNFCCC decisions was conducted, as well as of diplomatic meetings documented by Itamaraty, the Brazilian Ministry of Foreign Affairs (Phillips and Hardy 2002).

Debates on climate justice

Climate change is a global crisis that transcends borders, affecting people and ecosystems regardless of their contribution to its causes. Since at least the 1990s, the international community has been committed to building an international regulatory framework that contributes to effective actions to reduce global greenhouse gas emissions, in what is known as mitigation efforts (Ruiz-Campillo 2024; Uri et al. 2024) In this context, the concept of climate justice, as articulated by scholars such as Mary Robinson (2006), has emerged as a construct of interest for addressing the unequal impacts of climate change on different layers of society, as well as defending the concepts, or even principles, of justice, equity and shared responsibility in efforts to mitigate and adapt to the consequences of a new geological period (Rockström, et al. 2009; Steffen et al. 2018).

Climate justice is a multifaceted concept that encompasses ethical, social and political dimensions (Bauer et al. 2009; Schlosberg and Collins 2014). At its core, it recognizes that those who contribute least to global greenhouse gas (GHG) emissions often suffer most severely from the brunt of climate impacts. The concept emphasizes the need to rectify historical and systemic inequalities in addressing climate change, ensuring that vulnerable communities are not disproportionately burdened by its consequences (Schlosberg and Collins 2014).

As in Robinson (2006), climate justice can be understood as a concept directly linked to the field of human rights and, therefore, concatenated by principles of international law that are fundamental to its implementation, of which at least four stand out. The first of these principles is equity in the distribution of the benefits and burdens of climate action, recognizing the historical disparities in GHG emissions and calling for an equitable sharing of responsibility for dealing with climate change (Roberts and Parks 2006).

The second of these principles concerns how this responsibility is managed between and within generations. Scholars such as Henry Shue (2014), in his contribution to the development of principles related to intra-generational and inter-generational justice in the context of climate change, defend, for example, the rights of current and future generations, in a context where current actions can be prevented from compromising the well-being and opportunities of those who will inherit the planet in the years to come. In the context of the distributive approach to climate justice, Shue and other authors, including Caney (2005), also explore the moral obligations of wealthy nations towards those countries who have little historical responsibilities in the climate crisis, focusing on the fair allocation of resources for climate action and on an equitable distributions of burdens, including for mitigation.

The third principle of climate justice is that of equal participation, which emphasizes the importance of including marginalized and vulnerable communities in decision-making processes to combat climate change in its various layers, while guaranteeing their effective participation. Through the lens of a procedural approach to climate justice, asymmetries of power and influence over key international processes are put into evidence, stressing the need for fairness of processes, inclusivity, transparency and accountability. In multilateral climate talks, these elements translate into the concern with a participatory governance that considers diverse perspectives and ensures effective participation of the most affected populations in defining climate policies (Schlosberg 2007).

Finally, the fourth principle, the common but differentiated responsibilities (CBDR), recognizes that, although tackling climate change is a responsibility shared by all, countries have different historical responsibilities and capacities, including in light of their specific processes of economic and industrial development. Developed nations, which have historically contributed more to emissions, are expected to take a leading role in global efforts to mitigate climate change and support developing nations in adaptation.

Climate Justice in the Paris Agreement

The Paris Agreement is a landmark international agreement within the UNFCCC that attempts to address the key challenges of the interconnected and complex Earth systems under the Anthropocene (Schlosberg 2007). It acknowledges “the importance for some of the concept of ‘climate justice’ when taking action to address climate change” (United Nations 2023). However, within the framework of the Agreement or its international negotiations, there is no single concept that legally defines climate justice. The preamble of Paris only notes “the importance of ensuring the integrity of all ecosystems, including the oceans, and the protection of biodiversity, recognized by some cultures as Mother Earth” (United Nations 2023).

The Agreement is far from being a cohesive international instrument for addressing climate justice. Beyond the North-South polarization, even among the group of the G77 and China, one can identify asymmetrical understandings of how the principles of climate justice could be operationalized, although the Group traditionally campaigns for a rigid firewall among developed and developing countries.

Despite the lack of a clear guideline on climate justice, the legal architecture of Paris points out to the superscription of a delicate distributive climate justice approach. In order to analyze the extent to which this approach influences climate justice on the Paris Agreement, it is essential to understand how its main instruments and provisions reflect its basic principles, especially with regard to the mitigation, adaptation and climate finance agendas.

In the context of the Paris global goal to “keep the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels” (United Nations 2023), the Paris Agreement allows each State Party to determine its Nationally Determined Contributions (NDCs) to the global temperature goal. The NDCs must be reviewed every five years, be ambitious, not show retroactions, and above all reflect the principle of common but differentiated responsibilities. Although all countries commit to reducing emissions, developed nations are expected to take the lead in ambitious actions, providing financial and technological support to developing nations for their mitigation and adaptation efforts.

The 2023 Global Stocktaking (United Nations Framework Convention on Climate Change 2023d), held at COP 28 to assess collective progress towards implementing the goals of the Paris Agreement, reaffirms the importance of “meaningful and effective social dialogue” and “the participation of all stakeholders, including indigenous peoples, local communities and governments, women, youth and children”. It recognizes, however, that the international community is still short of reaching the global temperature target with the current NDCs, even though these instruments already cover around 87% of the international economy. There is, in the lack of climate ambition in mitigation, a direct and summarily negative corollary: the absence of robust climate justice considerations despite relevant inputs on equity considered by experts during technical assessment of all GST components (Winkler 2020).

In order to equalize this equation, the Paris Agreement stipulates that mitigation actions must be accompanied by measures to increase climate resilience, especially in the most vulnerable countries to its adverse effects. The adaptation agenda gains an essential dimension for the implementation of the concept of climate justice by pointing out that solutions for increasing resilience must incorporate scientific knowledge and that of traditional peoples and communities and establish measures that are in line with the needs of local populations and ecosystems. At COP 28 in Dubai, relevant discussions were held on adaptation, such as the definition of the Paris global adaptation target – in light of article 2, paragraph 1 b – and how to ensure at least a doubling of international resource mobilization for climate adaptation in developing countries by 2025.

In its turn, climate finance is considered a catalyst and a sine qua non condition for developing countries to be able to make their due contribution to the implementation of the Paris Agreement and reduce the effects suffered by their populations in a contingent climate. Article 9 of the Agreement establishes mechanisms to mobilize and provide financial resources for adaptation and mitigation actions in developing countries. This financial support addresses the principles of equity and common but differentiated responsibilities (CBDR), recognizing historical responsibilities and helping vulnerable nations deal with the impacts of climate change. Climate finance is unidirectional – from developed to developing countries – in addition to support for international development – as set out in the 2030 Agenda for Sustainable Development – and must be predictable in order to add to national processes for implementing the NDCs.

Within the framework of a distributive climate justice, the provision and mobilization of financial resources for developing countries is also a sign of commitment and trust-building between countries that hold unequal material and immaterial assets in the international arena of power. In this sense, the Paris Agreement represents a significant step towards integrating the principles of climate justice into international climate governance, in line with the perceptions of scholars who have shaped the academic discourse. By acknowledging historical disparities, encouraging financial support and promoting inclusion in decision-making, the agreement strives to create a fair and equitable framework for addressing the global challenge of climate change, as envisioned by these influential figures in the field.

Once upon a time: the forgotten promise of climate finance in the Paris Agreement

During the negotiations that led to the adoption of the UNFCCC in 1992, AOSIS called for the creation of an international insurance pool to help the populations of the most vulnerable countries overcome the financial impacts of long-lasting events caused by climate change, especially sea level rise (European Capacity Building Initiative 2018). The idea was relatively straightforward: industrialized countries would be responsible for the financial contributions of the insurance mechanism based on their GDP and their contribution to GHG emissions. The proposal was an attempt to articulate in practice the principle of common but differentiated responsibilities and the notion of historical responsibilities (United Nations Framework Convention on Climate Change 1991).

Although the Small Island States’ suggestion was not incorporated into the final text of the Convention, its articulation triggered an important process in the UNFCCC and in the very conceptualization of what would be the fourth pillar of action of the future Paris Agreement.¹ It is important to remember that the discussions on climate action at the UNFCCC were, from the outset, centered on reducing global GHG emissions as the main measure to control global warming. Science itself, at the end of the 1990s, was still building a solid understanding of the correlations between global warming and its impacts on human and environmental systems, especially since the consolidation of the reports of the Intergovernmental Panel on Climate Change (IPCC), created in 1988 by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO).

It was only in 2007, during COP 13 in Indonesia that the issue of loss and damage once again figured in the climate debate. The Bali Action Plan (Decision 1/CP.13) decided to launch a broad process for the long-term implementation of the Convention. In its adaptation dimension, the Plan indicated that issues related to climate disaster risk reduction and management measures and the treatment of loss and damage associated with the impacts of climate change need to be taken into account (United Nations Framework Convention on Climate Change 2008). As part of the Bali process, the AOSIS group tabulated a reformulated proposal for the pool as a financing mechanism for the treatment of loss and damage, based on insurance, rehabilitation and compensation and risk management instruments. The negotiating group of African countries (AGN group) joined the call and also incorporated the loss and damage dimension into its official position for Bali (Siegele 2017; Clémençon 2008).

From the Bali Plan onwards, there are at least two milestones that define the progress of the loss and damage agenda in the multilateral climate change regime up to COP 27, which fall into two categories, namely procedural decisions and structuring decisions. The first of these are the decisions that establish consultation processes in the Convention, such as technical dialogues and work programs. These processes generally take place in the face of a concrete demand from a negotiating group (i.e. the creation of an insurance pool), but which, given the impossibility of finding a consensus for its approval, generates a process of formal consultations and exchanges of information in order to mature ideas and future proposals. Structuring decisions tend to be taken based on procedural decisions, and create committees, executive councils and bodies in the UNFCCC and its Paris Agreement. There is also the possibility that the decisions are hybrid and therefore have both procedural and structuring elements (Zuhra and Sabirin 2024).

Since the COP in Bali, at least three important procedural decisions have been approved (European Capacity Building Initiative 2018)as follows:

1. COP 16, in 2010, Copenhagen (United Nations Framework Convention on Climate Change 2011a) – through decision 1/CP.16, paragraph 26, the Parties to the UNFCCC decided to establish a Work Program (WP) to consider addressing loss and damage associated with the impacts of climate change in developing countries that are particularly vulnerable to the adverse effects of climate change. The WP, according to the decision, would consist of workshops and expert meetings on the subject (United Nations Framework Convention on Climate Change 2011b). The following year, the WP was broken down into three dimensions, namely: analysis of the risk of loss and damage, possible approaches to dealing with it, and the Convention’s role in improving the implementation of the approaches identified;

2. COP 21 in Paris – creates the Paris Agreement through decision 1/CP21. The Paris Agreement includes, for the first time, provisions on loss and damage in its Article 8;

3. COP 24 in Katowice – expert dialogue on financing for loss and damage with no negotiating mandate, but established as a forum for exchanging technical information on the subject.

Two other structuring decisions were also taken which help to understand the process of increasing the relevance of the loss and damage agenda and its relationship with the financing items in the climate regime:

1. COP 18 in Doha – after extensive talks, the institutional arrangements for loss and damage under the Convention were defined, which included increasing common understanding of risk management approaches and the need for increased support, including financial, to address loss and damage;

2. COP 19 in Warsaw – creation of the Warsaw International Mechanism (WIM) for loss and damage associated with the impacts of climate change through decision 2/CP.19 and as a result of the process initiated by the COP 16 decisions. The WIM is one of the pillars of the regime’s treatment of the issue and has three main objectives. The first is to increase countries’ knowledge and understanding of risk approaches to dealing with loss and damage. The second relates to strengthening dialog and coordination on the subject between all relevant interlocutors and actors. Finally, the WIM aims to increase action and support, including financial and technical support, for addressing loss and damage in developing countries.

All decisions listed above form part of the context that led to the adoption of the decisions on new financial arrangements, including a fund, at COP 27. However, they cannot be taken as determining elements for the success of the Conference in Egypt for the debate on loss and damage, since there are at least three determining variables for the Sharm El-Sheikh mandate under consideration.

Variables Explaining the Creation of the New Loss and Damage Fund

The adoption of the decisions on the new financial arrangements for loss and damage at COP 27 in Egypt were determined by at least three variables. The first, based on empirical analysis, relates to the historical process of creating an imaginary on the subject within the framework of the international climate change regime, as explained in the previous section. This history, made up of procedural and structuring decisions, was responsible for consolidating, among the countries party to the UNFCCC and its Paris Agreement, a minimum understanding of what loss and damage are, even though they did not formalize a definition for the term in their annual deliberations (Calliari 2018; Clémençon 2008).

The second variable explaining the success of COP 27 concerns, through the lens of group politics, the configuration of forces in the bloc of developing countries around the issue of loss and damage. According to Farrell (2017), multilateral negotiations under the United Nations reflect a diverse set of configurations of alliances over different specific subject matters, including the context of the G77 and China. The emergence of different intra-groups of developing countries exposes the complex task to hold the Global South united in several climate agenda items. Also, there are evident shortcomings when negotiating through major groups in the climate talks. They include issues in identifying interests, taking a consensus-based decision-making process and, most importantly, the risk of overemphasizing the positions of dominant actors of the group (Laatikainen 2024).

The G77 and China is the negotiating group at the UNFCCC for the interests of developing countries as opposed to the so-called developed countries, made up of the more advanced economies such as the United States, the European Union, Japan and Australia. When united, the coalition allows for clear advances in the climate regime that privilege the viewpoint of developing countries, especially with regard to mobilizing and providing the means to implement the Agreement, notably funding, capacity building and technology transfer.

However, especially after COP 21, which created the Paris Agreement, the G77 and China of the climate regime fragmented into negotiating sub-groups and now has seven groupings that negotiate among themselves to determine the Group’s joint position, namely Latin American countries (ABU/Grupo Sur and AILAC), African countries (AGN), Arab countries (Arab Group), least developed countries (LDC), the like-minded group (LMDC) and small island states (AOSIS). As a corollary of this configuration, clear geopolitics of power have been established among the aforementioned groups, especially in light of the coordination of the BASIC countries (Brazil, South Africa, India and China), which stand out for their economic and social progress indices. These centrifugal forces represent a clear challenge to the very survival of the G77. If, on the one hand, it can reinforce the plurality and diversity of the Global South, on the other, it threats the already stumbling unity of the group through coalition-building and power politics dynamics (Farrell 2017; Laatikainen 2017).

The complex coalitions of the G77 and China reflect different stances of its sub-groups on the nature and future of climate change regime, including on matters related to climate justice and finance. One can identify at least two arrangements in this regard. Firstly, major economies and countries, in particular the ones of the BASIC and Arab Group, tend to support a strict and macro approach to the concept of differentiation (CBDR-RC) as a robust firewall when it comes to climate finance responsibilities between developed and developing countries. This approach leaves little space for recognition of differentiation within the G77, leading to the support of a climate justice framework whose primary focus is to guarantee parity of representation for developing countries as a whole in decision-making processes under the climate funds and guaranteed access to resources to all G77 members.

A second group of countries of the G77 and China, particularly spearheaded by AOSIS and LDCs, have long advocated for an interconnected approach on climate justice, procedural and distributional, that would incorporate ethic and legal rationales on their special circumstances and vulnerabilities (Calliari 2018). These include considerations on historical responsibilities, and of them being disproportionately affected by the adverse effects of climate change, highly indebted and constrained to accessing international concessional resources, including for climate action. A fair and effective climate finance landscape would, then, necessarily mean facilitated access and earmarked resources for the most vulnerable countries (Lai et al. 2022; Kalaidjian and Robinson 2022).

The consensus-based policy of the G77 tends to legitimize the interests of louder members of the Group in detriment to the ones from weak members, who “might be afraid to speak freely and challenge the more powerful interests in the group” (Baumann et al. 2024, 21).

Being a priority only for the AOSIS, the financing of losses and damages has taken more than thirty years to be addressed with due urgency (Vihma et al. 2011; Beylier 2024). It was only the support of the BASIC countries and the Arab group that made it possible, at the COP in Egypt, to consolidate a common G77 position calling for the creation of a fund to respond to the loss and damage caused by developing countries that are particularly vulnerable to climate change. Key to this support was the unequivocal defense of the principle of common but differentiated responsibilities for the provision of resources to the new fund and the concept that all developing countries would be eligible to access its resources.

On the other side of the table were the countries of the global north, which still resisted any attempt to formalize discussions on funding for loss and damage within the framework of the multilateral climate change regime. This group of countries argued, among other things, that neither the Convention nor the Paris Agreement established clear provisions on the obligation for the assurance of resources to assist developing countries respond to loss and damage. It was also important for developed countries that the understanding of liability and compensation, established under the Paris Agreement, remained intact. According to this understanding, no discussion about financing losses and damages could lead to liability or compensation schemes, especially in relation to the countries that have historically been the most polluting.

The at least partial overcoming of the developed countries’ reservations can be understood in light of the third explanatory variable, based on empirical analysis, namely the role of civil society. Pressure networks such as Climate Action Network International (CAN), United Cities and Local Governments (UCLG) and the Center for International Environmental Law (CIEL) acted through social media and public opinion to pressure all leaders present in Egypt to move forward in the negotiations on the creation of the fund. The main demand of these groups was support for a funding mechanism based on the principles of the climate regime, historical responsibilities, and a human rights approach to disasters caused by climate change (“Key messages for the fourth meeting of the transitional committee of the Loss And Damage Fund (TC4).” 2023).

COP 28 outcomes for climate loss and damage financing

The Transition Committee (TC), set up to draft recommendations on the operationalization of the new funding arrangements and the new fund for loss and damage, met five times before COP 28. At its last meeting, held in November in the United Arab Emirates, the Committee agreed on a package of recommendations on the new loss and damage fund, based on four main understandings (United Nations Framework Convention on Climate Change 2023b).

The first understanding is that the new fund should be established as the operating entity of the UNFCCC’s financial mechanism. Article 11 of the Convention created a financial mechanism responsible for mobilizing the resources needed to assist developing countries in meeting the Convention’s targets, which as of 2015 would be extended by the Paris Agreement. According to some TC members (United Nations Framework Convention on Climate Change 2023d), especially those from developing countries, this dimension was fundamental to establishing a clear link between the new fund and the Paris Agreement. This is because, as an operating entity, the new fund will have to follow COP recommendations on eligibility criteria, policies and access modalities.

The second understanding reached in Abu Dhabi by TC members was the interim arrangement, according to which the new fund should be established within the World Bank’s architecture for four years. This arrangement was made possible by the indication of eleven conditions that the World Bank (WB) must fulfill in order to receive the new fund, including the guarantee that all countries will be able to have direct access to the fund’s resources and that the new administrative structure will have a high degree of independence from the World Bank Board. The point in question generated a strong reaction from civil society, which viewed the relationship with the WB with concern and caution (Mooney 2023; “Key messages for the fourth meeting of the transitional committee of the Loss And Damage Fund (TC4).” 2023).

The TC also suggested that the new fund should have a system for allocating resources based on the priorities and needs of developing countries, taking into account vulnerable communities, and with special consideration for LDCs and SIDs, which could have a minimum floor of resources from the fund. This proposal overcomes the dichotomies between developed and developing countries at TC meetings about the creation of windows or sub-funds for each of the activities covered by the scope of the new fund (United Nations Framework Convention on Climate Change 2023c; 2023e).

The TC’s fourth and perhaps most important recommendation concerns the sources of funding for the new fund. While developing countries, supported by civil society, advocated for a clear affirmation of the responsibilities of the largest historical polluters as the main contributors to the new mechanism, developed countries relied on a legalistic understanding that Article 9 of Paris, by not explicitly mentioning loss and damage, exempted them from any financial responsibilities. In light of this impasse, the TC’s recommendation presents language of constructive ambiguity (Biniaz 2016) by calling on developed countries to continue providing resources for loss and damage and encouraging developing countries to do so on a voluntary basis. Common but differentiated responsibilities are not mentioned, but are articulated in a subtle way in the text reached.

The TC’s conclusions were largely based on a tenuous balance. It would not be uncommon for them to be considered during COP 28, with questions reopening several of the points raised by the Committee’s experts and leading to an impasse over the future of the new fund. However, it was likely that the same conditions that led to the Sharm el-Sheikh decision would act to maintain a new decision at the Dubai COP. This would indicate that the risks of breaking the consensus of the TC would be higher than accepting its recommendations, which was not the case.

The first year of the LDF executive board

As with the other UNFCCC climate funds, the first year of work of the LDF Board was decisive in determining the success of the mechanism in implementing its negotiated mandate. The fund’s relationship with the World Bank was still pending from COP 28 decision, which needed to be done through a memorandum of understanding between the LDF board and the WB board, so that the LDF could be formally considered a financial intermediate trust fund (FIF). If this issue is not resolved, the Dubai decision determines the opening of a nomination process for countries wishing to host the LDF, on a model similar to the genesis of the Green Climate Fund (GCF).

At its second meeting, the MOU was signed and the Philippines was selected as the host country of the new fund (United Nations Framework Convention on Climate Change 2024d). Now, unlike the GCF, the new fund will enjoy international legal personality to fulfill its mandate, including setting its relationship with the trustee, the World Bank.

Beyond the issues of its institutional arrangement, there are at least three fundamental decisions to be made by the LDF’s executive board in 2024 and beyond, notably: (i) the definition of climate vulnerability; (ii) the name of the fund; and (iii) its resource mobilization modalities.

Climate vulnerability

Although the use of the expression “developing countries particularly vulnerable to the adverse effects of climate change”, enshrined in the Paris Agreement, represented a constructive ambiguity that allowed Dubai to reach a consensus on the subject, the nature of the LDF does not allow its resources to be allocated in light of such lack of clarity. In this sense, one of the main discussions to be held by the members of the new fund’s executive board concerns the definition of climate vulnerability, so as to make it possible, for example, to prioritize the demands presented to the boards in the face of future extreme weather events.

There is no multilaterally agreed list of which developing countries are “particularly vulnerable to the adverse effects of climate change” as per the text of the Paris Agreement. However, in its preamble, the UNFCCC presents us with initial elements of this discussion by highlighting that “low-lying countries and other small island countries, countries with low-lying coastal zones, arid and semi-arid zones or zones subject to flooding, drought and desertification and developing countries with fragile mountain ecosystems are particularly vulnerable to the adverse effects of climate change”. The Paris Agreement also highlights the special case of SIDS and LDCs in the face of the impacts of a contingent climate.

Within the framework of the United Nations General Assembly, AOSIS has already been strongly advocating for the establishment of a universal multidimensional vulnerability index which, in addition to integrating exogenous shocks and structural problems of SIDS, aims to establish a real ranking of developing countries based on a series of social, economic and environmental indicators (United Nations 2024). In its first version, the ranking defines, for example, that among more than one hundred and forty countries listed, Brazil would be in the spectrum of least climate vulnerability, in 134th position.

The LDF’s constitutive instrument stipulates that its executive board consider minimum resource allocation mechanisms for SIDS and LDCs – which could represent a considerable mark up of resources. Recent examples within the framework of multilateral environmental funds include the 36% earmarked for SIDS and LDCs in the biodiversity fund (GBFF), under the umbrella of the Global Environment Facility (GEF), which will help implement the Global Biodiversity Framework, approved at COP-15 of the Convention on Biological Diversity.

The definition of groups of countries that are particularly vulnerable to climate change could, in this sense, represent a serious split in the G77 and China union, by pitting, for example, the fundraising interests of regions that already have low climate finance flows, such as GRULAC, against those of the AOSIS and AGN countries who advocate for their special circumstances and prioritization on the distribution of climate resources.

At its second session, in Songdo, Republic of Korea, the Board analyzed an initial proposal from the interim secretariat with proposals for access modalities, including information on triggers/thresholds, rapid disbursement, programmatic support, direct budget support, and small grant funding modalities (United Nations Framework Convention on Climate Change 2024e). The discussions centered on how to operationalized paragraph 49 of the fund’s governing instrument, including a benchmark with current practices in other relevant international funds.

This debate is not trivial, since it will determine the very possibility, pace and scale of resources that will be allocated to developing countries. In Songdo, some countries expressed the need to look at access modalities in light of each extreme and slow onset events types and at the moments of intervention to prevent the related losses and damages; while other stressed that they will not support a system based on a first come, first serve model nor one that excludes megadiverse regions such as Latin America. No decision on the matter was adopted at the second session of the Board (United Nations Framework Convention on Climate Change 2024a).

The LDF’s Name

This subject may seem trivial, but the name of the new fund was one of the most controversial topics during the transitional committee meetings. To a large extent, this was due to the US delegation’s assumption that the new fund would break the tenuous balance of the Paris Agreement (decision CP/21), which does not consider loss and damage measures to be related to climate litigation or compensation claims.

In this way, the Dubai decisions not only failed to formally define the LDF’s name, but also assigned this task to the executive board at its meetings. Among the proposals for overcoming the aforementioned impasse would be to establish the LDF as the Global Climate Response Fund, in order to minimize the misgivings of potential donors to the financial mechanism.

At it is third meeting, in Baku, the Board of the new fund finally decide on a name, which is now called the Fund for Responding to Loss and Damage (United Nations Framework Convention on Climate Change 2024f).

Resource mobilization

A third issue of considerable complexity concerns the LDF’s resource mobilization instruments. The text of the constitutive instrument, approved in Dubai, is unclear as to how the new fund will maintain a sustainable degree of capitalization over time. As we have seen, by not explicitly mentioning the principle of common but differentiated responsibilities, the Dubai decisions do not determine that the LDF will be primarily financed by sovereign resources from developed countries in light of their obligations (Article 9 of the Paris Agreement), unlike what happens in the GEF, GCF and Adaptation Fund (AF).

To overcome the voluntarism of developed nations, the LDF will need to design and apply innovative financial instruments, including so-called blended finance and international taxation measures. The main difficulty in this regard will be convincing the private sector to finance extremely risky climate actions with little or no return.

Conclusion

In an unprecedented way in the history of the Conferences of the Parties, COP 28 managed to approve two decisions that operationalize the loss and damage fund in light of the recommendations presented by the TC, created in Egypt. However, this process was not without its agitations (United Nations Framework Convention on Climate Change 2024b).

The main concern was the degree of acceptability of the recommendations on the new fund. It should be remembered that the TC set up in Egypt had a limited number of state representatives (United Nations Framework Convention on Climate Change 2024c). Although its members had to represent regional groups of the United Nations, it could not be guaranteed that all the Parties to the Paris Agreement, especially those developing countries that did not participate in the TC, would accept its results. In this sense, it was important that the representatives of the G77 and China showed unity during the five meetings of the TC and even spoke with one voice, as in the speeches made at the fifth meeting of the Committee (United Nations Framework Convention on Climate Change 2023a).

Two examples could have been raised for a possible breakdown of consensus in relation to the TC’s recommendations on loss and damage. The first would be the Russian Federation, which is not represented on the TC and is in the midst of a sensitive geopolitical situation. The second example of a possible divergence would be Turkey, since the country only ratified the Paris Agreement in 2021, with a strong claim to be considered a developing country and not a donor country under the rules of the international climate change regime (United Nations 2023).

However, no country opposed the proposed decisions tabulated by the Emirati presidency. In this sense, the Dubai decisions reinforce the idea that climate justice issues have gained relevance on the agenda of the COPs and the discussions on the Paris Agreement. They also emphasize that climate mitigation and adaptation actions, whether individual or collective, must necessarily pass through the filter of climate justice principles and be attentive to the needs listed by the communities most vulnerable to climate change.

Notwithstanding the successful outcomes of Dubai on climate finance for loss and damage, the core differences in the approaches to climate justice under the UNFCCC do not seem to have receded. Instead, the discussions of the first year of the Board of the FRLD point to a delicate balance stroke, especially within the G77 and China, on how to operationalize the notions of fairness and effectiveness in the climate finance institutions.

As highlighted by Beylier (2024), the establishment of the FRLD reflects a dual perspective for climate justice. On the one hand, it emphasizes distributive aspects by acknowledging the disproportionate effects of climate change in particularly vulnerable developing countries, despite the caveat on liability and compensation. On the other hand, the aforementioned negotiating process, as well as the Board of the FRLD, allowed for strengthening a procedural dimension of climate justice in the Paris Agreement through the contributions of vulnerable groups such as the AOSIS in this key decision-making process.

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• 1
  In the negotiations of the multilateral climate change regime, it is common to refer to three pillars of the Paris Agreement, namely mitigation, adaptation and means of implementation (capacity building, technology transfer and financing).

Publication Dates

• Publication in this collection
  06 June 2025
• Date of issue
  Apr 2025

History

• Received
  08 Oct 2024
• Accepted
  10 Feb 2025