Reaping Benefits from Loss and Damage Funds

There are not enough cases, datasets, and relevant evidence to justify the presented argument for the claim of financial and non-financial losses and damage

In November 2023, the 28th Conference of the Parties (COP28) agreed to establish a Loss and Damage Fund to finance the adverse effects of climate change in least developed and developing countries. As of now, $661.39 million has been pledged by different countries, including the COP28 host country UAE ($100 million), Germany ($100 million), EU member countries ($245.39 million), the UK ($51 million), the USA ($17.5 million), Japan ($10 million), and other CO2-emitting economies. Prior to operationalizing the Loss and Damage Fund, multiple stages of discussion were undertaken, including the Warsaw International Mechanism for loss and damage due to climate change impact and the COP21 Paris Agreement. The financial mechanism of the convention focused on financing, technology transfer, capacity development, and the transparency framework of climate financing activities. Later in COP27, there was a meaningful understanding for the establishment of the Loss and Damage Fund among the parties, which was operationalized after COP28 with a voluntary fund pledged by richer nations.

With the slogan ‘Beginning of the End,' parties agreed to operationalize the new funding agreement for loss and damage caused by climate change's adverse effects. However, the framework for the fund mobilization procedure has not been finalized and will be completed at COP29 in November 2024. Under the Paris Agreement, richer countries committed to jointly providing $100 billion annually to finance mitigation, adaptation, and capacity development for climate change programs in developing countries from the higher CO2-emission-contributing economies. So far, about $52.99 billion has already been disbursed under Green Climate Financing (GCF), and Nepal has only received about $253 million. As the 7th most vulnerable nation, Nepal could have benefited more from climate funds, but it could not due to the eligibility criteria and technical procedures of the fund application. With the complex procedures and understanding of the fundamentals of different funds, Nepal is lagging on the global stage. Therefore, this is the right time to strategically approach the operationalization framework of the Loss and Damage Fund so that countries like Nepal can benefit from the established funds.

The adverse impact of climate change is mostly seen in wetlands, water resources, mountains, agriculture, and the livelihoods of high-hill and mountain regions, as well as islands. According to the Kunming-Montreal Global Biodiversity Framework, there is a threat to the survival of one million species. Nepal is one of the most adversely affected countries in terms of biodiversity, water resources, and melting mountains. Nepal has eight of the world's highest peaks in the world and is the second richest country in water resources from underground, surface, and melting mountains.

The world knows better than Nepal how much this country is vulnerable to and adversely affected by climate change in diverse sectors. It is true that there will be no agreement on climate security without guaranteeing energy security for all countries. Nepal’s total peak demand is 2009 MW, and its installed capacity is 3030.1 MW. This means Nepal’s energy issue is no longer under debate, and, of course, sustainability can be questioned. In this situation, what does Nepal have to do to benefit from the Loss and Damage funds?

First, Nepal should understand that just saying the mountains are melting and we should be eligible for the fund is not sufficient, and this is no longer our single agenda. The green energy roadmap should be implemented as soon as possible, with the goal of reaching net zero emission. The recently tabled budget has imposed a carbon tax on fossil fuels and prioritizes green energy consumption. The budget has allocated considerable funds for the direct and indirect benefits of climate justice issues. This shows that the government is now moving toward climate justice and focusing on the net zero target by 2045.

This is just the beginning, but it is significant to concisely assess the financial and non-financial losses due to climate change in different sectors and regions. The assessment would also consider the possible emission of methane (CH4) from the damage to old woods in deep forest areas over the next 50-60 years. Now, Nepal is claiming a climate fund against CO2, but if this issue is not corrected on time, it will adversely affect the country and may need to pay for CH4 emissions.

Since the Loss and Damage Fund has been established and funds are pledged voluntarily, the Government of Nepal is focused on climate justice matters, but the question remains: is Nepal ready to claim and utilize the fund? To work on meaningful collaboration and result-oriented action for climate justice for a better future, Nepal should work on a few agendas.

First, Nepal should strategically collaborate with the technical team for the operational framework of funds, which will be endorsed by COP29 in November 2024. There are still a few months and work is in progress, so if Nepal diplomatically works for a globally acceptable framework, Nepal’s favorable framework would definitely be helpful to secure the fund comfortably, just like what Bangladesh is doing. Secondly, the existing capacity for climate change working structures and resources cannot capitalize on potential opportunities. Both institutional and resource capabilities must be strengthened to focus on needs assessment, project development, resource negotiation, implementation, and ensuring transparency for every activity under the projects. Third, Nepal is lacking evidence-based development and scientific analysis of sectoral needs. There are not enough cases, datasets, and relevant evidence to justify the presented argument for the claim of financial and non-financial losses and damages. So, the climate change data system must be maintained actively.

Similarly, the fourth agenda is project design. Nepal’s projects should be designed to meet actual needs and be implementable to contribute to climate justice and national interests. There are many projects running under different grants and loans, but are they really contributing to Nepal or just fulfilling the interests of donor agencies? The projects proposed for the fund must be focused on climate justice and reach the actual vulnerable community. Last but not least, political and community commitment and motivation toward climate justice activities must be maintained. Without commitment and ownership, the projects cannot be implemented, and that would not give us the expected results. Therefore, in order to benefit from the newly formed Loss and Damage funds, Nepal should actively participate in designing the funding framework, strengthen its capability and collect sufficient evidence to justify the presented arguments, design projects considering the issues of vulnerable communities, and maintain a high level of commitment and motivation toward climate justice.