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Wednesday, 23 February 2022

Who’s responsible for loss and damage compensation from climate change?

Climate loss and damage compensation is at the forefront of the conversation on COP27 again, with climate groups criticizing US Presidential Climate Envoy John Kerry for failing to address the issue during his visit to Egypt this week, the Financial Times reports.

Damage compensation has been a contentious point in the conversation on climate change for decades. The push to address the loss and damages sustained by the global south as a result of climate change — much of which was caused by advanced economies’ rapid industrialization and ensuing mass emissions — first began in the 1990s. The Alliance of Small Island States proposed (pdf) setting up a fund that would see developed industrialized countries compensate “low-lying developing countries” for future damages caused by rising sea levels and allow these affected nations to rebuild their communities. It wasn’t until the 2007 Bali Action Plan, however, that the concept of loss and damages was formally included in a UN resolution, according to Carbon Brief.

In the years since, there has been little headway on providing financing through an institutionalized channel specifically for loss and damage compensation, with much of the conversation focused instead on future climate disaster mitigation and the general green transition, NPR notes. Last year’s COP26 in Glasgow saw a concerted effort from developing countries — representing the vast majority of the world’s nations — to create a financing mechanism to support the recovery from climate disasters, Reuters reported. The push ended up largely falling flat, with the proposal eventually being turned down by developed countries who would be required to pony up the funding.

Part of the problem: Assuming retroactive liability and responsibility for the damage that’s already been done. The 2013 Warsaw International Mechanism on Loss and Damage (pdf) was a significant step forward for the issue by acknowledging that “loss and damage associated with the adverse effects of climate change includes, and in some cases involves more than, that which can be reduced by adaptation,” but, critically, it fell short of determining who should be held responsible for these losses and damages.

It doesn’t look like this direction will change anytime soon: In a speech in Cairo earlier this week following the launch of the Egypt-US climate working group ahead of COP27, Kerry spoke of a necessity for national commitments to curb climate change, only mentioning briefly the issue of loss and damage. The climate envoy suggested that focusing on retroactive compensations “could delay our ability to do the most important thing of all, which is [to] achieve mitigation sufficient to reduce the level of adaptation.”

Climate advocates are not happy: “Loss and damage is beyond adaptation,” and is a critical component of the conversation about climate mitigation, as it’s a “climate justice issue, said Tasneem Essop, executive director of Climate Action Network, at a briefing on Africa’s agenda for COP27 on Monday.

But while the issue was not of much importance for Kerry, it was for President Abdel Fattah El Sisi, who said this week that Egypt will work to ensure developing countries get the funding they need from developed countries to fight climate change. El Sisi has been outspoken about prioritizing finance for Africa’s green transition, which Bloomberg says will be a key theme for this year’s summit.

Possibly lending a helping hand to Africa to fund climate mitigation: The continent’s first Green Exchange: Two fintech entrepreneurs are setting up the first exchange dedicated to green bonds in Africa, to address the continent’s need for financing climate change projects, Bloomberg reports. The Green Exchange — based in Ghana’s Accra — will provide the tools needed for companies to issue green bonds and will help investors trade them in a secondary market. The founders aim to raise USD 5 bn from African green bond sales over five years, to fund sustainable projects such as EV charging stations, solar panel installations, and sustainable housing. Global green bond investments are expected to reach USD 1 tn in 2022 alone; however, the African market contributes a mere 0.4% of the global market share by value.

Egypt pioneered the use of green bonds in MENA, taking the region’s first sovereign green bond issuance to market in 2020, raising USD 750 mn from investors to channel into green projects. CIB also issued Egypt’s first-ever corporate green bond last year, raising USD 100 mn in a five-year, fixed-rate offering.

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