Categoría: Previous Issues Articles

The writing is on the wall – we need finance and (non-insurance) financial instruments to address loss and damage!

The COP has given the ExCom a clear mandate to use the Suva Expert Dialogue (SED) to work on enhancing finance (and other means of support) for vulnerable countries and communities.

Developing countries and experts were unanimous that we must find more money. Vulnerable people are currently facing “exploding risks” they didn’t create and are being left to pay for them. This must be reversed.

Various experts and representatives from Parties also noted with concern an excessive attention on insurance at the expense of stronger action on other, often cheaper, fairer and effective instruments. Labelling it a “magic” tool, as one expert from a developed country

called it, did obviously not match the perception of many in the room.

Developing countries continued to articulate their priorities: finance to be able to scale up instruments (e.g. through a such as a global solidarity fund) such as social protection schemes; relocation funds; reconstruction funds; alternative livelihood programmes; insurance premium subsidies to name few.

To deliver urgently needed resources we will need public contributions by developed country governments as well as the innovative sources of finance that many Parties and experts referred to – like a fair, equitable, polluter pays Climate Damages Tax, to raise the hundreds of billions of dollars necessary.
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While raising ambition has become the buzzword at the UNFCCC talks, ECO would like to encourage Parties to consider a more comprehensive definition of ambition. What if we measured successful climate action not only from a quantitative perspective (e.g.  measured in tons of greenhouse gases and Dollars for climate finance?), but also from a qualitative perspective (e.g. how has climate action contributed to respecting, promoting and considering human rights and related principles and obligations)? Effective implementation of the Paris Agreement requires a critical and cross-cutting element: putting people at the center of all climate decision-making and action.

At COP21, Parties committed to apply their respective rights-related obligations to their climate actions. This is monumental as literally all Parties to the UNFCCC are signatories to at least one international convention on human rights. Now that Parties are focusing on developing the Rulebook of the Paris Agreement which will have a long-term and decisive impact on the implementation of the Agreement, ECO would like to encourage them to reflect the full vision agreed on in Paris.

ECO is thrilled to hear that on Wednesday the European Union, supported by a number of other interventions, called for the inclusion of the various rights and associated elements from the Paris Agreement preamble into the set of recommended information for States to provide in their NDCs.
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ECO eagerly awaited the opening plenary of the Talanoa Dialogue yesterday, excited to see which climate champions would emerge. First off the blocks were the LDCs and AOSIS, both groups calling for the Talanoa Dialogue to result in enhanced ambition in the form of updated NDCs. AILAC likewise called for having updated NDCs by 2020, adding the importance of developing long-term strategies by 2020, as well that provide domestic roadmaps for the transformation that is required to fulfill the goals of the Paris Agreement. Props to the European Union for also emphasizing that this is an exercise focused on enhancing ambition and ensuring the relevance of long-term strategies to the ambition picture, and EIG for highlighting the key role the Talanoa Dialogue will play in raising ambition. ECO would love to hear more about what this means for your NDCs though. ECO welcomes that the Umbrella Group recognized that the Talanoa Dialogue is an exercise to inform NDCs, but being a bit more specific would help, don’t you think?

Thanks to South Africa for raising key questions about the outcome and process – how the transition will happen from the technical to the political phase, and what the outcome of the political phase would be.
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This year will be the third time the COP takes place in Poland — Dziękuję Ci [thank you]. ECO looks forward to more pierogi and sausages!

Sadly, food doesn’t make a good COP. COP24 is a chance for the Polish government to step up, help lead the transition, and strengthen global climate action. Poland can use this moment to revamp the country’s international reputation, rather than strengthening its shameful position as Europe’s number one climate laggard.

ECO welcomes Poland’s commitment to deliver on the Paris Rulebook, but wants to make it clear that only a robust, fleshed-out and balanced rulebook will be considered a successful outcome for COP24.

Alongside the Rulebook, ECO expects Poland to take its responsibility towards the Talanoa Dialogue seriously and make sure the political phase at COP24 leads to enhanced climate ambition. This includes a commitment that countries will ramp up their NDCs by 2020. This is as much a priority as progress on the rules.

ECO also encourages Poland to ratify the Doha amendment to the Kyoto Protocol and help it enter into force by COP24, given the importance of pre-2020 climate action and the honouring of deals made.
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Have you participated in the negotiations on the Modalities for the accounting of financial resources in SBSTA lately? When first hearing some countries and the co-chairs claiming they already had a very solid base to start drafting a final text soon, ECO felt like singing Waka Waka. As Sharkira said: “You know it’s serious we’re getting closer, this isn’t over”.

But here is the thing: progress on finance accounting is urgent and long overdue. What’s more, existing climate finance accounting rules are inadequate. They allow loans to be counted at full face value and inaccurate accounting of climate relevance, which obscures the level of assistance developing countries receive by a huge margin.

OXFAM highlighted the latest public climate finance numbers for 2015 and 2016, finding that net climate specific public finance in 2015 and 2016 is estimated to be around US$16 to $21 billion per year — significantly lower than the estimated $48 billion per year if donor numbers are taken at face value.

ECO notes with enthusiasm that for aid, donors have decided to end the practice of counting loans at full face value by agreeing that from 2018 headline ODA figures will be reported on a grant equivalent basis.
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1. The gap is clear, and it is finance!  
   
   There was much stating of the obvious – vulnerable people on the front line of climate impacts don’t have the luxury of assessing their risks neither considering to transfer or retain them. As the representative of Suriname brilliantly reminded participants: if a whole city like Paramaribo is at risk, what can we do?

   Back to reality, we now need to focus on how the international community is going to raise funds to address those risk – at least $50bn a year by 2022. Some sources even foresee needs up to $300 billion a year by 2030.  This will definitely require innovative sources of finance like a Climate Damages Tax.

   The Tuvalu solidarity fund and the Ethiopian productive safety net program are good examples. International finance must scale them up and roll them out more widely.

2. There was a powerful sense of déjà vu.
   
   The discussions that happened yesterday have already happened at the SCF Forum in 2016, in Doha in 2012, at workshops in Tokyo, Bangkok, Addis Ababa, Barbados and Mexico in 2012. Most progress done so far is about areas which developed countries prioritise, like enhancing understanding or insurance, but somehow there is amnesia around finance.

At “only” 1⁰C of global warming, extreme climate impacts — exceeding the adaptive capacity of countries, communities, and ecosystems — are already mounting. Loss and damage caused by climate change extends from slow onset processes like sea level rise, glacial retreat to extreme events such as floods, hurricanes, and tropical cyclones. Severe climate change consequences which the poor and vulnerable regions around the world already face.

A year of loss and damage: in July 2017 unusual heavy monsoon rains killed more than 1,200 people and affected around 43 million people in Bangladesh, Nepal, and India. The same monsoon cyclone also killed 16 people and affected millions in Karachi and Pakistan. Accounting for more than one fifth of the world’s population with many critical ecosystems, this region will experience an increase in the intensity of extreme weather events in the future with further temperature rises.

Last September, in West Africa, floods caused by extreme rains claimed 25 times more lives than Hurricane Harvey with massive disasters hitting the region. In Sierra Leone, heavy rains killed more than 400 people. In Niger, 11 people died in the capital city of Niamey and 3 people died and more than 300 people were severely affected in the Tillabéri region.
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Ten years ago, well before the UNFCCC proposed that countries prepare National Adaptation Plans, (NAPs) Bangladesh developed its own Bangladesh Climate Change Strategy and Action Plan (BCCSAP) with its own financial and intellectual resources. That led to the creation of the Bangladesh Climate Change Trust Fund (BCCTF) with annual contributions from the National Exchequer of around US$100 million a year to fund hundreds of projects over the years.

However each year 33% was kept in an interest bearing bank account for emergency purposes while only 67% of the amount allocated was disbursed . Over the years the emergency or reserve fund, the 33%, grew to several hundred million  as the terms of when to use the reserve fund were never finalized, so the funds were never used..

Recently, the government of Bangladesh set up an inter-ministerial committee to decide how and when to utilise the reserve fund. One idea being considered is to turn it into a national Loss and Damage Fund and develop a two-year pilot programme tasked to find out how to provide compensation to the victims of climate change.

The two year pilot phase will experiment with different aspects of loss and damage; including both fast onset as well as slow onset insurance as a potential mechanism, non-economic loss and damage, enabled migration, etc.
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ECO is sure that delegates remember the hot fires of dissent that the Warsaw International Mechanism for Loss and Damage (WIM) was forged in. At COP19, in the wake of Typhoon Haiyan, Parties agreed that the WIM would enhance understanding, strengthen coordination, and enhance action and support — including finance.  In fact, so hot was the passion of COP19, that terms like ‘enhance’ and ‘mobilise’ were used no less than five times in relation to finance in 2/CP19. Enthusiasm had not dimmed in the Paris Agreement, where again countries agreed to enhance action and support for loss and damage.

And yet some developed country delegates have tried to pour water and douse this fiery discussion.  Instead of discussing FINANCE they are very keen to discuss FINANCIAL MECHANISMS, which, somehow seems always to focus on insurance. Insurance may play a role to address loss and damage in some instances, but it should not be confused with finance. In fact, insurance is something that requires finance; it demands premium coverage for the poor and vulnerable people and countries. Otherwise, it pushes the responsibility for dealing with the worst climate impacts onto those who did not cause climate change.

Delegates, as must be clear to anyone familiar with either the foundational mandate of the WIM, Article 8 in the Paris Agreement, or, indeed, with the impacts being faced by those on the front line of climate impacts, actual $$$, £££, €€€, ¥¥¥ is essential.  
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There is undoubtedly a great deal of interest in insurance right now – it seems to be the most dynamic discussion area within Loss and Damage. But is this enthusiasm well-founded?  Does insurance:

• Provide major funding for disaster losses? Well, not really. Considering the 8 payouts from regional risk pools to least developed countries, the percentage of humanitarian needs that they met were 0.9%, 1.3%, 2%, 2.2%, 7%, 10%, 16% and 28%. Until all payouts are at the higher level, this cannot really be seen as a game changer.
• Provide funding faster than aid? Sometimes yes, especially for droughts, where humanitarian aid is typically late. But often some humanitarian aid arrives before cyclones hit, which enables countries to prepare, and in some cases (such as Hurricane Matthew in Haiti and Cyclone Pam in Vanuatu), by the time the payout was received, a greater quantity of aid had been given by humanitarian donors.
• Provide certainty of funding post-disaster? In many instances it does, but basis risk – which remains a real problem for all index-based schemes – undermines this.  As experienced by the Solomon Islands which lost 9.2% of GDP but received no payout because they experienced a tropical depression rather than a cyclone.