{"id":50930,"date":"2024-05-03T15:40:53","date_gmt":"2024-05-03T14:40:53","guid":{"rendered":"https:\/\/www.climatechangenews.com\/?p=50930"},"modified":"2024-05-08T09:18:25","modified_gmt":"2024-05-08T08:18:25","slug":"seismic-shifts-are-underway-to-find-finance-for-loss-and-damage","status":"publish","type":"post","link":"https:\/\/www.climatechangenews.com\/2024\/05\/03\/seismic-shifts-are-underway-to-find-finance-for-loss-and-damage\/","title":{"rendered":"Seismic shifts are underway to find finance for loss and damage"},"content":{"rendered":"<p><i><span data-contrast=\"none\">Avinash Persaud is Special Advisor to the President of the Inter-American Development Bank on Climate Change. Previously he was a member of the negotiation committee to establish the Loss and Damage Fund and an architect of the original &#8216;Bridgetown Initiative&#8217; on reform of the international financial architecture.\u202f\u00a0<\/span><\/i><\/p>\n<p><strong>After three decades of negotiations to establish the fund for climate loss and damage, its inaugural board meeting just concluded in Abu Dhabi. The establishment of this fund is a monumental milestone. We are still some way off, but equally historic are seismic shifts underway in how we may finance it.\u202f\u00a0<\/strong><\/p>\n<p><span data-contrast=\"none\">The first meeting was a modest success. The fourteen members chosen by developing country constituencies and twelve from developed countries demonstrated unity of purpose. Two impressive and committed co-chairs &#8211; Jean Christophe Donnellier of France and South African Richard Sherman &#8211; were elected. <\/span><span data-contrast=\"none\">The new board agreed on processes to select an executive director and a host country. <\/span><\/p>\n<p><span data-contrast=\"none\">Mistrust eased between some members of the board and the World Bank, which negotiators had previously chosen, with conditions, to be the secretariat of the fund. This unity and commitment are seeds of hope for the fund&#8217;s future. <\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:180,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<blockquote><p><a href=\"https:\/\/www.climatechangenews.com\/2024\/05\/03\/loss-and-damage-board-speeds-up-work-to-allow-countries-direct-access-to-funds\/\" target=\"_blank\" rel=\"noopener\"><strong>Loss and damage board<\/strong> speeds up work to allow countries direct access to funds<\/a><\/p><\/blockquote>\n<p><span data-contrast=\"none\">These seeds will need money to grow. The only long-run solution to the escalating climate crisis is accelerating the energy transition from fossil fuels. However, due to the lack of progress, we now face losses and damages that require financing of over $150bn per year &#8211; according to the IHLEG Report for COP26 and 27. <\/span><\/p>\n<p><span data-contrast=\"none\">These losses disproportionately affect the most vulnerable, exacerbating poverty and inequality. Adding injustice to a bleak situation is that the wealthiest countries are most responsible for the stock of greenhouse gases that cause global warming.\u202f<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:180,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">The OECD estimates that total development assistance is $200bn per year, and even though this is half of the commitments made five decades ago, the politics of the day suggest aid money is more likely to be re-channelled for domestic purposes than increased substantially. So where could $100bn plus come from? <\/span><\/p>\n<p><span data-contrast=\"none\">Some developed countries promoted the idea that they would initially pay the insurance premiums for a small number of small countries. Twinning insurance to disaster seems natural \u2013\u00a0 especially if you want to minimise using tax-payers money. But with insurers pulling out of California, Louisiana and Florida because of climate risks, those living in other climate-vulnerable countries &#8211; 40% of the world\u2019s population &#8211; felt this was at best not scalable and at worse disingenuous. <\/span><\/p>\n<p><span data-contrast=\"none\">Climate, like a preexisting medical condition, has become uninsurable. It is now a risk of substantial loss that is growing &#8211; and increasingly certain, frequent, and correlated &#8211; and so insurance&#8217;s spreading and pooling qualities don\u2019t work. If the annual known climate loss is $150bn and rising, yearly premiums cannot be much less without direct or cross-subsidies that no one is budgeting. It&#8217;s insurance, not magic.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:180,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<h3>Time to test new taxes<\/h3>\n<p><span data-contrast=\"none\">For the climate-vulnerable today, the only real insurance against future loss and damage is investing massively in resilience which would generate future savings several times their cost. <\/span><\/p>\n<p><span data-contrast=\"none\">One idea mooted by the Inter-American Development Bank is that the multilateral banks lend for a resilience project in a climate-vulnerable country at little more than the banks\u2019 preferential borrowing rates, and donors separately contribute to a substantial reduction in the interest rate once an independent assessment has certified that the investment has achieved the intended resilience. <\/span><\/p>\n<p><span data-contrast=\"none\">Countries can borrow for resilience if the repayment period is sufficiently long to capture the savings, but not for current loss and damage. Without grants to fund that, vulnerable countries will drown in debt long before sea levels rise.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:180,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">The global financial crisis and COVID showed the promise of long-dismissed ideas. Over the past twenty-four months, 140 countries have agreed an internationally minimum corporate income tax, and the EU has put on an extraterritorial carbon border adjustment tax. The International Maritime Organisation is debating an international levy to fund the shipping industry&#8217;s decarbonisation. <\/span><\/p>\n<blockquote><p><a href=\"https:\/\/www.climatechangenews.com\/2024\/04\/29\/drought-study-raises-tricky-questions-for-loss-and-damage-fund\/\" target=\"_blank\" rel=\"noopener\"><strong>Southern Africa drought<\/strong> flags dilemma for loss and damage fund<\/a><\/p><\/blockquote>\n<p><span data-contrast=\"none\">The fund\u2019s board will want to hear proposals from the new taskforce established by Barbados, France, and Kenya to consider international taxes to pay for global public goods. <\/span><\/p>\n<p><span data-contrast=\"none\">They will also be interested in the just-published proposal for a <\/span><a href=\"https:\/\/www.theguardian.com\/environment\/2024\/apr\/29\/taxing-big-fossil-fuel-firms-raise-billions-climate-finance\"><span data-contrast=\"none\">Climate Damages Tax<\/span><\/a><span data-contrast=\"none\"> on the production of fossil fuels by an amount related to the damage they will cause. <\/span><span data-contrast=\"none\">One dollar per barrel of oil produced, and its equivalent for coal and gas &#8211; an amount easily lost in the monthly volatility of prices &#8211; could finance both the loss and damage fund and rebates for the poorest consumers. There are enforcement mechanisms. Oil\u202fproducers\u202fcould be required to show they have paid the tax before their shipping insurance is legally enforceable.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:180,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Knowledge that scalable solutions exist is vital because some use their absence\u202fto stall progress. However, what we do is not about the how, but how much it matters to us. G7 central bankers purchased $24 trillion of government bonds to stave off recession during COVID and the global financial crisis.\u202fIt was unprecedented and heroic. <\/span><\/p>\n<p><span data-contrast=\"none\">With hindsight, if they had bought bonds that financed climate mitigation, the recovery would have been\u202fstronger and quicker,\u202fand\u202finflation &#8211; heavily driven by fossil fuels &#8211; would have been weaker. They would have saved the economy and progressed halfway to ending climate change and limiting loss and damage. Viable financing solutions exist. We have to decide to use them.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:180,&quot;335559740&quot;:240}\">\u00a0<\/span><i><\/i><\/p>\n","protected":false},"excerpt":{"rendered":"The new UN fund can channel taxes and other innovative ways of raising money to pay for climate loss and damage &#8211; we just have to decide to apply them","protected":false},"author":221,"featured_media":50933,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3861,4364],"tags":[3884,2158],"coauthors":[5173],"class_list":["post-50930","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-comment","category-loss-and-damage","tag-climate-finance","tag-loss-and-damage","type-comment"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Seismic shifts are underway to find finance for loss and damage<\/title>\n<meta name=\"description\" content=\"The new UN fund can channel taxes and other innovative ways of raising money to pay for climate loss and damage - 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