Loss and Damage Fund

Loss and Damage Fund Latest News

In a setback to global climate justice efforts, the United States has withdrawn from the loss and damage fund aimed at compensating developing countries for the damages caused by climate change.

About Loss and Damage Fund

• Definition: Loss and damage refers to the negative consequences that arise from the unavoidable risks of climate change, like rising sea levels, prolonged heatwaves, desertification, the acidification of the sea and extreme events, such as bushfires, species extinction and crop failures.
• Establishment: It was established at the 2022 UNFCCC Conference (COP27) in Egypt, to provide financial support to regions suffering both economic and non-economic losses caused by climate change.
• Developing countries, particularly small island states that face the greatest threats from climate impacts, had been demanding financial assistance in case of climate-related disasters, arguing that they were having to suffer due to a problem created by rich and developed countries.
• About $750 million has so far been promised for the fund, of which the US has contributed $17.5 million. The US, in fact, is one of the very few countries to have already transferred its committed amount to the Fund.
• The LDF is overseen by a Governing Board that determines how the fund’s resources are disbursed, with the World Bank serving as the interim trustee tasked with hosting the fund for four years.

Paris Agreement

• The Paris Agreement is an international accord that was adopted by nearly every country in 2015 to address climate change and its adverse effects.
• Its primary goal is to substantially reduce greenhouse gas (GHG) emissions in a bid to limit global warming in this century to “well below” 2 degrees Celsius above pre-industrial levels while pursuing the means to curb warming to 1.5 degrees.
• The agreement mentions the safer limit of 1.5 degrees based on a fact-finding report which found that breaching the threshold could lead to “some regions and vulnerable ecosystems” facing high risks, over an extended, decades-long period.
•  The treaty also requires all Parties (countries which have joined the agreement) to state every five years what they are doing to tackle climate change — what is known as their nationally determined contribution (NDC).

Loss and Damage Fund FAQs

Q1. What is the loss and damage fund for?

Ans: The Loss and Damage Fund helps low-income countries financially recover from unavoidable damages caused by climate-related disasters like floods and cyclones1.

Q2. What is loss and damage fund UPSC?

Ans: Loss and Damage Fund refers to a global mechanism assisting developing nations facing severe climate-induced economic and non-economic losses3.

Q3. How much money is needed for loss and damage?

Ans: Developing countries require at least $100 billion annually by 2030; some estimates suggest actual needs could reach up to $671 billion yearly18.

Q4. Is the loss and damage fund enough?

Ans: No, current pledges around $700 million are insufficient, covering less than 1% of the estimated annual requirement of at least $100 billion

Source: TOI