What is loss and damage?

Explaining the concept of ‘loss and damage’, its role in international climate negotiations, and which countries are suffering the worst effects.

Explainer Published 6 December 2022 7 minute READ

What does ‘loss and damage’ mean?

Loss and damage normally refers to the destructive impacts of climate change that cannot be or have not been avoided by what is known as ‘mitigation’ (reducing greenhouse gas emissions) or ‘adaptation’ (adjusting to and building resilience against current and future climate change impacts).

This reflects the fact that climate change is already having substantial negative effects on ecosystems, infrastructure, and people’s health and livelihoods around the world. However, there is no internationally agreed definition for loss and damage.

The term ‘Loss and Damage’ is  commonly used in reference to international climate negotiations on the topic and its surrounding politics. It also refers to plans and policies focused on addressing loss and damage.

Loss and Damage is a priority for many climate-vulnerable countries.

Loss and Damage is a priority for many climate-vulnerable countries in the UN climate negotiations due to the severe climate effects they are experiencing.

In some instances, for example for many small island states, such impacts pose an existential threat.

Loss and Damage has been considered a contentious issue by many, given its links to the historic responsibility of developed countries in causing human-induced climate change, and with associated calls for them to provide compensation (see below). However, over time the topic of Loss and Damage has become less ‘taboo’ in the eyes of developed countries.

Loss and damage is often divided into economic loss and damage, which includes harms to livelihoods and property, and non-economic loss and damage, which includes loss of life and losses to biodiversity and cultural heritage.

Loss and damage encompasses destruction caused by extreme weather events, which are becoming more frequent and severe due to climate change, as well as harms arising from slow-onset events, such as the melting of glaciers.

What is the extent of loss and damage so far?

The extent of current global loss and damage is difficult to quantify. It ranges from damage to infrastructure as a result of flooding to loss of life due to extreme heat. However, it is clear that loss and damage is already occurring on a large scale, and that it will only worsen as global warming increases.

Tuna migration habits in the Pacific Ocean, for example, are changing due to the heating of the ocean. This could have an enormous impact on the small island states whose food supplies and economies depend on tuna fishing, and could cause an estimated $140 million loss in average government revenue per year.

In the Lake Chad region, temperatures have risen nearly 2 degrees since the 1960s. Extreme weather events, from flooding to droughts, are affecting the livelihoods of 40 million people in this region.

This has contributed to lower fishing, agricultural and livestock yields, the loss of indigenous culture due to the displacement of communities, and conflict over arable land.

The costs for loss and damage are primarily being met by the communities and countries most impacted by climate change. Rural families in Bangladesh, for example, spend much of their income protecting themselves from climate impacts like flooding and storms. Indeed, women-headed households use up to 30 per cent of their total spending to do so.

The economies of the V20 – a coalition of the world’s most climate-vulnerable countries – have lost an estimated $525 billion in the last 20 years due to the impacts of climate change.

These costs make it harder for these states to recover, prepare for future events or reduce their current greenhouse gas emissions.

Who is responsible for loss and damage?

Many countries that suffer severe loss and damage – such as the least developed countries and the small island states – are least responsible for global carbon emissions both currently and historically.

The Maldives, for example, contributes only 0.03 per cent of global greenhouse gas emissions but sea-level rise poses an existential threat to the country since four-fifths of its islands are only a metre above sea level.

Similarly, the entire continent of Africa has contributed only 3.8 per cent to global greenhouse gas emissions yet it is the most vulnerable continent to the impacts of climate change and is already suffering severe loss and damage.

Consequently, politicians and civil society stakeholders in some developing countries have highlighted the historic responsibility of developed countries in causing climate change and have called on them to provide compensation for loss and damage.

In the past, developed countries have been wary of discussing Loss and Damage finance largely because they have feared they may become legally obligated to provide vast sums in compensation to climate-vulnerable states.

Large emerging economies account for an increasing share of global greenhouse gas emissions. These countries support calls for loss and damage finance in the climate talks but are increasingly coming under pressure to contribute funding themselves, given their growing emissions and increasing economic strength.

Compensation for loss and damage?

The 2015 global treaty on climate change, the Paris Agreement, includes a specific article on Loss and Damage. However, the agreement’s decision text states that this article does not provide a basis for claiming compensation.

As such, the adoption of the Paris Agreement contributed to shifting the Loss and Damage conversations at the climate negotiations away from liability and compensation.

The 2015 Paris Agreement does, however, not prevent countries from  seeking compensation for loss and damage through other avenues. Several are doing so.

In 2021, Tuvalu in the Pacific and Antigua and Barbuda in the Caribbean established a Commission for Small Island States on Climate Change and International Law. The intention is to take claims for loss and damage to international courts.

Vanuatu is also leading a campaign to ask the International Court of Justice for an advisory opinion on climate change. This could support future litigation in domestic and international courts.

Loss and damage in the international climate negotiations

Loss and damage was first introduced to the UN climate negotiations around 1991 when Vanuatu – on behalf of the Alliance of Small Island States (AOSIS) – proposed creating an insurance scheme for countries likely to be impacted by rising sea levels. The term then appeared in UN texts during the 2007 international climate negotiations in Bali.

The ‘Conference of the Parties’ or ‘COP’ is an annual event that brings together world leaders and negotiators to agree how to address climate change and its impacts.

Loss and damage subsequently gained momentum in 2013 when Parties to the United Nations Framework Convention on Climate Change (UNFCCC) agreed to establish the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts (WIM). The mechanism is meant to facilitate dialogue, fill knowledge gaps, and enhance action and support for those experiencing loss and damage.

At COP25 in Madrid in 2019, countries agreed to establish the ‘Santiago Network’ on Loss and Damage in order to connect developing countries with providers of technical assistance and, at COP27 in Sharm el-Sheikh in 2022, an agreement was reached on how to operationalize the network.

Prior to that, Loss and Damage had also received considerable attention at COP26 in Glasgow in 2021. The ‘Glasgow Climate Pact’, the key political outcome of the meeting, included a dedicated section on Loss and Damage and urged developed-country governments and relevant organizations to provide ‘enhanced and additional support’ for activities addressing loss and damage.

At COP26, the Group of 77 (G77) and China – a negotiating bloc for developing countries – jointly called for the establishment of a dedicated Loss and Damage finance facility. The proposal did not gain adequate support among developed countries.

Instead, Parties agreed to establish a dialogue ‘to discuss the arrangements for the funding of activities to avert, minimize and address loss and damage associated with the adverse impacts of climate change’. This ‘Glasgow Dialogue’ will run until June 2024.

Outside the formal COP26 negotiations, Scotland and Wallonia – a region of Belgium – pledged £2 million and €1 million respectively to address loss and damage. Five philanthropic organizations also pledged dedicated funding.

The first session of the ‘Glasgow Dialogue’ was held in June 2022. It focused on increasing understanding of financing needs as well as the coverage of, and gaps in, the international finance architecture in terms of the provision of Loss and Damage finance. While some countries found the forum useful, others criticized it for being a ‘talk shop’.

Loss and damage at COP27

Loss and Damage was a headline issue at COP27 and will undoubtedly be a key part of the conference’s legacy. For the first time ever, Loss and Damage finance was included on the formal negotiations’ agenda. This in itself was seen as an important breakthrough.

Several developed-country governments (like Austria, New Zealand and Belgium) pledged financial support for Loss and Damage, and the G7 and V20 launched a new initiative focused on enhancing financial protection for those experiencing loss and damage: ‘the ‘Global Shield against climate risks’.

Bilateral pledges, such as those by Austria, New Zealand and Belgium mentioned above, help raise the profile of Loss and Damage and provide some support to vulnerable people and communities.

But it should be noted that the amounts committed to date – before and at COP27 – have been relatively small and have not always consisted of money that is ‘new and additional’ to, for example, adaptation finance.

From the start of COP27, the G77 and China – as well as regional groups like AOSIS and the Least Developed Countries group – called for there to be a decision at COP27 to establish a dedicated Loss and Damage fund or facility. 

The agreement at COP27 to create a Loss and Damage fund is historic.

Developed-country Parties – like the US, the EU, the UK and Canada – initially said they wanted to launch a process to identify appropriate funding arrangements, with a decision on an outcome at a later stage (some, like the US, favoured 2024). Such arrangements could include a new fund, but this was not a guarantee.

However, over the course of COP27, the language softened, and on the evening before the conference was scheduled to end, the EU said it would support the establishment of a Loss and Damage fund if that fund targeted the most vulnerable countries and was open to receiving support from a broad range of donors.

This announcement was a turning point.  

Negotiations continued over the next two days, and Parties eventually agreed to establish new ‘funding arrangements’ for Loss and Damage, including a new fund. 

The agreement at COP27 to create a Loss and Damage fund is historic. It is something which climate-vulnerable developing countries have been pushing for for decades, but which developed countries have not supported.

However, critical decisions are yet to be worked out: where the fund will be placed (within or outside the remit of the UNFCCC), what types of activities it will support, how it will be governed, which countries will be eligible to receive support, and who will contribute to it financially.

At COP27, Parties agreed to establish a ‘transitional committee’ which will look at these types of issues, and which will make recommendations for Parties for consider at COP28 in 2023.

Chatham House and loss and damage

Want to learn more about the politics of Loss and Damage finance? Shortly before COP27, Chatham House released a research paper focused on enhancing understanding of different countries’ perspectives on Loss and Damage finance, and identifying politically realistic steps that could be taken in the near term  to build a shared vision among governments on a pathway forward.

This article was originally published on 10 August 2022 and updated on 6 December 2022.