Financing loss and damage: reviewing options under the Warsaw International Mechanism

ABSTRACT

After decades of pressure from vulnerable developing countries, the Warsaw International Mechanism on Loss and Damage (the WIM) was established at the nineteenth Conference of the Parties (COP 19) in 2013 to address costly damages from climate change. However, little progress has been made towards establishing a mechanism to fund loss and damage. The WIM's Executive Committee issued its first two-year workplan the following year at COP 20 which offered, among other things, a range of approaches to financing loss and damage programmes, which we review here. We provide brief overviews of each mechanism proposed by the WIM ExCom, describe their current applications, their statuses under the United Nations Framework Convention on Climate Change (UNFCCC), some of their advantages and disadvantages, and their current or potential application to loss and damage. We find that several of these mechanisms may be useful in supporting loss and damage programmes, but identify some key gaps. First, most of the mechanisms identified by the WIM ExCom are insurance schemes subsidized with voluntary contributions, which may not be adequate or reliable over time. Second, none were devised to apply to slow-onset events, or to non-economic losses and damages. That is, if harms are inflicted on parts of a society or its ecosystems that have no price, or if they occur gradually, they would probably not be covered by these mechanisms. Finally, the lack of a dedicated and adequate flow of finance to address the real loss and damage being experienced by vulnerable nations will require the use of innovative financial tools beyond those mentioned in the WIM ExCom workplan.

Key policy insights

• Despite a full article of the 2015 Paris Agreement devoted to loss and damage, there is little international agreement on the scope of loss and damage programmes, and especially how they would be funded and by whom.

• Most of the loss and damage funding mechanisms identified by the WIM ExCom are insurance schemes subsidized with voluntary contributions, which may burden the most vulnerable countries and may not be reliable over time.

• None of the mechanisms were devised to apply to slow-onset events, or to non-economic losses and damages.

  POLICY RELEVANCE

 After years of arguments by developing countries for recognition of loss and damage (beyond their ability to adapt to climate impacts), a full article of the 2015 Paris Agreement was devoted to the issue. International mechanisms to address loss and damage are receiving increased attention, particularly given the intensification of climate impacts occurring and projected to occur in the coming years, and the inability of mitigation and adaptation projects to adequately address those impacts. However, there is little international agreement on the scope of loss and damage programmes, and especially how they would be funded and by whom. As such, it is crucial to identify potential funding sources and assess their efficacy, reliability and equity, so that loss and damage response programmes can be institutionalized, implemented, evaluated and improved.

KEYWORDS:

• Climate finance
• insurance and risk
• least developed countries (LDCs)
• loss and damage
• UNFCCC
• Warsaw International Mechanism

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Jonathan Gewirtzman http://orcid.org/0000-0003-3959-3758

Sujay Natson http://orcid.org/0000-0002-6970-583X

Romain Weikmans http://orcid.org/0000-0002-1523-2993

Saleemul Huq http://orcid.org/0000-0002-9398-973X

Notes

1 Our review originated as a response to a call for submissions from the WIM Executive Committee; for a summary of those submissions, refer to UNFCCC, 2016).

2 Virtually all negotiations on loss and damage are held behind closed doors at COPs, and at the ExCom meeting to formulate the five-year workplan, all negotiations on the five-year workplan were held in closed sessions, excluding representatives of observer organizations.

3 The ARC model used the assumption that farmers would plant maize with maturation times of 120–140 days. However, 60% of maize planted by farmers had a maturation time of just 90 days. Therefore, the impact of the drought was much worse than anticipated, as rains came too late to water the maize seeds actually planted (Reeves, 2017).

4 National decision making in Bangladesh about when and how to release these funds was still ongoing at the time of writing.

Additional information

Funding

This work was supported by Fonds De La Recherche Scientifique – FNRS.