![\"\"](\"https:\/\/blog.iiasa.ac.at\/wp-content\/uploads\/sites\/5\/qq-580x325.jpg\")
COP25 Madrid, Spain \u00a9 Reinhard Mechler | IIASA<\/p><\/div>\n
\u00a0Why do we need a step-change on Loss and Damage finance?<\/strong><\/p>\n
Hard limits to adaptation are creating situations beyond adaptation; think for example of communities fleeing desertification or sea-level rise that can only retreat so far. The WIM has made substantial strides on its objectives to advance knowledge and exchange since its creation, but now the time is ripe to take the necessary steps to also move forward on addressing loss and damage from climate change.<\/p>\n
So far, this third WIM priority has mostly been addressed through insurance approaches, such as the Fiji Clearing House. While there is value in scaling up risk transfer options, insurance comes with drawbacks: insurance premium costs often exceed financial capacities of vulnerable groups or may result in a false sense of protection that undermines further resilience-building action. Additionally, risk transfer options remain focused on sudden onset events.<\/p>\n
Loss and damage from climate change is not just linked to sudden events; sea-level rise, desertification, and glacial melting take years to unfold, but once these tipping points are reached, recovery and reconstruction, and thus the typical logic of humanitarian assistance, are out of the question. As the climate crisis spirals forward tipping points may be reached sooner than expected, also challenging the sustainability of resilience building actions within the framework of development cooperation<\/p>\n
How to make a principled case to generate support for addressing loss and damage?<\/strong><\/p>\n
Most vulnerable countries agree that the WIM needs to advance on enhancing action and support for addressing loss and damage from climate change. Discussions at COP25 focused heavily on the issue of mobilizing finance for addressing loss and damage, but little headway was made, as views on the exact modalities of finance and its access differ vastly amongst Parties. Unfortunately, this means that the ongoing WIM review faces a certain risk of replicating the stalemate that characterised the Paris Agreement negotiations on the question of liability, when notions of compensatory justice were crossed out from Article 8 at the request of several developed, high emitting countries.<\/p>\n
In order to propel the discourse forward in future rounds of climate talks and in the WIM review, We suggest to build on principles of risk governance, including insurance, and\u00a0 international cooperation\u00a0 \u2013 mutuality, solidarity, accountability and transparency \u2013 and to combine these in novel ways in order to upscale action on both averting and minimizing as well as addressing losses and damages under the WIM:<\/p>\n
- \n
- As the underlying insurance principle, mutuality<\/em> <\/strong>is found in risk pooling and sharing \u2013 several parties pool funding to mobilize finance for offsetting losses in times of crisis, essentially spreading out and mutualizing risks across participants.<\/li>\n
- Solidarity <\/em><\/strong>describes the shared responsibility for supporting others in times of hardship. A<\/em>s a principle it underpins development cooperation and humanitarian assistance and is at the heart of the Agenda 2030<\/a>.<\/li>\n
- Accountability<\/em><\/strong> links actions with outcomes in a mutually responsible relationship and is motivated by a perceived ethical or legal obligation for supporting each other in addressing climate-attributed loss and damage.<\/li>\n
- As a transversal principle, transparency <\/em><\/strong>adds itself as a critical enabler of a finance architecture that expands the WIM to support those who are suffering loss and damage in ways that cannot be addressed through business-as-usual.<\/li>\n<\/ul>\n
All principles lend themselves to the WIM as a ground for advancing on its priority to enhance action and support for addressing loss and damage from climate change, but also offer inspiration for thinking out novel ways to advance further.<\/p>\n
What could this mean concretely?<\/strong><\/p>\n
These deliberations are not merely theoretical in nature but are seeing attention. For example through the further development of the (ARC) pool, a regional drought pool established in 2012 as a specialised agency of the African Union to help member states improve their planning, preparation and response capacities. Disbursements from the pool support participating governments\u2019 drought relief efforts, with requirements on how these are used (transparency and accountability<\/em>).<\/p>\n
Initial donor funding (solidarity<\/em>) and ARC member annual premium payments (mutuality<\/em>) capitalise the ARC. The pool is currently preparing for the launch of an additional capitalization mechanism, the Extreme Climate Facility<\/a> (ARC-XCF). This would issue climate catastrophe bonds, resulting in pay-outs whenever the index tracking frequency and magnitude of droughts and extreme temperature exceeds a predefined threshold (transparency<\/em>). While using the capital markets to access additional funding needs, accountability<\/em> for climate change is factored in to some extent through the international support divested to setting up the mechanism.<\/p>\n
Deubelli, T<\/a>.\u00a0\u00a0and\u00a0Mechler, R<\/a>. (2019).\u00a0Finance for Loss & Damage: Towards a comprehensive principled approach,\u00a0unpublished<\/em>.<\/p>\n
Linnerooth-Bayer, J<\/a>. Surminski, S., Bouwer, L., Noy, I., Mechler, R., McQuistan, C. (2018). Insurance as a Response to Loss and Damage?\u00a0<\/a>In:\u00a0Mechler R, Bouwer L, Schinko T<\/a>, Surminski S, Linnerooth-Bayer J (2018).\u00a0Loss and Damage from climate change. Concepts, methods and policy options. Springer, Cham: 483-512<\/p>\n
Mechler R, Bouwer L, Schinko T, Surminski S, Linnerooth-Bayer J (2018). Loss and Damage from climate change. Concepts, methods and policy options<\/a>. Springer, Cham.<\/p>\n
This blog is reposted from a Flood Resilience Portal blog.<\/a><\/p>\n