COP27 Dispatch: Why Loss and Damage Finance Is Critical to Small Island States

Loss and damage finance has made it onto the official COP agenda for the first time at Sharm El-Sheikh. An expert on small island states discusses why the issue has been so contentious.

Experts from the University of Pennsylvania are on the ground at COP27 in Sharm El-Sheikh, Egypt. In this special series from Energy Policy Now, they share their observations from the global climate conference and insights into key issues under negotiation.

Stacy-ann Robinson, a visiting scholar at the University of Pennsylvania’s Perry World House, provides a brief history of loss and damage finance in global climate negotiations, and why the issue has taken so long to become an official part of the COP negotiating agenda.

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania, and recording from COP27 in Sharm El Sheikh, Egypt. Over the two weeks of COP, I’ll be holding short conversations with experts from the University of Pennsylvania on a number of priority issues that are being discussed at this year’s global climate change conference. In this episode, I’ll be speaking with Stacy-ann Robinson, a visiting scholar with Penn’s Perry World House, whose research focuses on climate change adaptation in small island developing states. We’ll be talking about loss and damage finance, which is an important issue for these states and a major issue being negotiated here at COP. Stacy-ann, thanks for taking time out of your busy schedule to talk with us on the podcast.

Stacy-ann Robinson: Thank you so much, Andy, for having me. I really appreciate this opportunity to talk a bit more about this topic.

Stone: How has your week been here in COP?

Robinson: It has really been hectic, lots of folks here advocating for their rights. We’re here as Penn as observers observing the negotiations and also participating in many side events. So that has really been exciting. And of course the big-ticket item for small island developing states is getting loss and damage finance on the agenda for the first time. So lots of exciting things. Expectations are high, and I’m here to make my contribution, as well.

Stone: I wonder if you could just start us out by providing a brief introduction to the concept of loss and damage.

Robinson: Well, one of the things that I’ll say is that in the context of the UNFCCC, there’s definitely some disagreement, or there isn’t consensus on the history of loss and damage in the UNFCCC. In my work, when I focus on Small Island developing states, one of the things that I will go back to is the 1991 proposal that was submitted by Vanuatu on behalf of their Alliance of Small Island States, which is the main negotiating block for states in the UN. And there are others, of course.

That proposal really drew attention to the threat of global warming and sea level rise, and it actually called for an insurance pool to help countries that would have been faced with the impacts of this slow-onset event. So for me, it goes back to 1991, and as you know, that would predate the UNFCCC, which was agreed in 1992.

So I would argue that there is a history of this issue, even before the agreement of the UNFCCC in 1992. But if we’re looking specifically at the length of the negotiations, starting in 1992, some folks will say the first time “loss and damage,” as in that specific terminology, appeared within the context of the UNFCCC was actually in 2007, with the Bali Action Plan. But since then, there have been a number of milestones, I will say, but there is a feeling that loss and damage — and especially loss and damage finance — has been obstructed in the negotiations. And that’s why progress has been slow over the years. But since 2007, the Bali Action Plan, there has been the Warsaw International Mechanism that was established in 2013. And from my perspective, the other big milestone is the Paris Agreement that was agreed in 2015.

So if we’re thinking about loss and damage as a concept, some scholars will try to differentiate between “Loss and Damage” with a capital L and D, and “loss and damage” with lower case letters — or “losses and damages.” I think there is a general understanding of what that means, but for your listeners, one of the things that I would like to point out is that loss and damage are really two concepts in one. You can think of loss, and you can think of damage, right?

Stone: Yes.

Robinson: And thinking of it that way, you will realize that loss primarily refers to things that you can’t regain, right? Forever gone, not coming back. But if you’ve experienced damages, the expectation is that you’ll be able to rebuild. Whether or not you can rebuild in a good way or a satisfactory way or in a resilient way is a little bit different. So this creates this kind of dichotomy, with things that you can lose and never gain back really being those intangibles.

Stone: What might those be?

Robinson: We’re thinking here loss of life. You lose a life, you can’t get it back. You can also think of cultural heritage. It might be a language. You can also think of territory in that sort of way, and you might be able to reclaim some land, but the loss has already been experienced. But the damage is — and one of the great examples that is always used is hurricanes in the Caribbean. You might lose several houses or some kind of infrastructure in that way, but you can always rebuild it.

So from my perspective, and this is looking through the lens of small island developing states, the stakes are always higher for loss than damages. But there’s also a temporal element as well, which is something that we would need to keep in mind. If we’re thinking about loss and damage finance, one of the things that I always try to point out is that finance tends to address the damages more readily, but not necessarily the loss.

Stone: Because those are non-economic issues. Is that what it is?

Robinson: Non-economic issues, non-economic loss and damage — exactly, Andy. So it’s one of the fears I have about focusing so heavily on loss and damage finance, and I would want to encourage negotiators not to lose sight of the loss, those intangibles. How can we address those longer-term issues? And can we be realistic in determining whether finance can actually address loss, or is it more exclusively about damages?

Stone: Let me ask you a little bit more about that. And just to interject for a moment, you did mention that loss and damage is in the Paris Climate Agreement, so it was documented there in 2015. The key issue this year is that it actually has made it onto the agenda. Nobody was certain that that was going to be done. So I wonder if you could talk about that, and also obviously why the financing issue related to life loss and damage itself has been so contentious? I think you started to talk about that, but I’d like to dive into that a little bit more deeply.

Robinson: No problem. Just to clarify that, loss and damage has been on the agenda, being its own article in the Paris Agreement, but it’s a finance issue. Making it onto the agenda — that’s really the significance of the issue. And I think it’s important to make that distinction or to ensure that that distinction is understood, because I’ve seen several news stories over the past couple of days sort of conflating the issue. But we just want to clarify because one of the questions that you’ll always get is, “Hasn’t it been on the agenda?” You know, “Why is it now only on the agenda?” So just to clarify, but as a finance issue.

In my research, financing has always been contentious. But if we were to go back to the text of the 1992 convention, one of the underlying principles is CBDR plus RC, which is common by differentiator responsibilities and respective capabilities.

Stone: That’s a lot of words.

Robinson: Yes, a lot of words. So how that plays out is that the countries that are responsible for climate change also have a responsibility to finance action in those countries that are most impacted by climate change. So this idea of differentiation was set up very clearly in that convention, and for me one of the best illustrations is the annexes. So those countries listed on Annex I are those countries that were deemed responsible.

Stone: Those are the developed countries, essentially.

Robinson: Yes, the industrialized countries on Annex I. And those listed on Annex II were those countries that were identified as having this responsibility to finance climate action. And those not listed on Annex I, or the non-Annex I countries are those developing countries. Those are gravely impacted. And so we’ve set up this dynamic where we expect the financial flows to go from the Annex II countries in this case, to the non-Annex I countries.

But the issue of responsibility has been very central to the debate of who is responsible for our climate change, and who is responsible to finance? Even though this dynamic was set up — well, at least in my perspective — set up very clearly in the original convention. So I’m saying all of that to say these issues have followed us for thirty years. So even in light of the Paris Agreement, and there are tensions around this in the scholarly community, where some feel that the Paris Agreement is more bottom-up. You know, “Come and show me your NDC. Show me what you can do.” And they would argue that the Kyoto Protocol was different, more of a top-down approach. And I explain it in that way because I think it’s simpler to understand responsibility is still an issue. And to go back to the text of the Paris Agreement, the fact that Article 8 is dedicated to loss and damage, it really highlights the importance of the issue, and it really sets it up alongside mitigation and adaptation as important climate actions. We need to recognize loss and damage.

But the interesting thing about Article 8, while it says the importance of recognizing loss and damage, and it clearly identifies the role of the Warsaw International Mechanism, the WIM, the COP decision — what it said was that — and I’m paraphrasing here: Nothing in Article 8 should imply liability and compensation. So you can link responsibility with liability and compensation. So it comes back to responsibility. Not everybody sees it this way. I’ve been following these issues for a very long time, and I always think about the spirit of the convention. And here, we’re talking about the framework convention, the 1992 convention. And though the negotiations have progressed significantly since then, from my perspective, it’s one of those core issues — responsibility at the heart of it.

So if we are going to establish, for example, the importance of Article 8. And maybe that’s what we need to do, raise the importance of this article. But if there’s a decision that says, “Well, we shouldn’t be thinking about it in the context of liability and compensation,” that in and of itself is a tension.

Let me use the example of the Caribbean. Every year we have a hurricane season. What the data is showing us is that because of climate change, these weather events are becoming more intense — not necessarily more frequent, but more intense. So what we are starting to see are more extreme weather events in the Caribbean. In many instances, the damages and loss are so exponential. One great example is the case of Dominica, and even I would say when Hurricane Dorian in 2019 in the Bahamas, where that was just the strongest hurricane that had ever made landfall in the Bahamas. And the impact on the GDP was so significant, right?

So we are seeing this loss. We are seeing this damage. My next question is: Who is responsible? Who is responsible for this hurricane that has become so intense, that has allowed a country — for example, the Bahamas — to experience loss and damage to this scale? There are immediate problems. There are immediate actions that need to be taken, that need money. Who should pay?

Stone: So let’s take a step back here. Tell me a little bit more about the history of loss and damage.

Robinson: Well, just to say that for me, I always go back to the 1991 AOSIS Proposal. And for me that was important, because it signaled the importance of insurance. I think the intention at the time was for it to be reflected in the text of the 1992 convention, but it was not in the way that AOSIS had envisioned at the time. And what we ended up with in the convention was pretty much insurance being named as one of many options for dealing with these climatic changes, which was not what AOSIS wanted. That was not what they thought would have been important at the time.

Stone: AOSIS being — ?

Robinson: The Alliance of Small Island States. So what we were left with in 1992 was text that said, “We need to look at several options.” But really it wasn’t until 2007 that this term, “loss and damage” came up, and that was in the Bali Action Plan. And since then, from my perspective, the key moments in time have been the establishment of the WIM, which is the Warsaw International Mechanism. And one colleague who is just so smart said that it was sort of “like a study group.”

Stone: It was criticized for not getting much done.

Robinson: Right. You know, it’s an interesting way to angle it, but since then, the WIM has done a little bit more than probably persons will give it credit for. But then, after the WIM for me, the big issue is Paris and the dedication of an entire article to loss and damage. So that is my CliffsNotes version of the history of loss and damage. Of course, there are incremental wins every year, I would say. The multilateral process is slow, but it works even though it does take some time.

So there was progress on loss and damage in Glasgow last year, and definitely we can see progress now, with inclusion of financing on the agenda here in Egypt. The footnotes are also important, with the inclusion on the agenda. So while compensation is up for discussion, there wasn’t enthusiasm about liability being included in the discussions. And it makes me wonder about the pathways to climate justice, especially for small island developing states. Will they get justice from finance being included on the agenda? Will they get justice from the establishment of a financial mechanism? Or — and this is something that I have personally promoted — that we need different pathways to justice. So what we’re here negotiating in Egypt these two weeks should be seen as just one of several pathways that we need.

Stone: Let me ask you a final question here: What in your view may be a workable solution on L&D finance?

Robinson: Let me say that this is a contentious issue, as you’ve pointed to.

Stone: Yes, and I’ve just asked a really big question. I know.

Robinson: Yes, it’s a really big question. Some of the things that negotiators are grappling with include whether or not it should be a new facility, or whether it should be subsumed under an existing mechanism, for example, the Green Climate Fund. If it is subsumed, say for example if it is a new track in terms of GCF, Green Climate Fund financing, there are real concerns about governance of the mechanism, whether the most vulnerable countries will be served first. And this is what in part has led to the Alliance of Small Island States promoting this multidimensional vulnerability index, where they’re saying vulnerability in its very quantitative form should be factored into financing decisions.

So there are many issues to be sorted out, but I just want to point out to your listeners that the fact that it’s on the agenda, finance is a big win but might be in a small way, if you think about the magnitude of the problem and what needs to be achieved.

From my own research, I have really looked at some of the sources of financing that scholars have said the WIM — the Warsaw International Mechanism should urgently consider and mostly there are levies or taxes on bunker fuels, for example, or international airline travel. I think we looked at five of them. And from that, what my co-authors and I were trying to identify is, of these five, which would deliver the most optimal forms of justice for small island developing states? Because in my work, I see them as being among the most vulnerable countries in the world.

So if we consider, for example, the sustainability of the flows, the fairness, dependability on some other factors, what we’ve argued is that international airline travel and fossil fuel extraction levies might be viable, considering the circumstances of small island developing states. So this fits into my overall narrative, which is there isn’t one pathway to justice, and financing shouldn’t be thought of in this singular way.

I would recommend looking at all possible sources, all possible mechanisms, all possible institutional arrangements, and don’t discount the possibility of placing a tax on international airline travel or fossil fuel extraction as potential sources that could lead to the operationalization of this financing mechanism.

Stone: Stacy-ann, thank you very much for talking.

Robinson: You’re welcome, Andy.

Stone: My guest has been Stacy-ann Robinson, a visiting scholar with Penn’s Perry World House. Thanks for listening to this special episode of the Energy Policy Now Podcast, recorded at COP27 in Sharm El Sheikh, Egypt.

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Stacy-ann Robinson

Lightning Scholar, Perry World House
Stacy-ann Robinson is a Lightning Scholar with the University of Pennsylvania’s Perry World House. Her research focuses on the human, social, and policy dimensions of climate change adaptation in Small Island Developing States.

Andy Stone

Energy Policy Now Host and Producer
Andy Stone is producer and host of Energy Policy Now, the Kleinman Center’s podcast series. He previously worked in business planning with PJM Interconnection and was a senior energy reporter at Forbes Magazine.