COP-25 reminder: Where is the Compensation for the Climate Vulnerable

Industrialized countries pledged to compensate the vulnerable and the least developed countries in Copenhagen, in Paris, in various COPs and even in SDGs; but the reality is almost all countries have shirked away from their responsibilities.

Paris Agreement on climate change was signed in 2015 under the United Nations Framework Convention on Climate Change (UNFCCC), which is expected to be effective from 2020. Worthwhile to mention that under the Copenhagen Accord in 2009, following the “polluters pay” principle polluter industrialized countries pledged to provide $ 100 billion per year to the developing countries from 2020 as “new” and “additional” to development assistance and this pledge has been renewed further in the Paris Agreement and expressed to continue till 2025.

Besides, in the UN Sustainable Development Goal 13, industrialized countries also pledged to provide funding to address the impacts of climate change. 

In the 19th Conference of the Parties (COP-19) of UNFCCC’s in 2013, it was decided to develop a work plan for providing necessary financial supports to encounter the ‘losses and damages’ of developing countries those are vulnerable to the adverse effects of climate change (decision 2/CP.19). Later in the COP22 under Article 15 of the Cancun Adaptation Framework “Warsaw International Mechanism” was established to identify the ‘losses and damages’ arising from the climate change-induced ‘extreme events’ and ‘slow onset events’ and then that WIM was included into the Paris Agreement.

A Rule Book for the implementation of the Paris Agreement along with the Transparency Framework under Article 13 has been finalized in the last COP-24 to ensure real progress and equity in climate finance.

It is expected that in upcoming COP-25 developed and developing countries together will take necessary steps to access climate finance and also to establish dedicated funds to confront ‘loss and damage’.

Uncertainty of Global Climate Financing

Though there was the global demand for the obligation to deliver the pledged climate funds in the Paris Agreement it has been optional. Consequently, access to grant-based finance has become uncertain for the vulnerable least developed countries. Uncertainty of international climate finance has been intensified due to the withdrawal of the USA from the Paris Agreement. Against the pledge around only 20% of the total funds have been disbursed so far.

Against the pledge of mobilizing $100 billion by 2020 so far only $10.3 billion have been promised for the Green Climate Fund (GCF), suppose to be the main source of finance.

From the GCF, around $2.8 billion so far have been approved against the demand for around $ 20 billion where climate vulnerable country like Bangladesh alone needs $ 2.5 billion per year. However, the total project demand from GCF so far is $26.5 billion. In this backdrop, there is no assurance from which sources, when and at what mechanism the required funds would be mobilized. Undoubtedly, due to that uncertainty, the magnitude of the loss and damages will be increased in the future. Noted here that GCF provides only $1.3 billion to ten most vulnerable countries including Bangladesh, where Bangladesh gets only 0.007% of the total approved fund, but according to National Determined Contribution (NDC), every year Bangladesh alone requires $2.5 billion only for adaptation purpose.

On Paris Agreement, the unanimous definition of climate finance was not determined and the distinct explanation of ‘new’ and ‘additional’ to ODA as related to grant or loan is missing. Therefore, in the case of financing, obscurity has been increased further.

Only 45% of the GCF has been provided as grants. Not only that, as per the GCF policy ratio of adaptation and mitigation sectors would be 50:50, but only 24% of the GCF has been approved for adaptation, while the mitigation budget is 42%.

The affected countries have not been able to obtain the required funds by ensuring GCF’s fiduciary standards and due to these deficits various international financing institutions have been accredited to GCF for doing profitable or exploiting the unethical business opportunity, that is the direct breach of the pledge. Apart from this, the GCF has allowed the accreditation of GCF’s Project Implementing entities (Accredited Entities-AEs) those are involved in corruption.

Specifically, defaulted on payments to lenders or near-to-collapse Indian private bank ‘Infrastructure Leasing & Financial Services (IL&FS)’ and the alleged for money laundering the ‘HSBC’ bank being accredited, which have raised questions about the integrity of the GCF[i].

It is worth mentioning that, from project approval to implementation GCF authority doesn’t have any specific accountability or roadmap/policy to release the approved fund and that is why GCF Board have been able to approve only $2.8 billion till now since 2015. Bangladesh and other least developed most vulnerable countries have the genuine right to get necessary funds from the GCF. Though Bangladesh till now gets the approval of 85 million dollars for 3 projects from GCF, however, even though one project was approved in 2015 but no fund has been disbursed yet. If the targeted population becomes vulnerable due to the delay of fund allocation there is no provision in the GCF to provide compensation. That’s why the effectiveness of the GCF has been questionable.

Grant-based allocation to tackle loss and damage

The Paris Agreement recognizes the ‘loss and damage’ caused by climate change as a separate issue from adaptation and a review and to formulate an experimental report on the Warsaw International Mechanism (WIM) to tackle loss and damage is supposed to be decided at the upcoming COP25 (Decision 10 / CP.24).  However, no additional allocation as ‘new’ and ‘additional’ to ODA has been promised so far to mitigate the growing loss and damages of the vulnerable countries. Even the WIM’s action plan which was prepared in 2017 has no direction about funding from the GCF to address the loss and damages. Without providing grant-based compensation to reduce the risk of ‘loss and damage’, the developed countries are focusing on implementing insurance, crop insurance, livestock insurance. Through which the insurance premium would be collected from the affected people.

If the insurance is implemented instead of paying compensation, affected countries like Bangladesh, small island states are likely to face increase suffering of the climate-affected people due to the burden of paying insurance-related costs.

It should be noted that according to different credible research findings, the economic loss of Bangladesh in 2018 for slow onset events/extreme events of climate change was estimated to about $ 2.83 billion, which could be avoided with the required planned adaptation and mitigation. Recent Transparency International Bangladesh research shows that due to the flash floods the loss to per household is around BDT 17863 (1 BDT = 0.01156 USD). According to the Bangladesh Bureau of Statistics (BBS), due to natural disasters during the period 2009-2015, the financial loss of an average of 3070 crores BDT and 80 lakhs BDT per year and Bangladesh has been deprived of achieving an additional 0.30% GDP growth per year. Ever since cyclone Sidr, in 2007, Bangladesh has proposed international dialogue to design the mechanism to address ‘loss and damage’. But since there was no clear guideline to determine this ‘loss and damage’ and no positive decision has been taken so far.

In this context, implementation of the Paris Agreement in accordance with the Transparency Framework and the Rule Book of the Paris Agreement and tackling the ‘loss and damage’ to ensure visible progress, fairness and transparency in climate financing for sustainable development, following recommendations for consideration of relevant stakeholders of the signatory state parties of the Paris Agreement for upcoming COP-25 Conference for the interests of billions of affected people at risk of over the countries .

[i] https://www.climatechangenews.com/2019/11/13/gcf-partners-chilean-private-equity-firm-unrest-continues/