From the ILS/cat bond/risk transfer mavens at Artemis, November 30:
In a perhaps surprising turn of events, the opening hours of the COP28 climate talks today have seen a landmark agreement to operationalise and provide initial funding for the much-discussed loss and damage fund, that is designed to help the countries that are most vulnerable to the adverse effects of climate change.
The fund had been agreed on back at COP27 and much-discussed ever since, with agreements as to who should fund it, how that funding should be used, what kind of financing products should disburse funding and how should funding be triggered, all still seeming to be up in the air, to a degree at least as COP28 began.
Which is why we say ‘perhaps surprising’, as most had expected discussion and negotiation over the loss and damage fund to run on for at least a few days, if not the majority of the COP28 event.
There have always been discussions about whether some of the funding could be used to pay risk transfer premiums, to help the countries most vulnerable to the effects of climate change lock-in long-term insurance-like risk financing.
Agreements as to how the loss and damage fund will be put to work remain missing or unclear so far, but the agreement to operationalise it today and the initial funding announced is a good step towards this actually becoming reality, despite all the disagreement that has gone before.
The UAE, the host of this years COP28 climate talks, said today that it will commit $100 million to the loss and damage Fund, a move it hops will pave the way for other nations to make pledges.
COP28 President Dr. Sultan Al Jaber said, “What was promised in Sharm El Sheikh, has already be delivered in Dubai. The speed at which the world came together, to get this Fund operationalized within one year since Parties agreed to it in Sharm El Sheikh is unprecedented.”....
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And from the British Medical Journal, December 21, 2022:
Climate change: “Loss and damage” fund payouts could take decades, scientists warn
The loss and damage fund—agreed at the 27th United Nations climate change conference (COP27) to help poorer countries respond to climate disasters1—could be derailed by arguments over “contested science” and take years to pay out, scientists have warned.
Speaking at the World Science Forum in Cape Town on 7 December, Roger Pielke Jr, professor in the environmental studies programme at the University of Colorado Boulder, said, “One reason rich countries were happy to sign the loss and damage framework is because there’s a little bit of a secret there: arguments over loss and damage can go on for years, for decades, before any money changes hands.”
The loss and damage fund was agreed as COP27 closed, with a transitional committee expected to meet before the end of March 2023 to make recommendations on how the fund will work. These proposals will then be put to countries at COP28 in November 2023.
During his speech, Pielke highlighted that the United Nations Framework Convention on Climate Change (UNFCCC) and the UN’s Intergovernmental Panel on Climate Change (IPCC) use different definitions for climate change—which could cause problems when it comes to the fund.
According to the UNFCCC, climate change means “a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods.”2
In contrast, the IPCC defines it as “a change in the state of the climate that can be identified by changes in the mean or the variability of its properties and that persists for an extended period, typically decades or longer.”3
“The framework convention definition of climate change refers specifically to changes in climate that result from the emission of greenhouse gases. What this means is that in order to identify loss and damage under the framework convention definition, you have to be able to attribute whatever portion of losses have occurred to the emission of greenhouse gases,” Pielke said....
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