The focus of the ongoing COP is to decide on a new finance regime. Major polluters will be asked to massively increase their financial contributions to developing nations. Researchers from IIASA and CMCC show that Loss and Damage needs of vulnerable countries range between roughly 130 and 940 billion Dollars in 2025 alone. On top of money for mitigation and adaptation.

This press release was originally written and published by IIASA

Climate action includes climate mitigation and adaptation, and Loss and Damage, which refers to dealing with unavoided and unavoidable losses and damages in the most vulnerable countries. This describes impacts that could have been avoided, for example, by reducing emissions or by putting adaptation measures in place, like building stronger defenses against extreme weather like floods or heat waves. Losses and damages are also linked to unavoidable increases in climate hazards, like rising sea levels.

Researchers from IIASA and the Euro-Mediterranean Center on Climate Change (CMCC) show that Loss and Damage needs of vulnerable low- and middle-income countries are large. They are in an estimated range of 128–937 billion Dollars in 2025 alone. These sums are needed in addition to financial support in developing countries for mitigation, estimated at more than 600 billion Dollars, and adaptation, estimated at 187 to 359 billion Dollars, as calculated by IIASA researchers. Such sums should be considered by COP29 negotiators to ensure reliable funding for developing and the most vulnerable countries.

Developing nations are asking major polluters in the Global North to increase their contributions from currently 100 billion Dollars a year to one trillion Dollars a year from 2025. At the COP in Egypt two years ago, a new fund for Loss and Damage was agreed and it was initially funded last year at the COP in Dubai. Now it needs to be decided how it will be filled in the longer term.

There is ongoing debate whether Loss and Damage funding would be largely used to rebuild after climate-related disasters or to also support preventive measures, such as investing into social protection and health systems that build resilience irrespective of catastrophic events occurring.

“Science is crucial for informing high-stake climate policy discussions. Loss and damage is no difference,” said Massimo Tavoni, principal scientist at CMCC and director of the European Institute on Economics and the Environment (EIEE). “In an international effort with other research institutions, we have provided a first framework for strengthening the science of climate economic impacts and their repercussions for the loss and damage debate.”

Putting sums on the table, finally

Loss and Damage, after years of slow progress, is now a fast-moving area of climate policy. Given vague definitions for the underlying concept and the absence of clearly established methodologies, there are large unknowns, uncertainties regarding policy formulation and very few estimates on the size of Loss and Damage funding needs. Now we are putting sums on the table.

The research by IIASA and CMCC informs the Loss and Damage debate in two important ways. First, the policy framework presented offers an entry point for a comprehensive risk management and finance approach that coherently links Loss and Damage to climate mitigation and adaptation. This can provide insights for Loss and Damage deliberations at COP 29 in Azerbaijan. Second, the proposed methodological approach provides innovative insights for delineating possible contributions and entitlements to Loss and Damage funding.

Addressing impacts and inequality

There is increasing empirical evidence that the economic costs of climate change are substantial and highly differentiated between countries, thus there is an important degree of economic inequality attributable to global warming.

Research led by CMCC in collaboration with IIASA and the Potsdam Institute for Climate Impact Research (PIK) provides estimates of current unavoided economic impacts of climate change and their geographical distribution, while considering different historical emission responsibility principles since 1850, 1990, and 2015. The aim is to compute possible Loss and Damage contributions and entitlements to and answer the questions: Who pays? and Who gets funding?

The estimates of funding needs for residual unavoided impacts amount to 128–937 billion Dollars a year. This range is larger than that of the other few estimates that are available. Estimates include only impacts that are not avoided by adaptation, but not impacts that are becoming unavoidable due to increases in climatic hazard intensity, frequency, and duration.

The estimates show how Loss and Damage funding needs require flows from high- and upper middle-income countries to mid- and low-income countries proportional to their greenhouse gas emission responsibility.

Costs are expected to grow

At COP27 in Egypt a new Fund for Responding to Loss and Damage (FRLD) was decided and operationalised at COP28 in Dubai, where initial pledges to the fund exceeded 700 million Dollars overall.

It is still unclear, how and when this new fund will further be filled and for what it will be disbursed. What is clear is that the cost of Loss and Damage is substantial and expected to grow, if not counteracted by ambitious mitigation and adaptation action.

The FRLD is not expected to be able to cover all Loss and Damage funding needs, but rather to close priority gaps within the current landscape of global, regional and national institutions that are funding activities related to responding to Loss and Damage.

Why it matters for Loss and Damage

COP29 will importantly launch the first High-Level Dialogue on complementarity and coherence, with the aim of bringing together the wide range of actors that are already supporting Loss and Damage responses. The research by CMCC and IIASA provides a reality check of the scale of ambition both the FRLD and the funding arrangements will need to achieve.

This is a matter of justice as the climate crisis was caused by Global North; and it is a matter of coherence, as actions on climate mitigation, adaptation and Loss and Damage are interlinked. If mitigation and adaptation fall short, the costs of Loss and Damage increase. Therefore, Loss and Damage must be an integral part of the so-called New Collective Quantified Goal on Climate Finance (NCQF) to be decided at COP29.

To sum up, this means total climate finance needs may indeed be a magnitude higher than the 100 billion Dollars agreed upon at COP15 in 2009 in Copenhagen. COP29 should recognize this with decisive action to avoid climate action further falling behind needs, which will only mean much higher impacts, costs and disruption down the road.

For detailed data, see the Data Explorer by CMCC.

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Note: This article gives the view of the authors, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.