By coupling the current economic impacts of climate change and their geographical distribution with different historical responsibility principles, researchers can establish possible contributions and entitlements to Loss and Damage (L&D) funding. A new article led by the CMCC and published in Nature Reviews Earth & Environment leverages developments in climate economics to inform and bolster evidence for the costs and needs associated with L&D and provides inputs to help advance international negotiations.

L&D is a relatively new topic in climate policy, which has however continued to grow in importance after the decision to establish a funding mechanism was agreed at COP27 and operationalised at COP28. Although initial pledges exceeded USD 700 million, vague definitions for the L&D concept and an absence of clearly established methodologies have led to large uncertainties in the size of L&D funding needs. In turn, this has both affected policy formulation and funding arrangements.

A new article, led by the CMCC in collaboration with the International Institute for Applied Systems Analysis (IIASA) and the Potsdam Institute for Climate Impact Research (PIK), is published in Nature Reviews Earth & Environment. Authors explore novel ways of quantifying the economic costs of L&D which combines novel climate economic insights on damage quantification with principles of historical responsibility, applied to the L&D context.

“This work shows how trans-disciplinary science can advance the high-stake policy debate on L&D from climate change,” says Massimo Tavoni, director of the CMCC-RFF European Institute on Economics and the Environment. “The results point to significant economic impacts of climate change in vulnerable countries, and illustrate the dynamic nature of responsibility for apportioning the L&D fund. This is a call for improving and integrating research methodologies and observation to help advance international negotiations.”

“There’s more and more evidence that the economic costs of climate change are substantial. While global warming and extreme weather affect economies worldwide, it’s generally the regions least responsible for climate change and with the fewest resources to adapt, that are hit hardest. We here illustrate how insights from empirical climate economics can inform loss and damage funding needs by quantifying these effects.” says contributing author and researcher at PIK, Leonie Wenz.

Combining the latest science of climate economics with definitions of responsibility offers an opportunity to add to the mounting evidence on the consequences of climate change for economic well-being, inequality, and poverty. By adopting a dynamic understanding of responsibility, the paper’s findings help determine how growing needs for funding for L&D can be met, particularly considering that L&D is a global effort that requires contributions from a variety of sources.

“The research is also a timely contribution to negotiations on a post-2025 global goal on climate finance for supporting climate action in developing countries, which is to be decided on at COP29 in November in Azerbaijan. The scope and coverage of the climate goal is currently heavily debated and a number of parties have opted for also including needs associated with  L&D in addition to needs linked to climate mitigation and adaptation,” researcher at IIASA Reinhard Mechler.

The article:

Tavoni, M., Andreoni, P., Calcaterra, M. et al. Economic quantification of Loss and Damage funding needs. Nat Rev Earth Environ (2024). https://doi.org/10.1038/s43017-024-00565-7

Cover picture: Friends of the Earth International on Flickr