What’s Loss and Damage: Negotiating tool or moral compass?

What is it? Nobody agrees

If you’ve been following the UNFCCC negotiations for a while, chances are you’ve encountered the term ‘loss and damage’. For years, this issue has been one of the most divisive and controversial at the annual sessions of the UNFCCC COP, and COP21 will be no exception. But a quick look at the history of the concept and how it became such a big part of the climate negotiations reveals that the evidence base for the idea is not robust – nor is it really clear what ‘loss and damage’ refers to.

From rising sea levels to exacerbated weather events, climate change is affecting the planet in unpredictable ways. Humans are learning to adapt, but when brought to extremes, these impacts are simply impossible to adapt to.

Rising sea levels may eventually force people out of the world’s biggest coastal cities, and typhoons of increased strength and frequency may make entire regions inhabitable. Countries such as the small archipelago Kiribati may disappear underwater before the end of the century.

The concept of loss and damage is a recent one, and it emerged in response to awareness that a concept was needed to reflect the struggle of the people involved. With the acceptance that loss and damage is irreparable, the issue became one of not just financial, but moral responsibility.

The UNFCCC does not provide a clear definition of what loss and damage from climate change actually is. Rather, the loss and damage mechanism – which was established in Warsaw in 2013 – is described as a sub-category of a broader adaptation framework. The framework refers to things such as improving risk management, promoting better dialogue among institutions and enhancing practical actions such as technology transfer and better finance. But from this, it is not clear what type of environmental or social conditions qualify as a loss and damage scenario.

Why do we need a clear definition

Scientists and representatives of vulnerable communities challenge the UNFCCC’s approach to loss and damage, claiming it does not reflect the urgency and nature of the problem. They believe that failing to separate irreparable damages from impacts that a community can adapt to means that ultimately the measures taken won’t be appropriate.

For example, while adaptation requires practical actions to build or increase resilience among communities, loss and damage response is about risk management. Tools such as insurance schemes and contingency funds are important to address loss and damage, but not as vital when it comes to adaptation. Currently, this difference is hardly reflected in the UNFCCC negotiations.

One problem is that identifying whether loss and damage is climate change-related is not a clear-cut task. In October 2012, Hurricane Sandy swept through nine American states in 11 days, killing 233 people and wiping out 75 billion dollars worth of physical capital.

Scientists describe the damages caused by Sandy as ‘weather related loss and damage’, but it is now widely acknowledged that climate change had some responsibility for its severity. And climatologists believe that climate change will put on steroids an increasing number of similar superstorms. Though risk preparedness is important, and includes adaptation measures, it is obviously impossible to fully adapt to such events, should their frequency and severity increase in the future.

The bottom line: Who has to pay

In cases such as Sandy, the debate will increasingly hinge on working out who is liable for climate change related damages and how should they be repaid. But big emitters know that if financial compensation becomes an option, they would face a massive bill. It is a debt that no one is willing to pay, as has become obvious by the industrialised countries’ stern opposition at the climate talks to any such measure.

Climatologists and social scientists are trying to facilitate political dialogue around this contoversy by finding ways to address the needs of the most vulnerable, while bypassing the industrialised countries’ veto. In 2012 Koko Warner, expert in climate change and human mobility at the United Nations University in Bonn, proposed a working definition pinpointing loss and damage as the ‘adverse effects of climate related stressors that have not been or cannot be avoided through mitigation or adaptation efforts’.

Though there is still no consensus at the UNFCCC level and Warner’s proposal remains unofficial, widely accepted examples of the phenomenon include the so-called slow onset climate change events such as drought, melting ice caps in the polar regions and rising sea levels .

Receding coastlines have threatened the livelihood of communities living on small archipelagos for more than two decades. In 1991, representatives of Vanuatu were the first to table a proposal for an insurance mechanism that would compensate island states for the loss of land. But the idea of introducing compensation didn’t go down well with industrialised countries at the UN, and was immediately scrapped.

Unclear concepts are political ones

Climatologist Fredi Otto from the University of Oxford believes that by refusing to seek a scientific definition for loss and damage, the UNFCCC could be seen as playing in favour of the big emitters :

”The scientific community is asking [for a universally accepted definition of loss and damage], but there is no political discussion at UNFCCC level. And we believe that’s because if you think about how to define it, then of course you could get into the idea of compensation, which they really don’t want.”

Financial compensation for countries in need doesn’t sound that different from other aid schemes, if it wasn’t for the fact that compensation also implies liability.
‘If you provide funds on the basis of a compensation mechanism, that would mean that developed countries are responsible for the losses. And that would be quite likely the death of the loss and damage agenda,’ says Otto.

Stephanie Andrei, a researcher at the International Centre for Climate Change and Development who works on the social and political aspects of the issue, agrees: ‘I doubt there will ever be a compensation tool within the loss and damage mechanism.’

She believes that not only would the bill be too high, but also that non-economic damages are impossible to repay. How much money is a human life worth? How much should we pay to communities that have been living in the same place for time immemorial and could be uprooted?

‘The issue of loss and damage unravels a huge injustice in the climate change conversation’ she says. ‘It’s developing countries that are going to face the biggest repercussions, and it would be naive to think that they would accept money in exchange for people’s lives. At the same time, it’s very difficult to tell them that no, we don’t have a claim for compensation.’

But even the supporters of a compensation tool understand the need to get everyone on board and engage in discussion.

Attribution is the first hurdle towards compensation

Andrei supports the idea of loss and damage mechanism as a part of the adaptation framework, because compensation is taboo and because figuring out ‘whose fault it is’ is a massive task.
To get to compensation, you have to ‘attribute’ responsibility, assess if and to what extent an event is related to climate change. You then have to calculate which countries or companies are responsible for driving climate change, and bring them to court. Only then is compensation possible – and science doesn’t seem to have the tools to get there.

Fredi Otto believes that efforts towards an attribution process should start at the national level. ‘For example the US produces each year a ‘state of the climate report’, where they report how climate and weather are changing’ she says. ‘So you could imagine asking scientists from each country to compile a yearly report on how climate change is affecting the area.’

In combination with climate models, an inventory of local climate impacts could help assess the actual contribution of climate change to a given event, such as drought or flooding.

Saleemul Huq, director of the International Center for Climate Change and Development and an expert in climate negotiation processes, believes that the issue of compensation should eventually be discussed, but not in the near future.

For this and next year’s climate talks, the priority is to keep loss and damage on the agenda. The latest agreement draft, published this week during the last round of preliminary talks in Bonn, sends an encouraging sign, mentioning the need to address loss and damage as a separate issue.

Hopes pinned on the insurance sector

However, Huq says that for the time being the best way to turn words into practice is to develop insurance schemes that can work for the poor. Traditionally, people deal with unpredictable loss and damage by insuring their assets. But those who are most in danger generally can’t afford to pay for insurance premiums.

‘A solution that is being piloted at the moment is the so-called index based insurance,’ Huq explains. ‘Unlike traditional insurance, insurers wouldn’t inspect your house, or car, or field to assess the damages. Insured people would simply get paid when an environmental threshold, for example a certain wind speed, is crossed.’

Index based insurance is designed to protect against shared risks instead of individual ones. It’s a way for countries that can afford it to pay for future loss and damages in poor areas without getting entangled in attribution issues. This could be key to overcome the hostility of rich countries to loss and damage at the coming climate talks.

‘Germany has promoted this model and the G7 countries agreed to insure 400 million people,’ Huq explains. The mechanism is robust because it builds upon a system that is traditionally being used to prevent loss and damage at a community level. ‘Cars, for example. You can’t choose not to insure your car because the law requires it. So insurance has been used as a tool to drive public policies’, and it could work for loss and damage too.

Even when the compensation is sky-high, national insurance companies still survive through reinsurance, with companies such as Munich-Re or Swiss-Re. They in turn spread the risk globally, so if a disaster happens in the US they will still have an income stream from Russia or China.

The G7 scheme works precisely like that. It will pay insurance companies to protect 400 million vulnerable people who may be affected by climate change by spreading the risk.
‘It’s a global scheme, and many of them may well be in developed countries. We could eventually have a global scheme where the insurance companies around the world insure everybody equally,’ says Huq.

A loss and damage mechanism that is not based on a universally agreed definition of the problem, nor implies compensation for those affected may seems to fail in its core purpose . Yet its advocates maintain it’s important to keep the concept on the table at the climate talks. Even without the perspective of a financial solution, political acknowledgement of the issue would be something to build upon, a strong lobbying tool that could channel money for aid, social and scientific research.
For this year’s COP, the goal is not to let loss and damage slip off the radar. The latest agreement draft that will be the starting point of the talks in Paris is an important first step. But until that can take effect, it is international insurance that acts as an unofficial form of loss and damage response – and which offers the best hope of progress in the short term.

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