The issue of loss and damage from climate change has been a politically sensitive topic in the negotiations under the United Nations Framework Convention on Climate Change (UNFCCC) as developed countries see it as opening the way for claiming compensation from them based on their liability.
However, there have been several breakthroughs on the issue including the Warsaw International Mechanism on Loss and Damage set up at the 19th Conference of Parties (COP19) in Warsaw in 2009 and Article 8 on Loss and Damage in the Paris Agreement concluded at COP21 in Paris in 2015. Both these breakthroughs have allowed the discussion to move forward but the sticking point still remains: the inability of scientists to give clear positive attribution of climatic events to human-induced causes as well as the refusal of rich countries to consider financing loss and damage beyond providing insurance.
However, in the last few days, a scientific study on the actual death toll attributable to Hurricane Maria that hit Puerto Rico last year gave the number of people who died at nearly 3,000 instead of 64 as claimed by President Trump. These deaths as well as the massive damage from flooding associated with Hurricane Harvey that hit Houston have now been clearly attributed to elevated temperatures in the Caribbean which meant that both hurricanes were much more severe due to human-induced interference in the global atmosphere.
Subsequently, this year the heatwave that hit Japan and killed dozens of people followed by wildfires in Greece, Sweden and California have all been reliably attributed to human-induced climate change having already elevated the global atmospheric temperature by over one degree Centigrade.
Finally, the Special Report on 1.5 degrees by the Intergovernmental Panel on Climate Change (IPCC) which has been finalised and will be released in October has made it clear that our attempts to prevent loss and damage by mitigation and adaptation have not been successful and that loss and damage from climate change is now a present reality and not just something we need to prepare for in the future.
In preparation for COP24 to be held in Katowice, Poland in December this year, the UNFCCC has convened a special session in Bangkok, Thailand this week where this topic will be discussed.
Until now the only aspect of innovative finance for loss and damage that has been discussed under the UNFCCC has been insurance, particularly index-based insurance of which a number of pilot schemes have been set up in different regions.
However, despite the potential role of insurance in dealing with loss and damage from climate change, it has severe limitations, particularly when it comes to insuring the poorest in the most vulnerable countries, including Bangladesh.
Not only are the poorest not able to pay the premiums needed to get insurance but it is morally questionable to even ask them to do so when the problem is caused by the emissions of the rich.
Hence the time has now come to go well beyond insurance or even humanitarian assistance and think about setting up a global fund for loss and damage to enable rapid support to the victims of climate change that also goes beyond adaptation funding.
At the same time, it is also appropriate to think about innovative ways to apply the “polluter pays” principle to raise the funds for such a global fund for loss and damage.
There are already a number of existing models as well as new ideas that have been floated which should be examined carefully.
One existing model of applying the polluter pays principle is the scheme for oil spill damage compensation which is funded by all the oil tanker companies and which makes compensation payment for damage from oil spill regardless of who caused the oil spill.
Another way is to apply a levy such as the “French Solidarity” levy on air passengers which is used to fund development assistance by France.
The Least Developed Countries (LDC) Group has also proposed an International Air Passenger Levy (IAPL) which could be used for the global fund for loss and damage.
There is a civil society proposal for a Carbon Levy on fossil fuel companies' profits which could easily raise a hundred billion dollars a year with only a small levy on the profits only of those companies.
Finally, there are opportunities to raise national-level funds to support loss and damage at the local and national level. The government of Bangladesh is contemplating setting up a National Mechanism on Loss and Damage which would include using the reserve funds of the Bangladesh Climate Change Trust Fund (BCCTF). This would be set up as a two-year pilot to test different ways of funding compensation for loss and damage from climate change. Such a national loss and damage fund could then link with a global fund going forward.
I would argue that the time has now come to give serious consideration to setting up a global fund for loss and damage from climate change that goes beyond insurance, disaster preparedness and adaptation and raises funds by taxing polluters.
Saleemul Huq is Director of International Centre for Climate Change and Development at the Independent University, Bangladesh.