Rethinking Eligibility

In the summer of 2022, unprecedented monsoon rains, 547% above average, fuelled by climatic and anthropogenic factors, submerged a third of Pakistan, with damages equalling nearly to 10% of the nation’s GDP. This devastation stands in sharp contrast to Pakistan’s contribution to the emission of greenhouse gases, which is less than 1%. This disjuncture of negligible contribution with overwhelming vulnerability illustrates just one of the many reasons why the Global South has, for more than 30 years, advocated for the Loss and Damage Fund [“L&DF”].

At COP28, Dubai, the L&DF was operationalised, which was seen as a significant step towards meeting the gaps which were left behind by, firstly, the mitigation funds, which aim towards preventing ‘future’ climate changes and secondly, the adaptation funds, like the Green Climate Fund [“GCF”], which aim towards coping with ‘foreseeable changes.’ Unlike humanitarian finance, which is comparatively short term and adaptation finance, which are a protection against foreseeable shocks, the L&DF addresses irreversible and unavoidable harms that have already occurred and cannot be covered under mitigation or adaptation financing.

But as the eligibility criteria for the fund are still in talks, it raises concerns over potentially undermining the principles of common but differentiated responsibility [“CBDR”], a cornerstone of climate justice. Keeping the eligibility limited to Small Island and Developing States [“SIDS”], or Least Developed Countries [“LDC”], could prevent the L&DF from reaching countries whose political, infrastructural or social structures cannot cope with such climate catastrophes. This analytical paper discusses the L&DFs emerging eligibility criteria through the lens of CBDR, proposing a multi-factor vulnerability approach that can deliver real and accessible climate justice.

Early Origins

As early as the 1980s SIDS argued for the historic responsibility for ‘residual damage’ caused by centuries of industrialisation by the developed nations, and their emissions, while the Global South bore the consequences of it.

The concept of CBDR got codified in the Rio Declaration on Environment and Development and subsequently in the UN Framework Convention on Climate Change [“UNFCCC”], further updated by the Paris Agreement, acknowledges shared responsibility for environmental issues but recognises that states have different contributions to environmental problems and varying capacities to address them at their own pace. Viewed in this light, L&DF is an extension or one of the embodiments of CBDR, where the global emitters recognise the damage caused and take responsibility for it. Yet developed nations have seemed to resist any vocabularies of liability or compensation. In fact, the 2015 Paris Agreement explicitly states in paragraphs 51 and 52 that Article 8 on Loss and Damage “does not involve or provide any basis for any liability or compensation,” diluting accountability. Therefore, the operationalisation of the L&DF at COP28 is significant but largely symbolic, while it relies on voluntary contributions, it represents a step towards bridging the long-standing divide between the Global North and South.

In this context, the ICJ’s Advisory Opinion provides a crucial juridical grounding for the underlying idea that the L&DF seeks to accomplish. It affirmed that the States bear a binding obligation not only under climate change treaties but also under customary international law to prevent transboundary harm, to cooperate and to exercise precaution and due diligence by cutting greenhouse-gas emissions and adapting to the adverse impacts of climate change. The Court also held that although the damage from climate change is cumulative, the existing standard of ‘sufficient direct and certain causal nexus’ between an alleged wrongful act or omission and the harm suffered is flexible enough to address the challenges arising in respect of the phenomenon of climate change. This development strengthens the underpinning for LD&F by clarifying that climate-related actions and omissions may constitute internationally wrongful acts and that responsibility can be invoked.

Defining “Loss and Damage”

One of the biggest obstacles is that there is no formal definition of ‘Loss and Damage,’ but it is commonly understood to mean one of the three: all negative impacts caused by climate change, harms that occur after limits to adaptation have been reached, or the impacts not avoided by climate change mitigation and adaptation. It is also understood to be divided into economic losses, which are quantifiable like destruction of infrastructure, crops, etc and non-economic, which are generally harder to quantify, such as deaths, loss of culture and collapsing biodiversity. Definitional ambiguity is crucial because eligibility may hinge on what ‘counts’ as compensable loss. For instance, while the destruction of infrastructure due to a flood may be quantified, but erosion of cultural sites due to the same flood may not. Ultimately, without any clarity, eligibility will remain skewed and contested. If the scope is narrowed to only identify economic damage, countries facing slow-onset or non-economic harms will face a risk of exclusion, even though they may be equally, if not more vulnerable.

Eligibility

Even though it’s still in debate, the emerging eligibility design for availing L&DF seem to privilege categorical labels, like the Small Island and Developing States, or Least Developed Countries, and Fragile and Conflict-Affected States [“FCS”]. But I propose that this narrow approach clashes with CBDR in three ways;

Firstly, it excludes demonstrably vulnerable states, carrying on with the illustration of Pakistan to examine the perversity of the narrow eligibility. With its low emissions and high climate vulnerability, by any measure, Pakistan should be a prime candidate for support. Yet, under the current eligibility criteria, it risks exclusion. Pakistan is neither an LDC nor an FCS, even though it is important to note that it ranks 27^th on the Fragile States Index, just one place above Uganda, which is 28th,  which does qualify as an LDC and is most likely to enjoy automatic eligibility. This stark contrast shows how rigid reliance on UN development labels rather than looking at dynamic indicators of vulnerability might not produce desired outcomes. Pakistan’s unstable governance, high climate exposure and low emissions should technically be exactly the kind of country the Fund should provide protection to.

Secondly, many developing nations like India and China who advocate for the L&DF, while definitely being vulnerable to climate change, are also part of the top three emitters of greenhouse gases. To treat them solely as ‘developing’ beneficiaries ignores their growing capacity and contribution to the problem. A more balanced approach to CBDR, in my opinion, would be to push high emitters to share responsibility to contribute resources to the L&DF. This dual role would not only help close the gap between the actual needs and current contribution of the Fund, which is far below the actual requirement, but also deter high emitters, encouraging them to reduce emissions.

Thirdly, the reliance on UN-created categories like Small Island and Developing States, or Least Developed Countries, and Fragile and Conflict-Affected States, which is a very Eurocentric approach, ignores the dynamic and multi-dimensional nature of vulnerability. They fail to capture the slow-onset processes of desertification, biodiversity loss, and extreme heat, which may affect many middle-income but climate-vulnerable countries that may not have adequate resources, infrastructure, or the know-how to deal with the already caused damage and at the same time prevent future climate shocks.

Comparative Lessons

There exist models which are more inclusive. For instance, the Global Fund to Fight AIDS, Tuberculosis and Malaria uses a multi-factor approach, combining disease burden, institutional fragility and economic capacity. Its strength lies in targeting those most affected at a given point in time. Adopting a similar approach would ensure that genuinely affected countries are not excluded, prioritising the most fragile, truly aligning with the principle of CBDR and meeting the true purpose of LD&F.

Realising Possible Challenges

Underlying the eligibility debate is a deeper political anxiety of the states that the broad eligibility could be read as a recognition of legal liability and compensation. Particularly among the developing nations that fear that this could open the doors to claims of legal compensation. This is why the language of the Paris Convention was carefully couched in the vocabularies of “contributions” rather than reparations, and the same has been followed by the L&DF proposal, to encourage maximum participation. The UN Secretary-General, Antonio Guterres, suggested an innovative financing mechanism, such as taxing fossil fuel companies to contribute towards the Fund, which I believe is a practical and realistic way to go about increasing the Fund. This suggestion also aligns with the ICJ’s Advisory Opinion, which clarified that States may be held responsible for failing to take necessary regulatory and legislative steps to limit the emissions released by private entities under their jurisdiction.

An additional challenge arises from my own critique that high emitters among developing countries should also contribute towards the Fund, while this may be politically sensitive and challenging, this could be made palatable by linking contributions to the ‘target-area’ approach suggestion (as mentioned in the comparative lessons segment, taking inspiration from the Global Fund to Fight AIDS, Tuberculosis and Malaria). Developing States that contribute also retain access to the Fund, should they face catastrophic climate losses in the future. Such a model creates dual incentives for high emitters, but at the same time ensures that they recognise their present responsibility, while also fostering deterrence towards reducing their emissions.

Conclusion

Notwithstanding the ongoing political disputes over the relevance of historical responsibility for climate change to the responsibility for providing Loss and Damage finance. One thing which is clear is that strengthening the international collaboration and response to loss and damage serves the interests of rich and poor nations alike. Climate change acts as a threat multiplier, with the potential to exacerbate underlying tensions, vulnerabilities and fuelling instability in regions that are of strategic interest to global powers. Improving response to loss and damage, and creating a more inclusive and credible framework, one that aligns with the modern-day CBDR requirements, may also help restore trust between developed and developing nations to devote more resources to reducing their emissions and adopting more sustainable practices. Thereby reinforcing global efforts to confront the climate crisis as a shared challenge.