Climate ‘loss and damage’ should include supply chain impacts
Total losses were greater in high-income countries owing to greater asset exposure and more extensive reporting. However, when relative losses were expressed as a share of GDP, those of European countries – blessed with comparatively high per capita GDPs – were below the global average. And over half of those losses reflected indirect, trade-related impacts.
It is worth bringing these findings to bear on the concept of “vulnerability” which is at the heart of climate negotiations. It generally means how far a system is liable to suffer adverse impacts as a result of exposure to climate hazards. However, there is no consensus yet on how exactly vulnerability should be defined and quantified.
Article 4.8 of the UN climate convention predominantly lists vulnerable country groups based on the “adverse effects of climate change and/or the impact of the implementation of response measures”.
We suggest broadening the economic understanding of “adverse impacts” beyond direct economic impact, to encompass indirect impacts relating to regional trade and supply chains. These have a significant bearing on the stability and economic security of global supply chains, in addition to affecting vulnerable countries at local and regional level.
Viewed from this perspective, emerging countries such as China and India are more vulnerable than most countries in Africa. Their direct and indirect losses are substantial, in absolute terms, and their relative losses, measured as a share of GDP, are above the global average.
Fair, transparent funding mechanisms are essential
At COP29 in Azerbaijan last year, countries agreed on a “New Collective Quantified Goal” for climate finance. The goal calls on all parties to ramp up the supply of public and private financing for developing countries, with a target of US$1.3 trillion per year by 2035. Further impetus was given to the goal at COP30 in Brazil, in the form of the “Baku to Belém Roadmap to 1.3T”.
Our research shows that expanding the pool of funds and establishing fair, transparent mechanisms for rapidly directing funds to the most vulnerable communities and sectors, will be an important test for today’s climate-financing mechanisms.
Scaling up the loss and damage fund is an urgent priority. Losses are already enormous and can only increase. Targeted measures to adapt to climate change are vital for dealing with the intensifying impact. As well as being adequately financed, support for the fund will be needed from a broader range of multilateral or bilateral mechanisms.
An equitable, science-based allocation of funds is essential. The international community must finalise the specifics for climate financing without delay, increase the speed and scale of finance mobilisation and ensure funds are deployed in a transparent manner.
There is also a need to establish allocation criteria based on objective definitions of vulnerability, prioritise support for small island states, least developed countries and regions with little capacity for adapting to climate change, and develop sustainable mechanisms for responding to climate loss and harm.
Countries with different vulnerabilities will have different priorities when it comes to addressing climate-induced losses. These priorities are also informed by the challenges of cutting greenhouse gas emissions, adapting to climate change and sustainable development.
They will therefore need to individually assess their respective circumstances, with developing countries identifying their core needs and developed countries quantifying their contributions.
Coastal economies such as Puerto Rico and its Caribbean neighbours, along with Mozambique, Vietnam and the Philippines, experience especially high climate losses as a proportion of GDP: direct losses account for more than 60 per cent of their total losses.
Such countries are mostly economically disadvantaged. Therefore, they will need direct support from the international community to strengthen their disaster-prevention and adaptation capabilities, in the face of future loss and harm.
This story was published with permission from Carbon Brief.