What Is "Loss and Damage" from Climate Change? 8 Key Questions, Answered

The planet has already warmed by 1.1 degrees C (2 degrees F) due to human-induced climate change. Millions of people today are facing the real-life consequences of higher temperatures, rising seas, fiercer storms and unpredictable rainfall. Rapidly reducing emissions is essential to limit temperature rise and secure a safer future for us all, as is making major investments to protect communities from severe impacts that will continue to worsen.

Yet collective efforts to curb greenhouse gas emissions and adapt are currently not enough to tackle the speed and scale of climate impacts, meaning that some losses and damages from climate change are inevitable. How countries handle these losses and damages has been a key issue at UN climate negotiations and beyond.

Here, we provide an explainer on the concept of loss and damage and what’s needed to address it:

1) What Is Loss and Damage?

“Loss and damage” is a general term used in UN climate negotiations to refer to the consequences of climate change that go beyond what people can adapt to, or when options exist but a community doesn’t have the resources to access or utilize them. This could include the loss of coastal heritage sites due to rising sea levels, or the loss of homes and lives during extreme floods.

To date, there is no official definition of loss and damage under the UN.

Loss and damage is and will continue to harm vulnerable communities the most, making addressing the issue a matter of climate justice. Yet the subject has historically been fraught with contention both inside and outside UN climate negotiations. While developed countries agreed at the COP27 UN climate summit in 2022 to create a fund for addressing losses and damages in particularly vulnerable nations, many questions remain around how it will work and how much money wealthy nations will provide.

2) What Counts As Loss and Damage?

Loss and damage can result from both extreme weather events likes cyclones, droughts and heatwaves, as well as slow-onset changes such as sea level rise, desertification, glacial retreat, land degradation, ocean acidification and salinization. In some cases, damages may permanently alter places; for example, rising seas encroaching on low-lying islands, or drought shrinking freshwater resources and turning once-productive farmland into barren land.

Communities are particularly prone to experiencing loss and damage when they experience climate change impacts that go beyond what they can adapt to, whether due to lack of finance to implement adaptation or because there are no measures that are feasible to implement.

The damages from the effects of climate change can be divided into economic losses and non-economic losses, though there is overlap between the two.

Economic losses and damages are those affecting resources, goods and services that are commonly traded in markets, such as damage to critical infrastructure and property or supply chain disruptions. This can be on a national scale or a local scale, such as impacts on individual farmers or communities.

For example, in coastal Bangladesh, salt farming is a major source of employment. Yet in recent years, frequent cyclones, tidal surges and heavy rainfall have hampered salt production, eroding the country’s self-sufficiency and forcing it to import salt to manage the market shortfall.

Non-economic losses can be the most devastating — such as the incalculable toll of losing family members, the disappearance of cultures and ways of living, or the trauma of being forced to migrate from ancestral homes.

Take the communities in Kosrae, Micronesia, who have lost burial grounds due to coastal erosion caused by sea level rise. Likewise, the loss of sea ice in the Arctic has affected the cultural identity and hunting practices among Inuit communities.

While harder to quantify and monetize, non-economic losses have severe and detrimental effects on communities’ well-being.

3) What Is the Difference Between Mitigation, Adaptation and Addressing Loss and Damage?

Under the Paris Agreement on climate change, countries recognized the importance of “averting, minimizing and addressing” loss and damage. Loss and damage can be “averted” and “minimized” by curbing greenhouse gas emissions (mitigation) and taking preemptive action to protect communities from the consequences of climate change (adaptation). Climate adaptation measures include protecting communities from sea level rise by helping them move to higher ground, preparing for extreme weather disasters by investing in early warning systems, protecting food supplies, switching to drought-resistant crops and much more.

“Addressing” loss and damage is the crucial third pillar of climate action: helping people after they have experienced climate-related impacts.

Loss and damage is linked to adaptation and mitigation because it happens when efforts to reduce emissions are not ambitious enough and when adaptation efforts are unsuccessful or impossible to implement. The second installment of the IPCC’s 6th Assessment Report, published in February 2022, acknowledges that as the magnitude of climate change increases, so does the likelihood of exceeding adaptation limits. It differentiates between “soft” limits — when adaptation options exist, but communities don’t have the financial resources needed to pursue them — and “hard” limits, where “there are no reasonable prospects for avoiding intolerable risks.” These limits are particularly acute in vulnerable communities that lack the resources needed to implement effective adaptation options.

Coral reefs offer a good example of where adaptation is likely to reach its limits. The IPCC found that 70% to 90% of tropical coral reefs will die by mid-century even if temperature rise is limited to 1.5 degrees C (2.7 degrees F), with nearly total loss under 2 degrees C (3.6 degrees F) of warming. This will lead to irreversible losses of biodiversity and have a major impact on coastal communities that eat and sell fish that live along reefs.

While further research is needed to fully understand the limits of climate adaptation, it’s clear that losses and damages are already happening, and many communities lack the resources to deal with them. Climate plans and policies should account for loss and damage alongside mitigation and adaptation.

4) What’s the History of Loss and Damage in UN Climate Negotiations?

The issue of loss and damage in UN climate negotiations has been a live — and contentious — one for over three decades.

When the UNFCCC was first being drafted in 1991, the island nation of Vanuatu (on behalf of the Alliance of Small Island States) proposed creating an insurance scheme to provide financial resources to countries impacted by sea level rise. Under its proposal, each country would contribute funds based on their relative contribution to global emissions and their share of the global gross national product. However, the proposal was rejected, and the issue of loss and damage was not mentioned when the text of the Framework Convention was adopted in 1992.

Loss and damage first appeared in the negotiated outcome of the UN climate talks in 2007 as part of the Bali Action Plan. Yet it wasn’t until 2013 that the issue gained real traction in UN climate negotiations, when parties formed the Warsaw International Mechanism on Loss and Damage to avert, minimize and address loss and damage. The Warsaw Mechanism was mandated to share knowledge, strengthen dialogues among stakeholders, and mobilize expertise to enhance action and support for loss and damage. But neither the Warsaw Mechanism nor any other established mechanism delivers funding to help countries manage loss and damage.

In 2015, developing nations successfully pressed to include in the Paris Agreement a goal to limit global warming to 1.5 degrees C (2.7 degrees F) and an article  on loss and damage. However, the latter, Article 8, faced limitations since the Agreement doesn’t refer to finance related to loss and damage. In fact, developed countries secured language in the accompanying COP decision explicitly stating that loss and damage “does not involve or provide a basis for any liability or compensation.”

At COP26, a large coalition of climate-vulnerable countries advocated for creating a new finance facility or fund dedicated to loss and damage. Their urgent plea was born out of frustration with the world’s persistently inadequate response to the climate crisis. Yet once again, developed nations rejected the proposal.

Instead, at COP26 countries established a two-year Glasgow Dialogue to discuss possible arrangements for loss and damage funding. Governments also agreed to fund the Santiago Network on Loss and Damage (SNLD), which aims to provide developing countries with technical assistance to address loss and damage, but defining the finer details was pushed to COP27. At COP26, some EU member states also pledged more than €30 million towards the network.

The first session of the Glasgow Dialogue took place at the UN climate negotiations in Bonn, Germany in June 2022, where developing nations continued to express concerns that the dialogue was disconnected from the formal negotiations or any decision-making process, comparing it to a “talk-shop” without demonstrable progress.

Loss and damage again took center stage at COP27. The first test for loss and damage occurred on day one of the climate talks, where countries for the first time agreed to put loss and damage funding arrangements on the formal agenda.

Countries also resolved key questions around the SNLD’s governance structures, paving the way for its full operationalization at COP28 in late 2023. Over the next year, a selection process will be carried out to identify a host organization and secretariat for the network, and members will be elected to an advisory board.

The ultimate litmus test for success at COP27 was whether negotiators would agree to create a funding stream to address loss and damage. After a tense two weeks of wrangling, countries finally reached an historic breakthrough and agreed to establish funding arrangements to address loss and damage, including a loss and damage fund. Governments also established a Transitional Committee to grapple with details for how to design the fund before it can become operational at COP28. The final outcome at COP27 also recognized existing channels and initiatives, including those outside the UNFCCC and Paris Agreement, that are part of the mosaic of solutions to address loss and damage. The Transitional Committee will play a role in determining how the loss and damage fund will align with and complement these other solutions.

5) Is Loss and Damage an Issue of Liability and Compensation?

One reason why loss and damage has been so contentious historically is due to developed countries’ concerns that compensating for losses and damages caused by adverse climate impacts may be construed as an admission of legal liability, triggering litigation and compensation claims on a major scale. As such, developed countries fought to include language in the Paris Agreement to prevent them from being legally on the hook to provide compensation.

And at COP27, when loss and damage funding arrangements were added to the agenda, countries agreed that outcomes would be “based on cooperation and facilitation, and [would] not involve liability or compensation.” This provided the assurances developed countries were looking for to allow the negotiations to proceed.

6) What Are Some Possible Sources of Funding for Addressing Loss and Damage?

 Some developed countries point to humanitarian aid, disaster-risk management, and insurance as sources of finance for loss and damage, but they can’t function separately. To address the scale and scope of the problem, these all need to be parts of the “mosaic of solutions.”

For example, in the wake of devastating floods, Pakistan needed short-term humanitarian assistance as well as needs long-term support for rebuilding. Meanwhile, Palau is concerned that tuna are migrating out of its fishing areas as the ocean warms. Without the ability to fish for tuna, some Pacific island nations could lose income averaging 37% of government revenue. While humanitarian aid would not be poised nor mandated to address this problem, other forms of finance could.

That’s why countries agreed at COP27 to establish funding arrangements, including a separate dedicated loss and damage fund under the UNFCCC, to help bring coordination and alignment of the various types of funding needed both within and outside the UNFCCC to adequately address loss and damage. The details and structure of these arrangements and the fund are yet to be determined, but will be on the docket at future UN climate summits. (Read more on the current state of play on financing loss and damage.)

Outside of the UNFCCC, there have been additional important developments for financing loss and damage, including the Climate Vulnerable Forum and the Vulnerable Twenty (V20) Group’s crowd-sourced loss and damage fund and the G7 and V20’s Global Shield Against Climate Risks initiative, which aims to enhance existing financial structures on climate risk and loss and damage finance.

7) What Activities Could Loss and Damage Funds Support?

Addressing loss and damage could span a range of activities and should be shaped by the communities experiencing them. Examples include weather-indexed crop insurance for farmers or proactively setting aside funds to rebuild critical infrastructure when disaster strikes.

It could also entail providing immediate humanitarian assistance after an extreme weather event, offering relief and rehabilitation to victims through provision of basic amenities, enabling social protection systems to provide emergency cash transfers to the poor, and enhancing microcredit institutions to provide financing for livelihood restoration.

Such funding could also help people rebuild when their homes are destroyed. For example, while early warning systems in Bangladesh have helped radically reduce fatalities from extreme weather events, people leave the storm shelters to find their homes and livelihoods destroyed, and have thus unquestionably experienced loss and damage.

Finally, when necessary, funding for loss and damage can assist with migration and relocation of people who are permanently displaced, and/or help diversify skills if their original livelihoods are no longer available.

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8) What Needs to Happen Next to Address Loss and Damage?  

Climate impacts are already causing widespread disruptions, and they’re only poised to worsen. The need for loss and damage solutions — most notably, finance — is more urgent than ever before. With the groundbreaking outcome from COP27, the international community will have to work especially diligently on deciding the concrete details of loss and damage funding arrangements, including the newly established fund. Developing countries and communities on the front lines of climate impacts are counting on them.

This article was originally published April 6, 2022. It was last updated December 14, 2022.