Financing loss and damage from climate change impacts in Small Island Developing States

Abstract

Loss and damage (L&D) from anthropogenic climate change was for the first time formally recognised under the United Nations Convention on Climate Change (UNFCCC) in the Paris Agreement under Article 8. However, fearing legal ramifications by developed countries, any liability and compensation as well as any mandate for funding was explicitly excluded. Therefore, this thesis explores ways to mobilise, distribute and administer funds for L&D from climate change impacts under the UNFCCC, focusing on Small Island Developing States. Semi-structured interviews, participant observation, expert elicitation, case study approach and review methods such as systematic literature and desktop reviews are used to triangulate data and assess financing options. A potential financial mechanism is identified that is pragmatic, people-centered and can be incorporated into existing UNFCCC structures. The thesis commences by analysing existing available tools and their suitability to address L&D. Insurance pools are examined which are part of comprehensive risk management and insure developing countries against natural disasters. The analysis showed that insurance schemes need to remain in place but fail to address aspects of equity and are unsuitable for long-term recovery, slow-onset events (SOE), human mobility and non-economic losses (NELs). Strengths of insurance schemes are the capability to provide a fast cash flow to address the most basic needs after sudden-onset events. Another existing funding arrangement that was explored is the Green Climate Fund (GCF). Its relevance was derived from a data set of responses by 43 global semi-structured interviews with L&D practitioners from the UNFCCC, Executive Committee members of the Warsaw International Mechanism for Loss and Damage, government representatives, negotiators, NGOs and think tanks. As L&D is currently not included as a funding stream, an analysis of the Governing Instrument (GI) and the Investment Framework (IF) of the GCF was performed. It showed that the inclusion of L&D is possible through post-disaster applications for rehabilitation efforts. The design of the European Union's Solidarity Fund was used to propose new funding criteria and an application procedure to respond to L&D. A full application for the aftermath of the destruction in the Bahamas by Hurricane Dorian was developed. The thesis then moves on to analyse whether planned relocation is an adaptation response to climate change impacts or has to be considered L&D due to NELs. A tool for practitioners is developed to assess planned relocation projects against to ensure the move is an adaptive response as much as possible. NELs also occur from ad-hoc relocation and natural disasters. To identify these losses and appropriate response measures, 26 semi-structured interviews with residents from Dominica and Antigua and Barbuda were conducted and asked about their NELs after hurricanes Irma and Maria devastated their islands in 2019. I found that the definitions of NELs under the UNFCCC require adjustment to cater for the needs of residents. To finance NELs from SOE, a unique proposal is put forward that engages philanthropic organisations to channel finance into a fund, such as the GCF. The final part of the thesis presents necessary funding components and levers for fund mobilisation based on the global data set. The thesis concludes by distilling the results of all chapters into one comprehensive funding mechanism to finance all aspects of L&D. I found that interviewees: want L&D "addressed" and not just "averted and minimised"; consider that compensation is impractical; and that the Polluter Pays Principle should be used for fund mobilisation. By drawing on comprehensive empirical data sets and numerous research methods and has therefore the potential to overcome the politicisation and sensitive nature of L&D finance in international climate change negotiations. Show more