Why in News?

Following the devastating landslides that recently hit Kerala's Wayanad district, an important discussion has arisen on the possibility of subnational entities seeking compensation via the UNFCCC's Loss and Damage Fund (LDF).  

Although this demand is reasonable, it is not as simple as it seems to obtain climate funding.

What’s in Today’s Article?

• What is the Loss and Damage Fund (LDF)?
• How can India Take Advantage from the LDF?
• Need for the More Decentralised Funding from the LDF
• Challenges and Way Ahead Towards Utilising LDF

What is the Loss and Damage Fund (LDF)?

• Establishment: It was established at the 2022 United Nations Framework Convention on Climate Change (UNFCCC) Conference (COP27) in Egypt.
• What is Loss and Damage?
  • It refers to the adverse consequences brought about by climate change, and resulting in a range of impacts, such as
    • Loss of human lives,
    • Damage to infrastructure,
    • Loss of property and crops,
    • As well as the deterioration of ecosystems.
  • These impacts extend beyond the purely economic realm to encompass a broader spectrum of both economic and non-economic losses.
• Objective of the LDF:
  • It provides financial support to regions suffering both economic and non-economic losses caused by climate change.
  • These include extreme weather events and slow-onset processes, such as rising sea levels.
  • Financial support will be provided in the form of grants, concessional financing that can be utilised by any eligible country.
• Administration of the LDF:
  • The World Bank (WB) will assume the role of overseeing the fund's overall coordination, ensuring the efficient allocation of resources and aiding nations in their endeavours to recover from the aftermath of natural disasters.
  • A Governing Board determines how the Fund’s resources are disbursed, with the WB serving as the interim trustee.
  • The Board is currently developing mechanisms to facilitate access to the Fund’s resources, including direct access, small grants and rapid disbursement options.
• Significance of the LDF: The establishment of the Fund marks the initial phase in the implementation of financial instruments aimed at addressing consequences and fostering recovery from climate-induced disasters.
• Concerns related to LDF:
  • Despite its stated goals, concerns persist that climate funds are often too slow to be accessible immediately after a disaster, particularly for local communities at the sub-national level.
  • It is expected that the LDF would face similar issues.

How can India Take Advantage from the LDF?

• In damages caused by weather-related disasters, India has lost more than $56 billion between 2019 and 2023.
• In spite of this, India's National Climate Action Policy and budgets give mitigation efforts precedence over adaptation. This led to a subdued participation of India in Loss and Damage dialogues at COP meetings.
• Given that some parts of India are extremely vulnerable to climate change, India should push for more decentralised ways of allocating funds from the LDF, in international climate change negotiations.

Need for the More Decentralised Funding from the LDF:

• Adaptation and loss and damage needs are more strongly felt at the ground level by State governments.
• For example, in Kerala, the majority of the financial burden for disaster recovery fell on the State government.
• A notable example is the Rebuild Kerala Development Programme, launched in the aftermath of the (August) 2018 floods in the state.
• The fact that the WB provided loans to fund this program shows how important international climate finance is to the post-disaster recovery process.

Challenges and Way Ahead Towards Utilising LDF:

• Absence of a systematic method for conducting thorough evaluations of losses resulting from disasters:
  • This means that significant loss and damage needs that could qualify for assistance from the LDF may go unassessed and could impede India’s ability to access the LDF in the future.
• Way ahead: A clear legal and policy framework is desperately needed in India that prioritises locally led adaptation and provides a more precise method for assessing loss and damage.