Climate change is one of the greatest challenges of our time. This year has seen record breaking heat and has by some scientists been said to be the warmest year on earth in more than 120 000 years. The UN Secretary General has also sounded the alarm bells announcing that the era of global boiling has arrived. Climate change introduces risks to all parts of society and natural systems, and the scale of the issue necessitates urgent action and cooperation at global, regional, national and local levels.
Although the Paris Agreement has led to broad global commitment towards a climate neutral and resilient development pathway, the world is not on track to meet the long-term goals of the Paris Agreement. Emission reductions are not deep and fast enough and future tipping points where the earth’s climate system will be changed beyond repair are getting closer in time. For every additional fraction of temperature increase the gravity, scope and frequency of loss and damage will increase. Mitigation activities are the first stance of action, which, together with adaptation can reduce the potential loss and damage. However, both mitigation and adaptation actions are falling far behind what is needed.
Actions to avert, minimize and address loss and damage are urgently needed when projected impacts from climate change on human and natural systems meet soft or hard limits to adaptation. Loss and damage due to climate change is increasingly becoming a reality, and the consequences affect the most vulnerable and poorest countries, communities and ecosystems the worst.
Last year, Parties came together under the climate negotiations at COP27 and acknowledged the urgent and immediate need to assist developing countries that are particularly vulnerable in responding to economic and non-economic loss and damage associated with the adverse effects of climate change. As part of this response, new funding arrangements and a fund for responding to loss and damage was agreed to be established, and a Transitional Committee was set up to develop recommendations to be discussed at COP28 with the view to operationalise the COP27 decision. As part of the mandate of the Transitional Committee was the need to identify and expand sources of funding.
This study was commissioned by the Nordic Council of Ministers’ Working Group for Climate and Air as a response to the need to get more clarity on the potential to mobilize additional funding for loss and damage through innovative finance solutions. The project is funded by the Nordic Council of Ministers and a Nordic steering group has provided support and guidance. However, the report content does not necessarily reflect the Nordic Council of Ministers’ views, opinions, attitudes or recommendations.
The Nordic countries are considered strong contributors of grant based official development assistance (ODA), both bilaterally and through the UN auspices. Contributions from the Nordic countries have been reliable for decades and most Nordic countries have met the UN target of official development assistance of 0.7% of Gross National Income (GNI) since the 1970s. The Nordic countries are also leading donors of climate finance based on per capita contributions to the Green Climate Fund (GCF) and other global climate funds. Through these existing funding arrangements, Nordic countries are already providing funding for loss and damage. Furthermore, Nordic countries strongly support the ongoing efforts to find new and innovative sources of finance for the funding arrangements and a fund responding to loss and damage, noticing the limitations of government grants in responding to the scale of the issue.
In this context, this study is an important step in mapping, identifying and further developing potential solutions and sources for financial support to developing countries that are particularly vulnerable to climate change induced loss and damage.
The study aims at furthering the political dialogue from a factual perspective. It showcases different sources of finance and their potential in enhancing finance for loss and damage. Our hope is to invite to a broader dialogue including the public and private sector, highlighting opportunities for international cooperation and national government action, giving guidance on the choices that are in the hands of politicians and government officials.
The vision of the Nordic Council of Ministers is that the Nordic Region will become the most sustainable and integrated region in the world by 2030. One strategic priority area is that the co-operation within the Nordic Council of Ministers should contribute to the positive development of international co-operation on the environment and climate, and thus support the objectives of the Paris Agreement for combatting climate change. The Nordic initiative to increase the knowledge base on innovative finance for loss and damage aims to serve this purpose.
Mia Nielsen
Chair, Nordic Working Group for Climate and Air (NKL)
10th October 2023