As an idea that was born in Egypt at COP27, the Loss and Damage Fund was officially launched at COP28 in Dubai. It was received with overwhelming support from many, particularly in the developing world. The initiative is also bold enough to raise a few eyebrows and yet ambitious enough to fully realize the vision of a just energy transition that so many in the developing world have been pushing for. The Loss and Damage Fund has come as the financial savior, saving many of the world’s less fortunate nations from fiscal ruin due to the damages created by unforeseen natural disasters with climate change being the primary culprit. Within the realm of the oil and gas industry, the scenario is somewhat more complicated, but the initiative is more positive for the petroleum sector than some may perceive.
Though it may be looked upon as a hardship for oil and gas companies, many say that the Loss and Damage is a way for the petroleum industry to get involved in the energy transition in a positive manner, both as a corporate social responsibility initiative and as a tool to evolve with the transition to maintain or possibly even gain market share. Experts indicate that the energy industry can in fact contribute and remain profitable while working to decarbonize their operations and help the surrounding communities adapt to the new climate reality that the world lives in, something which the global petroleum sector has already been actively involved in even before the Fund was ever discussed.
With this in mind, generally reactions to the historic foundation of the Fund have still been mixed. The Fund is agreed upon in principle, but the fine details of the Fund are still being sorted out and need further discussions to be implemented in a fair and just manner.
“While the historic decision was welcomed, this is but the first step and success will depend on how quickly this fund gets off the ground. Representatives from 24 countries will work together over the next year to decide what form the fund should take, which countries should contribute, and where and how the money should be distributed,” it said in a report titled “What you need to know about the COP27 Loss and Damage Fund,” published by the UN Environment Programme. “But for the fund to be effective, the root cause of climate change must be tackled – and that involves reducing emissions. Unless emissions are drastically reduced, more and more countries will face the devastating effects of climate change. The world urgently needs to find more resources for mitigation, adaptation, and loss and damage so that climate change will not erode humanity’s chances to deliver on the Sustainable Development Goals.”
Nonetheless, ideas of forcing contributions or the use of coercion have generally been rejected. The Loss and Damage Fund by no means should be perceived to be a form of climate taxation for the more economically prosperous nations to give to the poor. Rather, the fund itself is designed to empower a collective global effort to ensure nations that are less economically successful do not bear too much of the brunt when the effects of climate change are truly felt. Almost half a billion dollars have been pledged and there could be a lot more on the way for years to come. “Rich nations attempted to broaden the pool of donors expected to contribute but made limited headway. The text ‘urges’ developed countries to provide financial resources to the fund, while other nations are only ‘encouraged’ to do so ‘on a voluntary basis’,” it said in a report titled “Countries pledge $400m to set up loss and damage fund” from Climate Home News.
Some of the most well-known oil and gas producers within the Arab world have demonstrated a willingness to contribute to the Fund and its extensive effort to create a symbiotic relationship between climate justice and the fossil fuel sector.
“The UAE’s contribution of $100 million is welcome, both for its solid cash and for the pressure it puts on the world’s biggest polluters to also step up and recognize their responsibility for decades of pollution,” ActionAid International Climate Justice Campaigner Teresa Anderson was quoted as saying in the same report.
Though the Loss and Damage has been the center of controversy regarding legal accountability for climate change in countries around the world, it is in fact an opportunity to realize a just energy transition, an effort that many companies in the oil and gas industry are willing and have already contributed to. While being a great initiative in the general sense, the Loss and Damage Fund is a global effort that needs to be inclusive and accommodate all perspectives. It should not be used as a tool for financial finger-pointing but rather as a cause that can unite the global economy to fund the protection of vulnerable communities worldwide while ensuring energy security for all through creating a diverse energy mix.
