Climate Finance: Tackling Loss and Damage

Deidre Brock Excerpts

Tuesday 5th September 2023 Westminster Hall

[Chris Law]

I thank the right hon. Member for a really valuable intervention. She reminds me of the startling numbers that I was given in 2017, at the first COP I attended, by a climate scientist called Dirk Messner. He described how, if we continue on the trajectory that we are on now, by 2050 1 billion people will be on the move because of displacement by climate change. A current figure is that more than one third of people on the move right now are on the move as a result, directly or indirectly, of climate change. Therefore the right hon. Member makes a very valuable point.

Not only has the UK made a massive contribution to the destructive impacts of climate change through its emissions, but it has benefited from the competitive advantage that its early adoption of fossil fuels and industrialisation brought and it continues to profit from the extraction of oil and gas from the North sea. The UK therefore has a moral obligation to recognise this historical responsibility and lead by example in addressing loss and damage. That cannot be denied or ignored. As we prepare to embark on the critical climate conference that will be COP28 in Dubai, it is paramount that the UK takes a bold and principled stance in addressing the devastating impacts of climate change, and encourage similar action from others as we collectively tackle the biggest global challenge facing the planet today.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

I congratulate my hon. Friend on managing to get this debate on such an important issue. Does he agree that this Government’s credibility on climate finance will continue to be fundamentally undermined until the UK’s official development assistance budget is restored to at least 0.7% of GNI and the cuts are no longer threatening the many projects currently supporting vulnerable communities?

[Chris Law]

I thank my hon. Friend for a really valuable point. When I go out in the world today and speak to organisations and bodies in both Europe and the US, they are, frankly, disappointed at the UK’s position in recent years on the reduction in relation to GNI. It is a shame—it is our collective shame—and it needs to be altered radically. And for sure, money for loss and damage should not come from existing ODA budgets, which have already been shrunk.

To understand the imperative for loss and damage funding, we need to examine the profound, real-life and often irreversible impacts of climate change. At various COP meetings that I have attended, I have heard harrowing testimonies from citizens of small island states whose homes are disappearing underwater because of climate change. I recently watched devastating footage from the Solomon Islands, where sea level rise rates have been nearly three times the global average. Data shows that sea levels around the islands have risen at the alarming rate of between 7 mm and 10 mm a year—well above the global average of 3 mm a year. As a result, many coastal areas have been inundated, displacing communities and leading to the loss of arable land. Indeed, whole islands have tragically vanished beneath the rising waters.

The disappearance of islands such as Kale, Zollies and Kakatina is not only a stark statistic but a poignant testament to the reality of climate-induced loss and damage. I say this to the Minister: just imagine for a second that it was the United Kingdom that was facing disappearing—the entire nation disappearing under the waters that surround us. We would be acting very differently from how we are now. Those communities in the Solomon Islands have lost their homes, their ancestral lands and their way of life. The impact of climate change in the Solomon Islands extends beyond the numbers and statistics, reaching into the heart of the nation’s communities.

In east Africa, agriculture, reliant on timely and predictable rainfall, is a cornerstone of the economy; the region is highly vulnerable to climate shocks such as droughts and floods. Widespread crop failures and significant loss of livestock have led to vast economic losses that destroy livelihoods and deepen poverty and inequality. One person is likely to be dying every 28 seconds because of acute hunger and famine-like conditions as a result of climate change. This has been accelerated by an unprecedented series of failed rains, causing prolonged droughts, or places being hit by destructive flash floods, devastating people’s crops and livelihoods. Emergency humanitarian aid is simply not enough; the humanitarian system is not appropriate to address the increasing impacts of climate change. A loss and damage fund is needed, and needed now.

In Malawi, floods and droughts are on the increase. Events include Cyclone Ana, which in January 2022 affected almost 1 million people, of whom 190,000 were displaced, and Cyclone Freddy, which displaced more than half a million people, destroyed crops and livelihoods and caused almost 700 deaths. The World Bank estimates that climate change could reduce Malawi’s GDP by up to 9% by 2030, which is only seven years away. That means that, despite continued work and increasing resilience to climate-induced shocks in Malawi, the impacts of climate change continue to erode development gains, particularly for vulnerable populations.

I recently learned of the impact of initial loss and damage funding from the SNP Scottish Government to projects in Malawi to support safe housing construction and provide psychological support for victims. This is a small-scale community-led initiative that needs to go much further and be supported by a global fund. Funding the loss and damage fund is not a matter of charity; it is an act of justice.

The SNP Scottish Government have embedded the concept of climate justice in their international development framework, launching a climate justice fund in 2012, which is due to increase by £24 million over the next three years. That was the first of its kind in the world. Crucially, it paved the way for others when it again became the first in the world to commit funding to loss and damage at COP26 in Glasgow. The whole world was there to listen and the whole world wanted to see that movement forward.

The Scottish Government’s role in providing funding for loss and damage is characterised by deep commitment to climate justice, concrete financial contributions, active participation in global climate efforts and a dedication to innovative and collaborative solutions. Scotland’s global climate leadership credibility is reinforced by its domestic action. It is concerning that the UK’s reputation could be undermined by the current Government’s decision to grant hundreds of new oil and gas licences and, I am afraid, the Labour party’s weakness in watering down its £28 billion green prosperity plan.

Scotland is now seen as a trusted global partner when it comes to climate loss and damage. I hope the Minister will agree with me that the Scottish Government should be empowered to do more on the international stage, rather than be restricted or put back in their box, as some of his Foreign, Commonwealth and Development Office colleagues have suggested. Because where Scotland has led, others have followed: Denmark, Germany, Austria, Belgium, Ireland, New Zealand and Canada have all now pledged loss and damage funding.

The Scottish Government did not hang about and wait for others to act first. They did not create excuses to give themselves reason to delay making a commitment. They saw the urgent need for this funding and acted upon it. Although these funds are small, they are already making a difference, both in practical terms and in how they have prompted others to follow suit. I sincerely hope the UK Government will see the value in that and act without unnecessary delay.

Although Scotland has contributed to important progress, it is not happening fast enough globally. The UK and other Governments around the world have a responsibility to come together and ensure that the practicalities of the loss and damage fund are agreed at COP 28, and implemented as soon as possible thereafter. At present, there has been no agreement on what the financial size of any loss and damage fund should be and how it should operate through the Transitional Committee agreed at COP 27, which has been tasked with establishing the institutional arrangements and has been working over the past year.

Several areas of contention are still being debated and need to be resolved before the committee’s plan is considered at COP 28. One of those is whether the loss and damage fund should be housed within existing climate finance mechanisms, or operate as an independent entity. The Alliance of Small Island States has called for a

“fit-for-purpose multilateral fund designated as an operating entity of the UNFCCC Financial Mechanism”.

I stumbled across that fairly mighty quote. It has been echoed by other vulnerable states and civil society that wish to see a flagship dedicated fund. Let me make this point clear. This cannot be about relabelling existing money, a point the hon. Member for Brighton, Pavilion (Caroline Lucas) made earlier. Loss and damage funding needs to be new money going to new places—the places already experiencing the devastating effects of climate change—now.

Furthermore, if we are to embed the concept of climate justice properly in our approach, the voices of developing and vulnerable states must be listened to and acted upon, equalising power in this currently unequal relationship. Loss and damage funding should be tailored to their needs, rather than a top-down approach from those who do not share their experiences. It is also incumbent on developed countries to ensure that they do not divide consensus on the need for a loss and damage fund.

Existing climate finance arrangements are based on a 1998 list of 155 developing countries and 43 contributors. It has been suggested that not all developing countries should be eligible for support, as not all of them are particularly vulnerable and in need of urgent loss and damage funding. It has also been argued that countries such as China, India and countries in the middle east should be expected to contribute to the fund and that there should be a narrower definition, with recipients restricted to those countries with the least capacity to cope and adapt, alongside their susceptibility to harm and to be adversely affected.

While that does not seem overly unreasonable, many developed countries have not lived up to their climate finance obligations, and it is incumbent on them to ensure that these are met before expecting others to do so. This debate should not be used as a convenient excuse to stall progress on the establishment of the fund. Given that the UK is one of the 24 members of the Transitional Committee, it needs to be a champion for the dedicated fund, for firm commitments from developed countries and for transparent governance ahead of the committee presenting its plans at COP28. I look forward to hearing the Minister’s detailed statement of where he stands on this later in the debate.

Climate finance agreed under the United Nations framework convention on climate change was intended to provide new and additional resources for lower-income countries to tackle the additional challenges brought by climate change. Despite that, the UK has failed to provide climate finance in addition to its ODA budget. The current commitment of £11.6 billion in international climate finance from 2021 to 2026 is welcome. I would like to be absolutely assured that that will continue, but it is under pressure due to the UK Government’s reckless decision to cut their ODA budget from 0.7% to 0.5% of GNI at a time of escalating need—a point that has already been made.

There is concern that the UK will seek to delay climate finance commitments due to these significant aid cuts. Will the Minister confirm that that will not be the case? I am also eager to hear from the Labour Front Bench on this. Back in July, on reports that the commitment was being dropped, the Labour party refused to comment on whether it would commit to the £11.6 billion funding pledge, so I hope to hear whether the Labour party will obediently do as it is told by the Tories and follow every fiscal decision made by them, or will it recognise the severity of the climate crisis and ensure the pledge is met.

The UK Government must ensure that the money attributed to loss and damage is new and additional to existing climate finance commitments, and not diverted from existing ODA budgets. Climate change is a global crisis that requires a global response—one that should not come at the expense of other essential development initiatives. Current estimates place the cost of loss and damage in developing countries alone at approximately half a trillion dollars by 2030. Christian Aid has estimated that the UK’s fair contribution to this fund could be 3.5%, equivalent to between $10 billion and $20 billion. It would simply not be possible to absorb that in the current climate finance commitments or to cut other aid spending further to fund it.

To raise the necessary funds, we must explore innovative financing mechanisms, which must be based on the polluter pays principle, as touched on earlier. Those responsible for a significant share of emissions must bear a corresponding share of responsibility for the damage this is causing. It is not unreasonable to look to the fossil fuel industry to pay a proportionate share of those costs, particularly given the level of profit and excessive profits they are making and the subsidies they receive. The figures required to cover the costs of loss and damage are high, but they are dwarfed by the billions in subsidies that the fossil fuel industry receives and the profits it makes.

To understand that, the excess profits of the five largest oil and gas companies alone amounted to $134 billion last year, and the United Nations Development Programme estimates that global fossil fuel subsidies are now at a staggeringly $423 billion a year. If we put those figures together, we are into more than half a trillion dollars per year, showing that there is no shortage of money, rather it is concentrated in the wrong hands.

Analysis by Christian Aid has shown that £6.5 billion could be raised by a wealth tax to support loss and damage. New forms of wealth taxes that are broad based and that take into account different forms of wealth could help significantly in ensuring that money is available for loss and damage. If both the Conservative and Labour parties are serious about adequately tackling this global climate emergency, they need to take bold action, instead of being hand in hand in timidly ruling these options out.

Will the Minister commit to ensuring that loss and damage finance is provided in the form of grants, not loans? Vulnerable nations and communities should not be burdened with debt or struggle to recover from the ravages of climate change. The UK Government’s contribution to loss and damage funding should not be merely seen as a financial transaction; it should be a declaration of values, a commitment to climate justice and a recognition of the profound responsibility we bear in the face of this global crisis. We are truly in this together, and we cannot walk away now.

To conclude, I have made it clear that we have a moral and historical obligation, as well as an obligation in our own self-interest, to act in the face of this climate emergency. When we talk about loss and damage funding, we are talking about humanity’s response to one of the greatest challenges of our time. The urgency of this crisis demands swift and decisive action, and the financial commitments made by developed nations must reflect the severity of the situation.

It is our duty to ensure that those commitments are translated into tangible support for those vulnerable communities most affected by climate change. Without such support, we will see the climate crisis create resource scarcity and poverty, cause disease and displacement, and lead to conflict and, as we touched on earlier, mass migration. That will affect all of us in this Chamber. It will affect our children and our children’s children’s children to come. It is in our enlightened self-interest to ensure that loss and damage funding is there as an essential lifeline for those who find themselves on the frontlines of a crisis that they did not create.

It is our collective responsibility as good global citizens to ensure that we act boldly and decisively, in order to make sure that the most vulnerable receive the support they need to rebuild their lives and to make sure that by co-operating together we protect all of our futures.

--- Later in debate ---

[Patrick Grady (Glasgow North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. Although Members may not have used all the time available, all the contributions have been substantial and this has been a worthwhile debate, which I warmly congratulate my hon. Friend the Member for Dundee West (Chris Law) on securing. I recognise his commitment to, and passion for, climate justice over many years. I think he has the distinction of attending the most UN framework convention on climate change conferences of parties of any serving MP—if not, he is certainly close to the record—so he speaks with an experience and authority to which we all, especially the Minister, ought to listen.

We have just returned from a summer recess during which the UN Secretary-General said:

“The era of global warming has ended; the era of global boiling has arrived”.

Only a very small minority of people anywhere in the world would now be prepared to argue that the extreme weather being experienced across the globe is not evidence of the impact that human-driven carbon dioxide emissions since the industrial revolution have had on the planet’s climate. Sadly, some of that minority still inhabit the Conservative Back Benches—although none of them has been brave enough to come to this debate to articulate that—and that has regrettable consequences for Government policy.

As every Member who has spoken in this debate has said, the reality is that climate change poses an existential threat—not necessarily to all human life, but certainly to the lifestyles to which we in the west have become accustomed and to which we encourage others elsewhere in the world to aspire. In 2015, when my hon. Friends and I were first elected, we would come to Westminster Hall debates and say that climate change threatened to undo the progress that had been made towards meeting the millennium development goals and driving down global poverty. Eight years later, we can say with certainty that climate change is undoing that progress and is in fact driving up hunger, poverty and disease in many parts of the world. That is why addressing the issue of loss and damage is so important.

The concept of loss and damage and the need for additional finances to repair loss and damage caused by climate change is not new; it dates at least to the early 1990s when the Alliance of Small Island States first brought it to the table of the existing UN framework. The hon. Member for Brentford and Isleworth (Ruth Cadbury) spoke powerfully about the threat that small island states face. They are among the first to experience the impact of climate change and face the prospect of their islands being literally wiped off the face of the earth by rising sea levels or becoming uninhabitable as marine ecosystems break down. My hon. Friend the Member for Dundee West asked the Minister to imagine if this country was threatened with being swamped—it is! Not far away, there is a tidal barrier that increasingly cannot cope with the tidal surges and rising sea levels, so this country is going to be affected. Low-lying areas of this island will be affected by climate change.

We all need to act, and that is what loss and damage is about. It recognises that some of the impacts of climate change will be literally beyond repair and certainly beyond prevention and mitigation. That in turn means that support for people and places affected by loss and damage also has to go beyond existing support. If climate change is undoing progress towards the sustainable development goals and poverty reduction, by definition the support to make up for it will have to be additional to what has already been pledged or assessed as required.

In 2022, the Vulnerable Twenty, or V20, which is a group of the Finance Ministers of countries vulnerable to climate change, estimated that

“Climate change has eliminated one fifth of the wealth of the V20 over the last two decades: initial evidence shows that the V20 would have been 20% wealthier today had it not been for climate change and the losses it incurred for poor and vulnerable economies.”

Therefore, there is an important economic argument. Free marketeers and capitalists who see trickle-down economics as the rising tide—ironically—that floats all boats should be paying attention to this. It reminds me of Lord Stern’s description of climate change in 2006—17 years ago—as

“the greatest and widest-ranging market failure ever seen.”

So let the free marketeers come up with their solutions if they want to—some of that has been addressed, and we will come back to it. It is crucial to understand that this issue must not be ignored. A price has to be paid to deal with the impact of climate change. The question is, who will pay it and how?

The hon. Member for Liverpool, Walton (Dan Carden) made important points about the role of future generations and our responsibility towards them. He was right to say that those who have done the most to cause climate change, and who have benefited from the extraction of the earth’s resources and the pumping of pollution into the atmosphere, now have a moral responsibility to support those who are most affected by climate change. That is the concept of climate justice, which has been adopted by the Scottish Government, and many other Governments and climate campaigners around the world, but the UK Government conspicuously avoid even acknowledging it, let alone accepting or committing to it. We will wait, I suspect again in vain, to hear the Minister say that the UK Government accept that climate justice is an important concept that exists and ought to be lived up to.

The important symbolism around the concept of reparations and reparative justice should not be allowed to get in the way of the urgent need to mobilise new additional funding to support countries and communities experiencing loss and damage from climate change. One key point that everyone has made today is that that funding has to be additional, which is also why we have to consider new and innovative ways of leveraging funding. Private sector companies, particularly those that make vast fortunes from the extraction and consumption of fossil fuels, clearly have to be a source, either through direct contributions to global funds or through taxation or levies at a country or international level. That is the “polluter pays” principle, which was raised by the hon. Member for Brighton, Pavilion (Caroline Lucas) and others who have spoken. There have been long-standing calls for a financial transaction tax, or Robin Hood tax, which could raise additional capital for fighting climate change.

It is particularly important that funding is disbursed in the form of grants and not loans; the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) made that point. There might be other ways, including insurance-based models—there is a lot of innovative thinking in this area—but we must not drive developing countries even further into debt.

[Deidre Brock]

Indeed. Those most likely to be affected by the adverse impact of climate change are already burdened by debt, which cripples their economies. My hon. Friend agrees that loss and damage funding should be additional and in the form of grants, not loans, but does he support the proposal that finance should be mobilised through the cancellation of existing debt? The SNP has spoken about that for a long time.