By Dr. Sindra Sharma
23 / 05 / 2024
Feeding rays and sharks on the beach in Maldives. As an archipelago of low-lying islands and atolls in the Indian Ocean, the existence of the Maldives is severely threatened by sea level rise. Image credit: FotografieLink/iStock

In the face of an escalating climate crisis, Small Island Developing States (SIDS) stand on the frontlines, bearing the brunt of adverse impacts despite contributing minimally to the causes. The dialogues and documents surrounding the Fourth International Conference on SIDS (SIDS4) should highlight the critical need for these nations to lead with strength and urgency in securing climate justice. The current SIDS4 Co-Chair Text on the Antigua and Barbuda Agenda for SIDS (ABAS), however, falls short in adequately addressing these imperatives. The current text not only fails to adequately reflect the New Collective Quantified Goal (NCQG), but it also places a disproportionate emphasis on debt-based instruments and private finance. Although the Loss and Damage Fund is mentioned, the text does not emphasise the critical need for significantly scaled-up grant-based finance. Furthermore, it fails to establish a clear connection between the Loss and Damage Fund and the NCQG, which is essential for a coherent and comprehensive approach to climate finance for SIDS.

This blog underscores the necessity for a robust NCQG that includes comprehensive provisions for loss and damage and advocates for financing mechanisms that enable fiscal space for SIDS to effectively respond to climate impacts.

The Urgency of a Strong NCQG with Loss and Damage

The process of SIDS 4 includes interactive dialogues that unpack certain issues further. Interactive Dialogue 3 is on the subject of ‘Making climate finance work for small island developing States: building on the outcomes of the twenty-eighth session of the Conference of the Parties (COP28) to the United Nations Framework Convention on Climate Change (UNFCCC/Convention)’.Its background note emphasises the historic agreement at COP28, which set the stage for the Loss and Damage Fund and ambitious adaptation goals and notes the NCQG which is to be set in 2025 starting from a floor of $100 billion to reach up to $500 billion. There is no indication where this mysterious figure of $500 billion comes from especially as needs are clearly in the trillions. However, the actual climate finance needs far exceed these figures with the UNFCCC’s own Standing Committee on Finance finding needs to be between $5.8-5.9 trillion as articulated in its first Needs Determination Report (NDR). SIDS must push for an NCQG that reflects the true scale of their needs, ensuring it is rights-based, gender-just, and equitable​​. The ABAS comes in the most critical decade of action. With only 6 years remaining we must change the tides of inaction for the very survival of SIDS. 1.5°C will already have devastating impacts, the scale of needs at 1.5°C when 70-90% of coral reefs are gone, have not been adequately modelled. Maybe it is impossible to capture such an extreme loss. For SIDS when our cultures are tied to the land and the sea, when the coral reefs are your first playgrounds and treasure chests, where cultural, religious, and spiritual values are found —you lose more than the nourishment, beauty and critical ecosystem services that they provide. The ABAS cannot shy away from being bold when so much is at stake. It is for this reason that the ABAS should explicitly state that loss and damage is the third pillar of climate action and must be reflected as such in the NCQG. 

One of the questions posed for Interactive Dialogue 3 is: What actions are required to keep the momentum going and move forward with the operationalisation process of those agreements (Global Goal on Adaptation, NCQG, and the Loss and Damage Fund (LDF)). We can answer this by enshrining it within the NCQG. The NCQG must be needs and science driven and include dedicated sub-goals for mitigation, adaptation, and loss and damage. This structure will address the chronic underfunding of adaptation and the lack of support for loss and damage. It is imperative that developed countries fulfil their obligations by providing public, grant, and concessional finance adhering to the principles of equity and common but differentiated responsibilities as per the Paris Agreement​​ and the Convention. 

The newly decided Loss and Damage Fund's operational status provides crucial context for ongoing NCQG discussions. As an operating entity of the UNFCCC it paves the way for a more robust NCQG by ensuring Loss and Damage receives the urgent recognition and resources it deserves.

Financing Models for Climate Justice

Interactive Dialogue 2 is on the topic of ‘Enhancing Critical Forms of Financing and Aid Effectiveness Through Collaborative Partnerships’ Its background note highlights structural challenges including unsustainable debt levels and proposes innovative and accessible financing instruments for SIDS. However debt-based instruments, such as loans and bonds, exacerbate the debt burden of SIDS and debt restructuring can just delay the problem to a later time. Instead, there is a critical need for grant-based finance and highly concessional loans that do not further strain their economies​​. Effective financing mechanisms should include:

• Grant-Based Climate Finance: Developed countries must provide new and additional climate finance in the form of grants, not loans. This approach acknowledges the historical responsibility of high-emitting countries and aligns with the principles of climate justice.

• Polluter Pays Mechanisms such as the Climate Damages Tax: For instance, the Climate Damages Tax proposes a tax on fossil fuel extraction in wealthy nations to raise $720 billion by 2030 for the Loss and Damage Fund, assisting developing countries facing climate impacts. The tax would start at $5 per tonne of CO2e and increase annually, with 80% going to the fund and 20% as a domestic dividend for climate transition in the taxing countries.

• Debt Cancellation: Comprehensive debt cancellation is essential to free up resources for investment in critical areas like health, education, and climate action without the burden of repayments.

• Climate Resilient Debt Clauses (CRDCs): These financial instruments, which allow for debt repayment deferrals in the event of severe climate shocks, can enhance the resilience of SIDS without significantly increasing their debt burden​​.

Enhancing Climate Finance Access

To enable SIDS to access necessary resources at scale, the current climate finance system must undergo significant changes. Simplifying access processes and increasing the provision of grant  financing are crucial steps. Promoting direct access modalities is also necessary to enhance alignment with national priorities and increase country ownership​​​​.

The ABAS calls for the establishment of a Multidimensional Vulnerability Index (MVI) to better reflect the unique challenges of SIDS, ensuring more equitable access to concessional finance. However it is important to note that there are significant risks to the MVI, especially in relation to creating inequitable distributions of vulnerability. 

Strengthening the SIDS4 Co-Chair Text

The SIDS4 Co-Chair Text needs to explicitly reject debt-based instruments and prioritize grant-based finance and highly concessional loans. It should focus on climate justice, recognizing the historical responsibility of high emitters and avoiding reliance on private sector finance and market mechanisms, which can be unpredictable and potentially exploitative. The text must include a strong emphasis on the Loss and Damage Fund, ensuring it is adequately capitalised with grant based finance and operationalized with special consideration for SIDS​​.

The document should also incorporate language protecting the rights of marginalised groups, including LGBTQIA+ and Indigenous Peoples, to ensure inclusive and just development. The next ten years are critical for SIDS, and the international community's full support is imperative to prevent far-reaching consequences. This support must be rooted in science, inclusive of traditional and Indigenous knowledge, and robust international collaboration​​.

As they have done, time and time again, SIDS must lead with a strong and unified voice to secure climate justice in this critical decade. The ABAS Text must reflect the urgency and scale of the challenges faced by these nations. By advocating for a robust NCQG that includes comprehensive provisions for loss and damage and by ensuring accessible and just financing mechanisms, SIDS can chart a course towards resilient prosperity. It is time for historic high emitters to fulfil their obligations and support SIDS in their fight for survival and justice.

Sindra Sharma is an expert in climate policy and international development, emphasising climate justice for Small Island Developing States. With a PhD from the London School of Economics and multidisciplinary advanced degrees from the University of Auckland, she has contributed to the climate dialogue by advising negotiators and working with Civil Society to advance climate justice narratives in policy discussions and broader contexts, approaching loss and damage in a holistic and integrated manner. She oversees the L&DC’s strategic planning, working with members to develop and execute comprehensive strategic plans in alignment with the L&DC’s overarching goal and mission statement. She is also a Senior Policy and Governance Advisor at Pacific Islands Climate Action Network (PICAN) working on elevating pacific priorities regionally and multilaterally.