This paper, published in the lead up to COP 27, argues that negotiations on Loss and Damage finance will need to consider four key questions and proposes answers to each:
1. Where will a financial mechanism be located?: The Loss and Damage fund could be located within the climate regime, as a new entity under the Financial Mechanism under the UNFCCC and the Paris Agreement or as a new window or trust under the Green Climate Fund or the Warsaw International Mechanism. There could also be complementary mechanisms outside the UnFCCC including in another UN agency or at the International Monetary Fund or the World Bank, the G7 or G20 or a new UN trust fund.
2. Who will pay for it? There are two options: To ask for public contributions from developed countries, philanthropies, sovereign wealth funds, the IMF and/or the World Bank) or it could impose new taxes such as levies on air travel, bunker fuel, fossil fuel extraction, greenhouse gas emissions and financial transactions). The fund could adopt both approaches, though the paper acknowledges that some taxes could have negative impacts on the countries who would be recipients of the finance for Loss and Damage (i.e. developing countries).
3. Who will control it? The fund should be governed by the principles of common but differentiated responsibility and funding should be new and additional; needs-based, adequate, and predictable; public and grant-based; guided by vulnerability criteria; and locally driven.
4. What will it do? The fund should make it clear that Loss and Damage is separate and distinct from but also linked to mitigation and adaptation. Funding should address critical gaps in slow onset and non-economic losses.