Loss & Damage Is Here & Now for African Nations and Others

The climate summit in Sharm El Sheikh, Egypt last month approved a fund to compensate the most vulnerable countries for "loss and damage" they have suffered due to global warming caused primarily by industrialized countries.

A compromise brokered by the European Union resulted in overwhelming consensus to create the fund, as the United States backed down on its opposition to the fund.

While climate activists rightly celebrated the victory, the compromise decision had a fatal flaw. "We have the fund, but we need money to make it worthwhile," said Mohamed Adow, executive director of Power Shift Africa. "What we have is an empty bucket."

In the meantime, the damage continues to mount. Adding in the cumulative impact of the COVID-19 pandemic, the war in Ukraine, and more, the world now faces a "polycrisis." Those who contributed least to these crises, in the Global South and within the Global North as well, continue to suffer disproportionately from the loss of lives and livelihoods.

Far from taking the lead on the climate, as President Biden claimed in his speech to the COP27 summit, the United States continues to be a major obstacle to global action. The president did pledge to ask Congress for $2 billion to assist developing countries in responding to climate change.

But he carefully avoided using the language of "loss and damage" or acknowledging in any way that the United States had an obligation to pay. Without congressional approval, Biden's pledge will almost certainly end up as an empty promise.

A few countries, such as Denmark and New Zealand, have set up designated funds designated for loss and damage. Overall, however, rich countries are certain to default on their promises, as they did on their pledge at COP15 in Copenhagen in 2009 to come up with $100 billion a year in "new money" by 2020. The funds provided not only fell short of the goal, but most were in fact diverted from other urgent development needs.

New thinking on climate change and the 21st century polycrisis is coming not from any of the great powers, but from the Global South. The woman who is taking the lead comes from one of the smallest countries on the planet, with less than 300,000 people on only 166 square miles. Prime Minister Mia Mottley of Barbados gave a speech that eclipsed Biden's remarks. Her speech was based on the Bridgetown Initiative, which she launched in September.

From Egypt, Prime Minister Mottley flew the next day from Egypt to Durban, South Africa to deliver the 20th Nelson Mandela Lecture, where she elaborated on her vision and her plan.

Mottley put the case for loss and damage like this:

"If I lived next door to you, and every day I am dumping on your property, dumping on your property, and the money you had to send your children to school or to pay medical care for your wife all of a sudden, now has to be taken up to clean up the property because you can't sleep at night, you can't eat food in peace, then you would say that I should be sued and that I must stand responsibility for the fact that I am causing you to spend the majority of your earnings on being able just to live."

"As a former attorney general," she added, "I say we don't ask you for open-ended liability, but what we do ask you for is justice."

While making the case for additional grants, Mottley also laid out other options that might be more saleable to policymakers now.

One such option would be a windfall profits tax on oil and gas companies. Many countries in the EU have adopted these this year. And despite the political clout of the fossil fuel industry in Congress, polls show overwhelming approval among voters in the United States as well as other holdout countries such as Australia.

As Mottley puts it, oil and gas corporations "whose balance sheets far exceed that of many countries in the world ... have a responsibility to put something on the table in a loss and damage fund for those who are now having to pay out and pay out."

The other option, which is winning approval within the International Monetary Fund (IMF), is to use the IMF mechanism of Special Drawing Rights (SDRs) to make more funds available immediately. This is the international equivalent of the Federal Reserve deciding to increase the money supply. SDRs are based on a basket of five convertible currencies (the dollar, the euro, the pound sterling, the Chinese renminbi, and the Japanese yen). In 2021 the IMF allocated $650 billion SDRs in response to COVID-19, its largest allocation ever, thus providing about $62 billion to 75 lower-income countries. This cost nothing to the United States or any other country, while providing desperately needed relief to African and other vulnerable countries.

Rich countries also have the option of reallocating a portion of their SDRs, which they do not need or use for themselves, to other countries. France just announced the release of $5.26 billion in SDRs (about 14 percent of its allocation) to the most vulnerable countries. Likewise, the Biden administration has proposed an allocation of $21 billion, a slightly larger percentage of its allocation.

While Mottley points out the need for a total rethinking of the IMF and World Bank, such actions by the IMF can and should be implemented immediately. This would be a substantive start towards reorienting these institutions, which have historically favored the Global North at the expense of the Global South.

In preparation for the U.S.-Africa Leaders Summit on December 13-15, Biden's Africa staff have prepared a policy agenda refreshingly free of focus on competition with China and Russia. Judd Devermont, the National Security Council senior director for Africa, told the Washington Post that President Biden would announce U.S. support for adding the African Union to the G20, a step that could be taken at the G20 Summit in September 2023.

If President Biden could also announce $21 billion in SDRs to vulnerable countries, effective immediately, that would indeed be a signal to African and other vulnerable countries that the United States is capable of putting global problem solving over geopolitical competition.

And there would be no cost to U.S. taxpayers. Without assured congressional approval, however, such an announcement could also be another empty gesture. On the eve of the summit, that approval remains in doubt.