Governments are starkly divided over plans for a loss and damage fund, with two months to go until it is due to be established.
While rich and poor countries have agreed to set up a fund to address loss and damage caused by climate change, they are miles apart on who pays and who benefits.
At a ministerial meeting on the sidelines of the UN general assembly on Friday, there was little sign of bridging the gap. The event complemented ongoing technical discussions ahead of Cop28 climate talks in Dubai this December, where decisions are due on how to get the fund up and running.
Ana Mulio Alvarez, an analyst at E3G, said the meeting “did not advance negotiations but it served as a political moment to put the cards on the table more publicly”.
A transitional committee has been working since March to draw up the rules for the fund.
Who gets the money?
One of the major sticking points is the question of who should be eligible for help.
The decision adopted at last year’s Cop27 summit in Sharm el-Sheikh, Egypt, says it should assist “developing countries that are particularly vulnerable” to climate change impacts. That is open to interpretation.
For the vast majority of rich countries, the pool of beneficiaries should be limited.
Developing countries call for $100 billion loss and damage target
The EU’s interim climate chief Maroš Šefčovič told the meeting that the resources should “explicitly target countries and its communities that are particularly vulnerable to the adverse effects of climate change, such as least developed countries (LDCs) and small island developing states (SIDs)”.
His views were echoed by the representatives of the US, UK and Australian governments, among others.
‘No discrimination’
Developing countries disagree with the position, arguing that all of them should be able to tap into the fund’s coffers.
Speaking on behalf of the G77 group of developing countries, a representative from Cuba said “the fund should operate without discrimination”.
Among the most vocal campaigners for a fund open to all is Pakistan, where devastating floods killed more than 1,700 people and caused damage totaling more than $30 billion last year. Classed as middle income by the World Bank, it would not automatically qualify for support based on a tight definition of vulnerability.
“All vulnerable developing countries, irrespective of their level of development and geographical grouping, must be eligible,” said Pakistan’s foreign minister Jalil Abbas Jilani. “We would not be able to lend our support to any such select, divisive and exclusionary approach.”
Speaking on behalf of the Alliance of Small Island States, Samoa said all developing countries should be eligible, but the fund’s resources should be “allocated equitably” so that the small island states are “not left behind and forgotten”.
Who pays?
The question of who pays into the fund is equally contentious.
When the European Union opened the door to a fund at the Cop27 climate talks last year, its then climate chief Frans Timmermans said large economies like China should also pay. The agreement was eventually struck without that condition, but the same debate has now reemerged.
EU’s Šefčovič said the fund should attract contributions from “all well-resourced governments”, in addition to innovative sources of financing, philanthropies, and the private sector. Spain and France floated the idea of introducing new taxes and levies as a way to bolster resources.
The UK’s energy minister Graham Stuart said governments “must break out” of “outdated categories from decades ago”, to deliver the volume of support needed. His statement was likely referencing the UN classification of developed countries established in 1992. The fund “must be financed by all, all of those capable of doing so,” Stuart added.
Similarly, the US disagreed with the notion that only developed countries would be invited to pay into the fund. “There is no existing donor base for loss and damage funding, it is a new idea,” a government official said.
The counterargument is that history matters. Developed countries got that way by being early adopters of coal, oil and gas. Emissions dating back to the industrial revolution are still in the air causing suffering today.
“Developed countries should effectively fulfill their funding obligations,” said China’s representative. “Developed countries who shoulder historical responsibilities for climate change should provide new additional finance for the funding arrangement of the fund in the form of grants supplemented by concessional loans.”
Debt trap fears
Developed and developing countries also disagree on what the money should be spent on, how the fund should be governed and whether it should be delivered as grants or loans
Avinash Persaud, special finance envoy to Prime Minister Mia Mottley of Barbados, is on the transitional committee. He told Climate Home he feared some developed countries see the loss and damage mechanism more as a way to coordinate existing funding that is primarily loan-based.
“Countries that are particularly vulnerable are already highly indebted,” he said. “We are going to be drowning in debt if we need to get loans every time get hit by a climate event.”
Time running out
With the clock ticking to the climate summit, the time to strike a compromise is limited.
The transitional committee is holding another round of talks next month, before preparing its recommendations for governments to consider in Dubai.
Persaud said he remained “cautiously optimistic” that countries will reach an agreement.
E3G’s Mulio Alvarez said the disagreements put the negotiations in a “tough position”.
“Real steps need to be taken towards a transformation of the financial architecture in order to meet needs, rebuild trust and increase understanding between parties,” she added. “There is a real risk that the fund could be set up but not adequately funded or truly operational.”
The post Ministerial shows fault lines on climate loss and damage fund appeared first on Climate Home News.
https://www.climatechangenews.com/2023/09/25/ministerial-shows-fault-lines-on-climate-loss-and-damage-fund/
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The “cost” of cutting UK emissions to net-zero is less than the cost of a single fossil-fuel price shock, according to a new report from the Climate Change Committee (CCC).
Moreover, a net-zero economy would be almost completely protected from fossil-fuel price spikes in the future, says the government’s climate advisory body.
The report is being published amid surging oil and gas prices after the US and Israel attacked Iran, which has triggered chaos on international energy markets.
It builds on the CCC’s earlier advice on the seventh “carbon budget”, which found that it would cost the UK less than 0.2% of GDP per year to reach its net-zero target.
In the new report, the CCC sets out for the first time a full cost-benefit analysis of the UK’s net-zero target, including the cost of clean-energy investments, lower fossil-fuel bills, the health benefits of cleaner air and the avoided climate damages from cutting emissions.
It finds that the country’s legally binding target to reach “net-zero emissions” by 2050 will bring benefits worth an average of £110bn per year to the UK from 2025-2050, with a total “net present value” of £1,580bn.
The CCC states that its new report responds to requests from parliamentarians and government officials seeking to better understand its cost assumptions, amid the ongoing cost-of-living crisis in the UK.
The report also pushes back on “misinformation” about the cost of net-zero, with CCC chair Nigel Topping saying in a statement that it is “important that decision-makers and commentators are using accurate information to inform debates”.
Co-benefits outweigh costs
The CCC’s new report is the first to compare the overall cost of decarbonising with the wider benefits of avoiding dangerous climate change, as well as other “co-benefits”, such as cleaner air and healthier diets.
It sets the CCC’s previous estimate of the net cost of net-zero – some £4bn per year on average out to 2050 – against the value of avoided damages and other co-benefits.
These “co-benefits” are estimated to provide £2bn to £8bn per year in net benefit by the middle of the century, according to the report.
The CCC notes that this approach allowed it to “fully appraise the value of the net-zero transition”.
It concludes that the net benefits of reaching net-zero emissions by 2050 are an average of £110bn per year from 2025 to 2050.
These benefits to the UK amount to more than £1.5tn in total and start to outweigh costs as soon as 2029, says the CCC, as shown in the figure below.
In addition, the CCC says that every pound spent on net-zero will bring benefits worth 2.2-4.1 times as much.
This updated analysis includes the value of benefits from improved air quality being 20% higher in 2050 than previously suggested by the CCC.
However, the “most significant” benefit of the transition is the avoidance of climate damages, with an estimated value of £40-130bn in 2050. The report states:
“Climate change is here, now. Until the world reaches net-zero CO2 [carbon dioxide] emissions, with deep reductions in other greenhouse gases, global temperatures will continue to rise. That will inevitably lead to increasingly extreme weather, including in the UK.”
The CCC’s conclusion is in line with findings from the Office for Budget Responsibility (OBR) in 2025, which suggested that the economic damages of unmitigated climate change would be far more severe than the cost of reaching net-zero.
The CCC notes that its approach to the cost-benefit analysis of the net-zero target is in line with the Treasury’s “green book”, which is used to guide the valuation of policy choices across UK government.
It says that one of the key drivers of overall economic benefit is a more efficient energy system, with losses halved compared with today’s economy.
It says that the UK currently loses £60bn a year through energy waste. For example, it says nearly half of the energy in gas is lost during combustion to generate electricity.
In a net-zero energy system, such energy waste would be halved to £30bn per year, says the CCC, thanks to electrified solutions, such as electric vehicles (EVs) and heat pumps.
For example, it notes that EVs are around four times more efficient than a typical petrol car and so require roughly a quarter of the energy to travel a given distance.
Collectively, these efficiencies are expected to halve energy losses, saving the equivalent of around £1,000 per household, according to the CCC.
Net-zero protects against price spikes
The CCC tests its seventh carbon budget analysis against a range of “sensitivities” that reflect the uncertainties in modelling methodologies and assumptions for key technologies. This includes testing the impact of a fossil-fuel price spike between now and 2050.
In the original analysis, the committee had assumed that the cost of fossil fuels would remain largely flat after 2030.
However, the report notes that, in reality, fossil-fuel prices are “highly volatile”. It adds:
“Fossil-fuel prices are…driven by international commodity markets that can fluctuate sharply in response to geopolitical events, supply constraints, and global demand shifts. A system that relies heavily on fossil fuels is, therefore, exposed to significant price shocks and heightened risk to energy security.”
It draws on previous OBR modelling of the impact of a gas price spike. This suggested that future price spikes would cost the UK government between 2-3% of GDP in each year the spike occurs, assuming similar levels of support to households and businesses as was provided in 2022-23.
The CCC adapts this approach to test a gas-price spike during the seventh carbon budget period, which runs from 2038 to 2042.
It finds that, if a similar energy crisis occurred in 2040 and no further action had been taken to cut UK emissions, then average household energy bills would increase by 59%. In contrast, bills would only rise by 4%, if the UK was on the path to net-zero by 2050.
The committee says that when considering the impact on households, businesses and the government, a single fossil-fuel price shock of this nature would cost the country more than the total estimated cost of reaching.
The finding is particularly relevant in the context of rising oil and gas prices following conflict in the Middle East, which has prompted some politicians and commentators to call for the UK to slow down its efforts to cut emissions.
In his statement, Topping said that it was “more important than ever for the UK to move away from being reliant on volatile foreign fossil fuels, to clean, domestic, less wasteful energy”.
Angharad Hopkinson, political campaigner for Greenpeace UK, welcomed this finding, saying in a statement:
“Each time this happens it gets harder and harder to swallow the cost. The best thing the UK can do for the climate is also the best thing for the cost of living crisis – get off the uncontrollable oil and gas rollercoaster that drags us into wars we didn’t want but still have to pay for. Inaction on climate is unaffordable.”
Benefits remain even if key technologies are more expensive
In addition to testing the impact of more volatile fossil-fuel prices, the CCC also tests the implications if key low-carbon technologies are cheaper – or more expensive – than thought.
It concludes that the upfront investments in net-zero yield significant overall benefits under all of the “sensitivities” it tested. As such, it offers a rebuttal to the common narrative that net-zero will cost the UK trillions of pounds.
The net cost of net-zero comes out at between 0% and 0.5% of GDP between 2025 and 2050, says the CCC, under the various sensitivities it tested.
“This sensitivity analysis shows that an electrified energy system is both a more efficient and a more secure energy system,” adds the CCC.
Finally, the report takes into account the costs of the alternative to net-zero. It looks at what would need to be spent in an economy where net-zero was not pursued any further.
The CCC says that the gross system cost of the balanced pathway falls below the baseline cost from 2041, which is consistent with its previous seventh carbon budget advice.
As shown in the chart below, costs fall under a net-zero pathway between 2025 to 2050, whereas they rise in the baseline of no further action.
Moreover, the total costs of the alternatives are broadly similar, with the relatively small difference shown by the solid line.
The decline in energy system costs shown in the figure above is broadly driven by more efficient low-carbon technologies, says the CCC, helping costs to fall from 12% of GDP today to 7% by the middle of the century.
The CCC’s new analysis comes ahead of the UK parliament voting on and legislating for the seventh carbon budget, which it must do before 30 June 2026.
The post CCC: Net-zero will protect UK from fossil-fuel price shocks appeared first on Carbon Brief.
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