In March 1996, the American tobacco company Liggett Group made public the agreement reached in a class action case, whereby it agreed to allocate 5% of its income to tobacco prevention programs. Liggett accepted, without saying so, the responsibility derived from abusive, deceptive and continuous commercial practices that caused irreparable damage to the company. The then president of the United States, Bill Clinton, described that agreement as “the first crack in the stone wall of denialism”, and he was not wrong. From then until today, the tobacco industry has been forced to pay fortunes in compensation for their actions.
A quarter of a century later, the ethical and economic foundations that underpinned the fight against tobacco companies inspire victims of climate change. The debate on the consideration of “loss and damage” has slowly gained strength, until becoming the only memorable result of the COP27 that has just been closed in the Egyptian city of Sharm el-Sheikh: the endowment of a fund for to this end for the poorest and most vulnerable countries would partially compensate for the colossal omissions in terms of mitigation of greenhouse gases and adaptation to climate change.
For the developing world, climate change is not a threat, but a contemporary and existential challenge, the remedy of which should be a legal obligation, as well as an ethical one.
The loss and damage fund was approved in extremis, when the official term for negotiations was closed, and despite resistance from some of the richest countries. Most especially that of the United States. The polluting great power refuses to accept that many innocent people are paying too much as a result of the actions of a few. For the developing world, climate change is not a threat, but a contemporary and existential challenge, the remedy of which should be a legal obligation, as well as an ethical one.
The informal leadership of the so-called G77 + China —representing the 134 countries of the Global South demanding the fund— fell precisely on Pakistan. Just six months ago, this overpopulated nation in South Asia lost more than 1,500 lives and close to 29,000 million euros in the floods that inundated a third of its territory, and whose origin is directly linked to climate change. Pakistan, responsible for just 1% of global CO₂ emissions, epitomizes the cause behind the new fund agreed at the COP.
For now, what was signed in Sharm el-Sheikh better reflects the legal precautions of rich countries than their financial and political obligations. Although, as reported The New York TimesEuropean countries announced commitments worth 300 million euros —for a variety of programs more or less related with the fund—no nation will be legally responsible for the payments. This evaporates any legal notion of compensation or reparation, and reduces the initiative to an exercise of goodwill. According to the official text of the agreement, the magnitudes and operational details of the new tool will have to be developed by a committee of 24 countries that presents a proposal at COP28 (November 2023) that includes the origin and destination of the resources, as well as the list of potential recipients of funds.
The risk of a new empty promise
In essence, the challenge is to establish a credible and operational mechanism. If its magnitude is too small, the background will be irrelevant; but an overly ambitious commitment would be considered a toast to the sun. And poor countries already know something about this. The great success of the COP15 in Copenhagen (2009) was the promise to reach a total of 100,000 million dollars (95,500 million euros) per year by 2020 to support mitigation and adaptation efforts in the developing world. The figure, which was already grossly below the needs estimated by the UN, remained in that year at 17,000 million less than what was established (see graph).
As if that were not enough, the vast majority went to mitigation activities —the priority of the rich— and only 24% went to adaptation —the priority of the poor.
It is, therefore, not to stumble on the same stone. For this reason, some experts and negotiators have made a special effort to consider alternative or complementary financing mechanisms to bilateral donations from the richest countries. One of the most interesting is to involve international financial organizations such as the World Bank (WB) or the International Monetary Fund (IMF). Buried in an obscure paragraph on the penultimate page, the fund agreement includes an invitation to these institutions to consider at their annual spring meetings how they can “contribute to funding arrangements, including new and innovative approaches.”
It is hard to ignore that Somali families fleeing famine caused by drought and plague do not deserve the same protection as those fleeing war
The in-depth review of the loan and donation mechanisms of the so-called Bretton Woods institutions —the IMF and the World Bank— constitutes one of the paths that arouses the most expectations in the debate on climate financing, be it reparations, adaptation or others. The door would be opened, for example, to canceling foreign debt linked to compensation for losses and damages. The pandemic and the economic crisis derived from it multiplied the indebtedness of the Global South, a situation that has become even more critical with the war in Ukraine and the rise in international interest rates. In fact, the United Nations has warned about the situation of 54 highly indebted poor countries, in which half of the world’s population lives in extreme poverty and is overexposed to the impact of climate change.
“Debt-for-climate” swaps are not new—as the IMF itself explains in a recent paper—and could now be extended to the “loss and damage” logic. Former British Prime Minister Gordon Brown has called for the climate finance summit called by French President Emmanuel Macron for next June to cancel unpayable debts in exchange for action against global warming. This summit will be co-chaired by the Prime Minister of Barbados, Mia Mottley, who eloquently defended her Bridgetown Initiative for the reform of the financing mechanisms of multilateral banks last July. The G20’s own group of experts has estimated that the financing available for development challenges could be increased by a whopping one trillion dollars (960,000 million euros) if these changes were to take place.
Let those who pollute pay
Beyond official donors, the redress argument could be extended to the private sector, some of which bear direct—and obscenely lucrative—responsibility for causing climate damage and loss. This contribution could be made through taxes—as the UN Secretary General proposed—or through sustainable investments. And there is always the recourse of the courts. The report The cost of delaypresented before COP27 by a coalition of more than 100 researchers, activists and public officials, provided devastating data: the accumulated income of six large oil and gas companies in the first half of 2022 would allow them to cover the cost of all weather shocks suffered by poor countries, and still maintain a net benefit of 70,000 million dollars.
It does not appear that these companies have taken notice. In the peculiar universe of climate negotiations, claims for damages are filed by those responsible for the disaster. German energy companies RWE and Uniper demanded compensation of €1.4 billion and €1 billion respectively from the Dutch state for the government’s decision to end coal consumption by 2030. This is just one example of a thriving industry. The transactions, political influence and litigation of the most polluting companies on the planet are supported by an army of lawyers from the most prestigious and expensive firms, as denounced every year by the Climate Index of Law Firms. Even the public relations firm hired to manage communication for COP27 also works for the paradoxical Oil and Gas Climate Initiative, which includes companies like Exxon Mobile and Chevron.
The income accumulated by six large oil and gas companies in the first half of 2022 would allow them to cover the cost of all the climatic shocks suffered by poor countries
Demands in the opposite direction are rare, but they do exist. This newspaper reported last summer on the case that a Peruvian farmer presented against RWE itself before the German courts, and that he has been admitted for processing. Saúl Luciano Lliuya argues that the most polluting company in Europe must answer for the consequences of the thaw that is taking place in the Ancash region, where he lives. In his response, the industry has taken refuge in the impossibility of attributing the local effects of global warming to a specific company.
But this is an argument very similar to the one that the tobacco companies used at the time. Or the one used by the pharmaceutical companies denounced for their responsibility in the opioid crisis that the United States is experiencing. Both industries ended up disbursing billions of dollars and responding to society for their crimes. Why should it be different in this case? None of the 636 lobbyists sent by the fossil fuel industry to COP27 can seriously argue that their clients were unaware of the consequences of their actions. It is a matter of time before the reparation demands begin to prosper or that the governments begin to act accordingly.
An opportunity for the climate displaced
Reparation for “loss and damage” can take many different and ambitious forms if there is the will to do so. Although it is not present in the official negotiations, one of the most serious and obvious consequences of the ecological crisis is related to the so-called “climate displaced”. This poorly defined category groups all those people who have been forced to leave their place of origin as a consequence of extreme natural shocks derived from global warming. UNHCR has calculated that between 2008 and 2016 no fewer than 21.5 million people were displaced by sudden-onset weather events. Those numbers do not take into account the effect of slow-impact events such as droughts or rising sea levels. Taken together, a World Bank model estimates that by 2050 changes in climate will have caused the flight of no less than 216 million people in different regions of the developing world.
Much of this forced displacement will occur within the territory of the affected countries, but a fraction will be forced to cross the border. Unfortunately, nothing in current international legislation obliges the protection of these individuals. But it is hard to ignore that Somali families fleeing famine caused by drought and plague do not deserve the same protection as those fleeing war. Furthermore, the moral argument for protection is even stronger when the potential host countries —the most polluting ones— are at the very origin of the problem. For this reason, the protection of climate displaced persons would constitute a good compensation tool for the most vulnerable regions of the planet.
If he manages to pull through, the loss and damages fund may become yet another “crack in the stone wall of denialism”, but this time a climate one. The financial endowment will open the way to other larger-scale measures, underpinning a negotiation process whose credibility lies in part in guaranteeing a minimum balance of interests. Because this agreement introduces an ethical component whose importance goes far beyond the economic value of compensation. Time will tell if this is a new empty promise.
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