Nepal Becomes First Beneficiary Of Loss And Damage Fund

Source: Indian Express
GS III: Disaster and Disaster Management

Why in the News?

The Fund for Responding to Loss and Damage (FRLD) has provisionally set aside $20 million for Nepal, making it the first beneficiary of the international fund established to support vulnerable developing countries facing climate-related losses and damages.

News in Brief

• The FRLD was established in 2022 to provide financial assistance to developing countries affected by climate change.
• The fund’s board has provisionally approved $20 million for Nepal’s recovery and reconstruction following devastating floods.
• Nepal’s estimated economic losses and damages from the floods reached approximately $2.69 billion, while initial recovery and reconstruction needs were estimated at a minimum of $4.71 billion.
• The FRLD has received 176 funding requests from 119 countries, amounting to approximately $2.5 billion, which are being processed.

What is Loss and Damage in climate change?

• The Loss and damage refers to the adverse consequences of climate change that occur despite mitigation and adaptation efforts.
• It includes both economic and non-economic losses.

Economic losses

• Damage to houses, roads, bridges and other infrastructure.
• Loss of agricultural production and livelihoods.
• Destruction of businesses and public assets.
• Costs associated with reconstruction and rehabilitation.

Non-economic losses

• Loss of human life and cultural heritage.
• Displacement of communities.
• Damage to ecosystems and biodiversity.
• Loss of traditional knowledge, social networks and cultural identity.

Loss and damage may result from sudden-onset events, such as floods and cyclones, as well as slow-onset processes, such as sea-level rise, desertification and glacial offset.

Fund for responding to loss and damage

The Fund for Responding to Loss and Damage (FRLD) is an international climate finance mechanism established to assist developing countries that are particularly vulnerable to the adverse effects of climate change.

It addresses climate-related losses that cannot be adequately avoided through mitigation or managed through adaptation alone.

Background

• COP27, 2022: Countries agreed to establish a dedicated fund to address loss and damage in vulnerable developing countries.
• COP28, 2023: The fund was operationalized, with an initial announcement of pledges to support its functioning.
• Subsequent developments: The fund began developing its funding arrangements and procedures to provide financial support to vulnerable countries.
• Nepal’s case: The provisional allocation of $20 million represents an important step towards providing financial assistance for recovery and reconstruction after climate-related disasters.

Provisional Funding for Nepal

• The FRLD board provisionally set aside$20 million for Nepal following the devastating floods in August.
• Nepal must submit a formal funding request, which will be considered at the board’s next meeting in December.
• The proposed assistance is intended to support recovery and reconstruction.
• The provisional allocation is less than 1% of Nepal’s estimated reconstruction requirements, but it represents an important initial step towards international climate-related financial assistance.

Impact of the floods in Nepal

• The disaster caused more than 1,300 deaths.
• Over 5,000 people were reported missing at the time of the report.
• Economic losses and damages were estimated at approximately $2.69 billion.
• Initial recovery and reconstruction requirements were estimated at a minimum of $4.71 billion.
• The disaster highlights the vulnerability of mountainous regions to climate-related hazards and the substantial financial requirements associated with post-disaster recovery.

Funding requests from developing countries

• The FRLD had received 176 funding requests from 119 countries.
• These requests amounted to approximately $2.5 billion.
• The requests were still being processed, with further decisions expected at a scheduled board meeting in December.
• Funding requests for individual incidents are generally expected to fall within the range of $5 million to $20 million, according to the report.
• The growing number of requests highlights the gap between the financial needs of vulnerable countries and the resources available for climate-related disaster recovery.

Conditions for Accessing Funds

• The Fund’s initial allocation process involves several procedural requirements.
• Countries must submit formal funding requests.
• Proposals are subject to assessment and approval by the fund’s board.
• Further bureaucratic procedures may delay the release of assistance.
• In Nepal’s case, the proposed funding is linked to the preparation and approval of the required project proposals.
• Such procedures are important for accountability but must be designed to ensure that emergency assistance reaches affected communities in a timely manner.

Climate Justice and Common but Differentiated Responsibilities

• The FRLD is closely linked to principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) under the United Nations Framework Convention on Climate Change (UNFCCC).
• The principle recognizes that countries have shared responsibility for addressing climate change, but their responsibilities and capacities differ.
• Developing countries argue that they face disproportionate climate risks despite having contributed relatively little to historical greenhouse gas emissions.
• Climate finance mechanisms, including the FRLD, seek to address these inequalities by supporting countries with limited financial and institutional capacity.

Significance and Challenges

• The FRLD supports vulnerable developing countries that lack the financial resources to recover from climate-related disasters.
• It advances climate justice by recognizing the unequal distribution of climate risks and helps restore infrastructure, livelihoods and essential public services after disasters.
• It also complements adaptation finance by addressing residual impacts that cannot be fully prevented and strengthens international cooperation in tackling climate change.

Challenge

• The FRLD faces inadequate funding compared with the growing recovery and reconstruction needs of vulnerable countries.
• Increasing climate-related disasters may further widen this gap, while complex approval procedures and delays in disbursement can hinder timely assistance.
• Uncertain financial contributions, limited technical capacity to prepare funding proposals and concerns over transparency and accountability also affect its effectiveness.
• Moreover, assessing non-economic losses, such as damage to cultural heritage, biodiversity and community networks, remains difficult.

Way Forward and Conclusion

The FRLD requires adequate and predictable funding, simplified procedures and timely disbursement to support vulnerable countries. Transparent monitoring, stronger institutional capacity and better coordination with national disaster management strategies are essential for effective fund utilization.

The provisional allocation of $20 million to Nepal marks an important step towards climate justice. However, the fund’s success depends on bridging the climate finance gap, prioritizing vulnerable countries and addressing both economic and non-economic losses.

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