Setting the Stage for Climate Finance at COP29: Quantifying Loss & Damage Costs
Agreeing on the New Collective Quantified Goal (NCQG) for Climate Finance will be the defining moment at the upcoming COP 29 in Baku. The NCQG, set to replace the existing annual goal of $100 billion set in 2009 at the Copenhagen Climate Summit, aims to mobilize additional resources for climate finance. It will also have direct implications for the future scale of the Loss and Damage (L&D) Fund, which was created at the COP28 to support the most vulnerable countries facing the adverse effects of climate change.
In 2024, several critical milestones have been reached to operationalize the L&D Fund: appointing the Fund Board, selecting the inaugural Executive Director, and choosing the host country, the Philippines, along with the host organization, the World Bank. With these institutional arrangements in place, the Fund must now focus on pivotal questions that will shape its future impact: who should contribute to the Fund, how to ensure countries pay a “fair share,” and how funds should be allocated, among other considerations.
Before addressing these, however, the international community needs to agree on a common methodology for quantifying L&D costs — both economic (direct, such as damage to infrastructure, and indirect, such as production losses) and non-economic (e.g., loss of life, cultural identity, impacts on health and well-being, and displacement). Until now, most L&D costing methods have focused on economic costs from extreme weather events, largely overlooking those caused by slow-onset processes (e.g., sea-level rise, desertification, glacial retreat) as well as non-economic costs. As a result, the available estimates of L&D costs are heterogenous. Moreover, L&D cost assessments have paid little attention to Small Island Developing States (SIDS), even though climate change poses significant threats to their populations, assets, and infrastructure.
To address the need for a commonly accepted methodology, the Sustainable Development Solutions Network’s (SDSN) SDG Transformation Center developed an integrated framework to help countries quantify climate-induced costs, assess their responsibilities, and fairly share the burden of financing adaptation and L&D costs. This framework is presented in a recently published working paper, “Adaptation, Loss, and Damage: A Global Climate Impact Fund for Climate Justice.”
More recently, the SDSN SDG Transformation Center, in collaboration with the United Nations University Institute for Environment and Human Security (UNU-EHS), are planning to initiate a project to estimate both economic and non-economic total climate-impact costs (i.e., adaptation and L&D costs) from extreme weather events and slow-onset processes for SIDS. These countries, which contribute the least to global greenhouse gas emissions, are at the front lines of climate change. The Economics of Climate Adaptation (ECA) framework will be used to estimate present and future impacts from natural hazards (e.g., floods, hurricanes, tropical cyclones, and storms) and climate-induced events (e.g., sea-level rise) on selected assets at various geographical scales (city, region, or country).
The project will also assess how adaptation and L&D costs impact the existing SDG financing gaps in the selected SIDS and will analyze whether current development finance is sufficient to offset the costs of climate shocks. If the funds fall short, the project will explore potential mechanisms to help countries address these financing gaps.
In the coming two weeks, Member States will determine the future of climate finance and climate justice within the multilateral climate regime. While several developed countries have pledged over $661 million in voluntary contributions to the L&D Fund, a critical question remains: Will Member States increase their financial commitments and pledges during and after COP29? If the Fund’s scale remains in the hundreds of millions rather than the needed hundreds of billions, its impact on building resilience in the most vulnerable countries will be limited — especially given the rise in extreme weather events, accelerating slow-onset processes, and escalating economic and non-economic costs.
Exploring mechanisms to address the financing gap is essential. It is also crucial to ensure that increasing L&D costs do not further exacerbate existing SDG financing gaps, which impede progress toward achieving the SDG Agenda. Increased funding for loss and damages must go hand-in-hand with the development and implementation of long-term resilience and sustainable development pathways.
We hope that COP29 decisions will align with the needs of countries that have contributed the least to the climate crisis but are suffering its worst impacts.
If you are interested in partnering with us on the project assessing L&D costs and finance for SIDS, please contact Isabella Massa (SDSN) at isabella.massa@unsdsn.org and Maxime Souvignet (UNU-EHS) at souvignet@ehs.unu.edu.
Resources from the SDG Transformation Center: