11 June, 2024

How countries can report loss and damage finance needs

Drawing lessons from the Caribbean, we take a look at where, how and why to report on loss and damage finance needs, the types of costs that can be reported and what makes an event ‘climate-related'.

This year, for the first time, the UNFCCC is explicitly inviting interested countries to report information specifically on loss and damage. Drawing lessons from the Caribbean, we take a look at the types of costs that can be reported, what makes an event ‘climate-related,’ and where, how and why to report on loss and damage finance needs.

Where to report loss and damage

Despite persistent data gaps, information already exists that countries can use when reporting their loss and damage needs.

Two UN reporting channels are currently open to report information on loss and damage. The Standing Committee on Finance (SCF) has put out a call for information and data for their second report on the needs of developing countries, with a deadline of 30 June 2024. Here, countries have the chance to officially record loss and damage as it relates to their financial requirements.

And by the end of the year, countries are required to submit their first Biennial Transparency Report (BTRs) under the Enhanced Transparency Framework of the Paris Agreement. Under the rules governing these progress reports, countries can include information on loss and damage, such as asset costs (things like destroyed or damaged infrastructure or cultural heritage sites) and activity costs (things like clean-up or recovery costs).

Properly tagging and reporting available information as loss and damage needs in BTRs and SCF outputs will help build a much-needed evidence base on the topic. Our experience in the Caribbean tells us that a minority of countries are already doing this, though in a fairly unsystematic manner.

Caribbean states are capturing economic and non-economic costs related to extreme climatic events in different official documents, ranging from Nationally Determined Contributions, National Adaptation Plans, National Communications and Biennial Update Reports. Our new report on the region finds severe loss and damage from hurricanes and ocean acidification are particularly pressing concerns.

Reporting asset costs

The asset costs of loss and damage (the financial value of damaged or destroyed assets, often including their replacement costs) are already being recorded in various places. Countries can draw on these sources to report their loss and damage finance needs, if the events that triggered these losses were more intense or frequent due to climate change.

The Consultative Group of Experts’ guide on reporting climate impacts highlights various places which already capture losses and related costs, from the DesInventar database to the national Post Disaster Needs Assessments that countries issue following major natural disasters.

Countries’ losses are also recorded in EM-DAT, a database of natural disasters associated with at least ten dead or missing, or at least 100 affected, injured or homeless people, or where a call for international assistance or an emergency declaration is recorded.

Asset losses also include longer-term and indirect economic losses, such as increased debt levels. Where calculations for such indirect effects exist, they can be reported as loss and damage financing needs. While economic losses are typically reported in US dollars, reporting on non-economic loss and damage does not follow a standard set of metrics.

Reporting activity costs

Another cost category that countries can report are the costs of activities that countries need to take to address loss and damage. In principle, each country can define its own loss and damage activities and report related costs. However, as we found in the Caribbean, not many countries list specific loss and damage activities and related financial needs in national documents.

Countries that haven’t determined their loss and damage activities can still report activity costs. As proposed by the Transitional Committee set up to design the loss and damage fund, this covers preparedness, early response and long-term recovery and rehabilitation from climate-related slow onset or extreme events.

In many cases, recovery costs in particular have already been calculated but are rarely reported as loss and damage finance needs. For example, Post Disaster Needs Assessments use a standard calculation to estimate post-disaster reconstruction. The EM-DAT database includes “reconstruction costs” as a reporting category.

Which events count as climate-related?

While the science of extreme event attribution has made great progress over recent years, a lack of data on developing countries still hinders studies that calculate whether or not an event was made worse by climate change.

Still, the IPCC provided a comprehensive table of events by region that we scientifically know are made worse by global warming (see pages 122-129). This can serve as a basis for determining the types of events that could be considered climate-related according to the best available science. But does ‘climate-related’ mean all associated costs are loss and damage?

In the scientific literature, an approach is emerging that calculates the share of costs according to the extent to which climate change increased the risk of the hazard. In the absence of sufficient regional data, this ‘fraction of attributable risk’ approach currently uses global averages for different types of events and should therefore be treated with care.

There’s also an argument in some literature for reporting all costs as loss and damage due to the unjust risk imposed by emissions. Big emitters know they’re imposing the risk of devastation on those who can do little to reduce these risks, and who do not profit from the emissions. It is argued that asking those affected to calculate the share of harm they experience due to climate change would again unfairly shift the burden onto those affected.

As the loss and damage fund gets underway, a working definition of loss and damage finance is finally starting to take shape. This offers countries wishing to access loss and damage finance in the future a chance to already start documenting their needs. By doing so, they can also play an active role in shaping our understanding of loss and damage finance to the benefit of all countries on the frontlines of the climate crisis.