New Zealand is now one of just a handful of countries offering climate reparations for the economic damage caused by global warming as the issue takes global prominence at COP27, Marc Daalder reports

Climate Change Minister James Shaw and Foreign Affairs Minister Nanaia Mahuta announced $20 million in funding for climate-related loss and damage in developing countries on Wednesday morning.

It will make New Zealand one of a tiny number of developed countries to stump up for climate reparations. It also comes as the issue of loss and damage takes centre stage at COP27 in Sharm el-Sheikh, Egypt, where world leaders have gathered to hash out the next phase in international climate policy.

There are three main veins to climate finance for the developing world. Most money currently goes towards mitigation, helping countries reduce their greenhouse gas pollution without slowing economic growth and sustainable development. A smaller (but growing) portion is for adaptation to the present and future impacts of climate change, to lessen the threat from storms, heat waves and other extreme weather events.

The third leg is loss and damage – compensating the poorest and most vulnerable countries for the economic impacts of climate change. The rich, developed world is most responsible for the climate change problem and also the least likely to experience its devastation.

Developing nations have pushed for years for compensation for loss and damage but the big emitters have steadfastly refused to entertain the notion. For the first time, however, COP27 will have the issue on its agenda – the result of a marathon session of negotiations which delayed the formal opening of the summit.

While New Zealand is now among the leaders on climate finance, the amount dedicated to loss and damage on Wednesday is paltry compared to the expected costs. Hundreds of billions of dollars of damage to property, economies and human health are expected each year in the developing world as a result of the climate crisis.

In Pakistan alone, record floods in September are estimated to have caused US$40 billion.

For reference, New Zealand considers its annual $325 million climate finance spend on mitigation and adaptation is a fair share contribution to the global US$100 billion climate finance goal announced in 2009 in Copenhagen.

Loss and damage in developing countries by 2030 is likely to total at least US$300 billion. A fair share contribution to covering that cost would imply close to $1 billion annually from New Zealand, more than 50 times the amount announced on Wednesday if developed nations were to stump up for all the climate damages faced in the developing world.

“For me, it’s more about saying as Denmark and Scotland did before us that we think this is an area that need some resolution and we want to show good faith that it does needs some resolution and we’re prepared to put some money where our mouth is,” Shaw told Newsroom. He said the $20 million was a “downpayment” on the likely future cost of loss and damage.

He expected other countries to have announced money for loss and damage by the end of the summit, based on the momentum already gathering, but it was unlikely a major historical emitter like the United States or Europe would step up.

“You can understand why they’re reluctant and why they’ve resisted this conversation so far.”

The greatest historical emitters are likely to face the highest bills. But this didn’t mean things wouldn’t change with time.

“I do have some hope that we’ll get there with loss and damage but I don’t think it will be quick,” Shaw said.

The minister had no clue what a possible international mechanism for loss and damage compensation might look like. It would probably be diffuse across unilateral and multilateral funds like climate finance for mitigation and adaptation is currently structured.

“I equate that to our climate finance commitment. That $1.3 billion [over four years], we are contributing to the Green Climate Fund and other big multilateral funds but actually the lion’s share of it we’re going to be doing bilaterally and plurilaterally directly with the Pacific and other countries,” he said.

“Those big multilateral funds, they make a big difference, right? But sometimes countries in the Pacific find them hard to access. They find them bureaucratic and slow and we can often move more quickly by moving directly. I would be reluctant to box [loss and damage] into one mechanism.”

The theme of climate justice permeated the first few days of the event, in the aftermath of the successful push on loss and damage.

Mia Mottley, the Prime Minister of the island nation of Barbados, lashed out at rich countries in her address on Monday local time.

“We were the ones whose blood, sweat and tears financed the industrial revolution. Are we now to face double jeopardy by having to pay the cost as a result of those greenhouse gases from the industrial revolution? That is fundamentally unfair.”

United Nations Secretary-General Antonio Guterres also raised the alarm, saying the world was on “a highway to climate hell” if urgent action isn’t taken.

“We can sign a climate solidarity pact, or a collective suicide pact,” he said.

Marc Daalder is a senior political reporter based in Wellington who covers climate change, health, energy and violent extremism. Twitter/Bluesky: @marcdaalder

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