Loss and Damage Fund
The recently published “Emissions Gap Report” from the United Nations Environment Program (UNEP) reveals an alarming truth: G20 countries (developed nations, such as the US, Canada, and China) contribute to more than 75% of global carbon emissions. While this continues, the rest of the world bear the brunt of the effects in the form of draught, extreme weather patterns, and heat waves. For example, the entire African continent emits less than 4%, and yet, it now faces its most severe drought in four decades. Therefore, one of COP27’s deliverables is the creation of the “Loss and Damage Fund” to help developing countries unduly affected by those emissions.
THE GREAT STARTING POINT
According to the United Nations Framework Convention on Climate Change, a global transformation to a low-carbon economy would require at least $4-6 trillion annually. Though the world leaders’ understood this—pledging to “pay $100 billion annually” to developing countries by 2020 at COP15 in 2009—it did not come to fruition. A lack of private funding support and various macroeconomic problems, namely the recession, exacerbated the fund flows. COP27, therefore, has created a framework for acquiring needed capital for its newly minted Loss and Damage Fund. Some of the proposed recommendations are to raise money by levying windfall taxes on fossil fuel companies, utilizing debt instruments, and applying international duties on carbon-emitted parties. Combined with funds set aside by philanthropists and governments, the efforts of the Loss and Damage Fund could be the starting point of something GREATer.
WHAT SHOULD BUSINESSES CONSIDER?
The UNEP states that the root cause of climate change, carbon emissions, must be tackled for the fund to be truly effective. It recommends using the assets to foster Sustainable Development Goals in each affected country to enact lasting changes. The policies in tandem with the budget will favor fund-receiving governments to allocate money to the community and ecosystem-based projects, which are critical to building resilience to the impacts of the climate crisis. From this, the private sector in developing countries can expect more Public-Private Partnerships to spur local community development via initiatives such as smart farming, carbon reduction technology, and disaster prevention projects. For larger-scale companies, especially those operating in carbon-intensive industries, it would be wiser to consider lowering the emission amount today, for more tax and duty will soon be imposed on those who emit more than the standard.
The creation of this Loss and Damage Fund shows humanity’s resilience; when the last goal from COP15 did not deliver, we got back up and started a new, more realistic one in COP27. This takeaway could also serve as a business lesson in that it is never too late to begin any endeavor, especially one that benefits the world. The time to do GREAT actions is always now.
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