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Loss and Damage Fund Faces Setback as U.S. Withdraws

Why in the News?

The Loss and Damage Fund (LDF), created at COP27 (2022) to support developing nations facing climate disasters, faces uncertainty as the U.S. withdraws its financial commitment. This raises concerns over the future of global climate finance and justice.

Background and Purpose:

• Established at COP27 (2022) to assist developing nations facing climate-related disasters.
• Aims to provide financial aid for rising sea levels, desertification, extreme weather events, and biodiversity loss.
• Developing nations, especially small island states, have long sought compensation from wealthier nations due to their historical responsibility for emissions.

Current Status and Challenges

• So far, $750 million pledged; the S. initially contributed $17.5 million.
• Major setback: The S. withdrew from the fund, raising concerns about future climate finance commitments.
• The World Bank serves as the interim trustee for four years, while a Governing Board oversees fund allocation.

Broader Implications

• The Paris Agreement (2015) remains a key framework for global climate efforts.
• The loss of U.S. funding could weaken financial support for climate-vulnerable nations.
• Raises questions about the commitment of developed nations toward climate justice and global responsibility.

About Loss and Damage Fund (LDF):

• Established: COP27 (2022) in Egypt under the UNFCCC.
• Purpose: Provides financial aid to nations facing economic & non-economic climate-related losses (e.g., rising sea levels, extreme weather).
• Oversight: Managed by a Governing Board, with the World Bank as interim trustee for four years.
• Funding: $750 million pledged; US contributed $17.5 million but later withdrew.
• Beneficiaries: Developing nations, particularly small island states.
• About Paris Agreement (2015):
• Goal: Limit global warming below 2°C, aiming for 1.5°C.
• Requirement: Nations submit Nationally Determined Contributions (NDCs) every five years.