COP27: Climate vulnerable countries, G7 launch plan for quick loss and damage funding

COP27: Climate vulnerable countries, G7 launch plan for quick loss and damage funding

Subject: Environment

Context:

• The Vulnerable Twenty (V20) group of finance ministers — representing 58 countries vulnerable to climate change — and the G7 (group of seven industrialised countries) launched the Global Shield Against Climate Risks initiative November 14, 2022. The initiative was launched at the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change in Sharm El-Sheikh, Egypt.

About Global Shield Against Climate Risks-

• It is envisioned as a social protection and insurance-based finance mechanism for loss and damage outside the UNFCCC process.
• The finance facility, based on a polluter pays principle, is being intensely argued by the Least Developed Countries and the Association of Small Island States negotiating blocs at the negotiations in COP27.
• The initiative will provide pre-arranged financial support designed to be quickly deployed during climate disasters such as the devastating Pakistan floods in August.
• Pakistan, Bangladesh, Costa Rica, Fiji, Senegal, Philippines and Ghana will be among the first countries to receive assistance from the Global Shield initiative.
• Initial contributions to the initiative include 170 million euros from Germany, 35 million danish kroner from Denmark,10 million euros from Ireland and seven million dollars from Canada.
• The US is also part of the Global Shield initiative and is funding the African Risk Capacity, an insurance and disaster risk solutions company.
• The initiative is also supported by other countries such as the United Kingdom and UN organisations such as the UN Development Programme and the UN Office of Disaster Risk Reduction.
• The Global Shield is touted to expand financial protection instruments for governments, communities, businesses and households.
• In terms of implementation, it will align with the vulnerable country’s financial and economic strategies, helping close the financing gaps.
• This would include livelihood protection, social protection systems, livestock and crop insurance, property insurance, business interruption insurance, risk-sharing networks and credit guarantees.
• It will support the integrated development of instruments at the level of governments, humanitarian agencies and non-profits, to ensure that money is available when needed.
• The Global Shield, and its predecessor, the InsuResilience Global Partnership, have thrived whilst delay tactics from rich countries have ensured no progress within the UNFCCC.
• Another crucial issue is that the financing mechanism may put an additional burden on already vulnerable populations under debt burden.

What is the Polluter Pays Principle?

• The ‘polluter pays’ principle is the commonly accepted practice that those who produce pollution should bear the costs of managing it to prevent damage to human health or the environment.
• For instance, a factory that produces a potentially poisonous substance as a by-product of its activities is usually held responsible for its safe disposal.
• The polluter pays principle is part of a set of broader principles to guide sustainable development worldwide (formally known as the 1992 Rio Declaration).
• The principle underpins most of the regulation of pollution affecting land, water and air.