Climate finance and loss and damage

Climate finance is money provided or mobilised to cut emissions and to adapt to climate change. It matters because the countries and communities most exposed to climate harm are often those least able to pay for solar plants, seawalls, drought-resistant seeds or rebuilt homes. The principle behind much of the debate is common but differentiated responsibilities: all countries share the problem, but richer countries, with larger historical emissions and greater capacity, are expected to contribute more.

Under the Paris Agreement, developed countries committed to mobilising finance for developing countries, and the long-standing goal of 100 billion US dollars a year — first set for 2020 — became a symbol of trust. Assessments by the OECD reported that the goal was met in 2022, two years late, though developing countries and analysts dispute how much of the counted finance was grants rather than loans, and how much was genuinely new rather than relabelled aid. The definition of climate finance is therefore itself contested.

Loss and damage is a separate, newer concept: harm that cannot be avoided by cutting emissions or adapting, such as land lost to the sea, glaciers gone, or lives and cultural heritage destroyed by an extreme event. After years of negotiation, countries agreed at COP27 in 2022 to create a loss and damage fund, which was operationalised at COP28 in 2023 and began receiving pledges. Its scale, eligibility rules and governance remain under negotiation, and early pledges fall far short of estimated needs.

For India, the finance debate is practical. Adaptation needs — water, heat, coastal protection, resilient farming — compete with development budgets, and loans for adaptation are controversial because adaptation often produces no revenue to repay them. Grants, concessional finance and insurance that actually pay out after a disaster are therefore more valuable than headline totals suggest.