The agreement coming out of the COP-21 negotiations gave breakthrough recognition to the concept of “loss and damage,” sorting through thorny discussions and politically charged negotiating positions. These positions revolved around liability and compensation, which developing countries called for but developed countries were unwilling to have included in the agreement.

The UN Framework Convention on Climate Change (UNFCCC) defines loss and damage as “the actual and/or potential manifestation of impacts associated with climate change in developing countries that negatively affect human and natural systems,” including impacts from extreme events (for example heatwaves, flooding, and drought) and slow-onset events (for example, sea-level rise and glacial retreat).

“Loss” applies to the complete disappearance of something such as human lives, habitats, or even species. These are gone forever and cannot be brought back. “Damage” refers to something that can be repaired, such as a road or building or embankment. Thus loss and damage from climate change refers to the complete and irrecoverable loss of some things and the repairable damage of other things due to the impacts of human-induced climate change.

Ultimately, the Paris Agreement included anticipatory compensation mechanisms through risk insurance; assured the continuation of a global mechanism on loss and damage called the Warsaw International Mechanism; and gave recognition to the long-articulated position of many countries that have been arguing for support of short-term coping and longer-term adaptation when mitigation and adaptation efforts are insufficient to deal with the effects of climate change.

The Road to Paris

The concept of loss and damage from human-induced climate change is not new. Small-island developing states have been raising the issue under aegis of the Alliance of Small Island States for more than 20 years, from the very beginning of the UNFCCC negotiations. A work program on loss and damage was agreed to under the Cancun Adaptation Agreement adopted at COP-16 in 2010. A further decision was adopted at COP-18 in Doha in 2012.

At COP-19 in Poland, negotiators agreed to review the issue for three years under a process known as the Warsaw International Mechanism for Loss and Damage. The Warsaw Mechanism aimed to enhance understanding of comprehensive risk management; address gaps in understanding; strengthen dialogue, coordination, coherence, and synergies among stakeholders; and enhance action and support for loss and damage, including finance, technology, and capacity building.

Red Lines and Negotiating Positions

Going in to COP-21, loss and damage was a very contentious and sensitive topic. The negotiating text contained one option from the developing countries with a number of proposed paragraphs around liability and compensation. They called for developed countries to be held liable for the impacts from loss and damage and pushed for compensation. The text also contained an alternative proposal from the “Umbrella Group,” an informal collection of non-EU developed countries including the United States, that suggested deleting all mention of loss and damage. The main contention focused on liability and compensation.

Developed countries were not against the concept of loss and damage per se but had to deal with political realities back home, and this set their negotiating positions. As U.S. Secretary of State Kerry noted, “We’re not against [loss and damage]. We’re in favor of framing it in a way that doesn’t create a legal remedy because Congress will never buy into an agreement that has something like that…The impact of it would be to kill the deal.”

But developing countries were similarly clear, as was noted in the media, that leaving loss and damage out entirely was a deal breaker for them. Pa Ousman Jarju, chair of the Least Developed Countries group of 48 nations, noted, “We do not foresee an outcome in Paris without loss and damage… That is a red line for us.”

Going into COP-21, developing countries had three main demands: First, make the Warsaw Mechanism permanent (otherwise it was set to end at COP-22 in December 2016). Second, elevate the issue of displacement and migration to one of nine action areas under the agreed work program of the mechanism. They called for it to be under a separate “facility” that recognizes the importance of needing to deal with displacement and migration due to climate change. Third, developing countries asked for some form of financing for irrecoverable losses and damage.

As the negotiations started, President Obama implicitly accepted in his opening statement that loss and damage was affecting Inuit villages in Alaska. The following day he met with leaders of island countries and announced a $30 million contribution to the G7 Climate Risk Insurance Initiative, which is implicitly addresses loss and damage. With these two actions, it looked as if the United States would try to find common ground with developing countries.

The Agreement

After two weeks of mostly behind-the-scenes discussions between the United States and some island countries, a final agreement emerged that included language on loss and damage for both the Paris Agreement and the decision text supporting it.

Article 8.1 of the Paris Agreement notes that, “Parties recognize the importance of averting, minimizing, and addressing loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events, and the role of sustainable development in reducing the risk of loss and damage.”

Article 8.3 notes that, “Accordingly, areas of cooperation and facilitation to enhance understanding, action and support may include:

• Early warning systems
• Emergency preparedness 
• Slow onset events
• Events that may involve irreversible and permanent loss and damage
• Comprehensive risk assessment and management
• Risk insurance facilities, climate risk pooling, and other insurance solutions
• Non-economic losses
• Resilience of communities, livelihoods, and ecosystems

A Success for Climate Diplomacy

Despite strong opposing negotiating positions during COP-21, not all was lost and damaged. The final agreement presents a number of interesting conclusions resulting from successful climate diplomacy.

A concession by developing countries on liability and compensation was reflected in the agreement’s decision text, which notes that there is no possibility of claiming liability and compensation for loss and damage. This had been a requirement from the United States, which otherwise would not agree to the other elements of the overall deal. Developing countries had to concede on this point. Consequently rich countries, instead of compensating after loss or damage, can subsidize risk or flood insurance beforehand for those in low-lying developing countries who face unaffordable premiums.

Developing countries reached a major achievement, however, in the treatment of loss and damage in an article separate from the article covering adaptation. Moreover, under the Paris Agreement the Warsaw Mechanism was embedded as a permanent institution and a task force on climate change-related displacement was established within it.

Overall, the outcome from COP-21 for loss and damage was positive. Most importantly, the agreement advances the parameters on loss and damage within the UN Framework Convention on Climate Change structure, and sets the stage for COP-22 in Morocco, where the outputs from the Warsaw Mechanism will be further examined, including its structure, effectiveness, and mandate. Global climate diplomacy has thus taken important steps to tackling an emerging and complicated dimension of climate change impacts.