When wildfires become unstoppable, consuming forests, farmlands, communities, and anything else in their path, how will those affected cope? When typhoons slam coastal populations, dumping over a foot of rain in a single event, who will be there to help mop up? When seas rise up, drowning centuries-old communities, where will the displaced go?

The international community’s answers to these questions, so far, are rooted in the concepts of loss and damage, liability and compensation, risk transfer, and climate financing. The distinctions between these mechanics, which operate variously through the United Nations Framework Convention on Climate Change (UNFCCC), individual governments, NGOs, and the private sector, are sometimes blurred.

In particular, loss and damage is a term that is often associated with liability and compensation. Both are used in the jargon of climate policy, predominantly in the context of finance transfers from polluter nations to highly impacted vulnerable nations. How are these two key terms related and why does it matter?

Loss and damage is a term that is used to describe total losses, such as death and land lost due to climate induced sea-level rise, and repairable damage, such as destroyed infrastructure. While loss and damage typically refers to the economic consequences of climate change, the term can also apply to cultural and traditional practices that are lost due to climate impacts.

Liability refers to the legal culpability of nations that have made large contributions to greenhouse gas emissions. Compensation, as the word suggests, are payouts to poor and highly impacted nations. If a court determined that a nation was liable for the impacts of climate change, then that nation could be required to compensate others who are now suffering the consequences. This is a chain of events that most industrial countries have sought to avoid.

To the more casual observer the distinction between these two sets of terms is not always clear. To negotiators, however, the differences between “loss and damage” and “liability and compensation” are not only distinct, but represent embattled red lines.

At the Negotiating Table

Within the United Nations, the precise terminology of various agreements can trigger intense debates over philosophical factors, such as morality, and technical elements, such as financing. How this language is negotiated and subsequently codified into international treaties by the UNFCCC, multilateral agreements, and national plans of action will shape the ways in which our world responds to climate change.

“Loss and damage” as a term had its beginnings in the frames of insurance and risk transfer within the broader concepts of liability and compensation. According to a study by Vanhala and Hestbaek about the history of loss and damage at UNFCCC negotiations, the meaning of the concept has changed dramatically. From 2003 to 2008, loss and damage was commonly used within the context of liability and compensation, but after 2009, loss and damage began to emerge as a separate idea.

By 2013, the distinction had evolved to the point where loss and damage could become its own policy point. During COP-19 in Poland, the Warsaw International Mechanism on Loss and Damage was established to address loss and damage associated with climate change within the UNFCCC process. At COP-21 last year, loss and damage found a more permanent home under its own article in the Paris Agreement, something that many championed as a major victory for climate justice.

The pivot away from liability and compensation is a significant part of the reason why loss and damage was included in the landmark Paris text. The agreement very clearly states, “Article 8 of the Agreement does not involve or provide a basis for any liability and compensation.” There are several reasons for this explicit exclusion.

One, is that it is unlikely that the bulk of wealthy nations would have signed an agreement that did not include such a caveat, rendering it useless in the goal of achieving a comprehensive global agreement. For the United States government, the concept of incorporating liability and compensation into any agreement is a red line, explained Special Envoy Todd Stern in a press conference. This position has remained since the Warsaw Mechanism was created in 2013 and is not expected to change.

Second, the science of attributing any individual storm or incident of severe weather to climate change is a tricky business. There is no way to know how much of an unusually severe storm is due to climate change versus background natural variation in the Earth’s climate system, except through historical modeling, which is a new science.

If the attribution hurdle is cleared, there is yet another: How do you determine who pays and how much? And for developed countries, at what point have they paid enough? There are no good answers for these questions at the moment.

Reaching Critical Mass?

As politicians and diplomats wrangle over definitions and technicalities, the question of what to do about the toll being taken by climate change is becoming more pressing. Extreme weather events, such as flooding in Louisiana, recurrent droughts in Northern India, and powerful heatwaves in the Middle East, are striking vulnerable areas around the globe. The heat is on to formulate a global response.

In this context, some question the wisdom of trying to incorporate something as unwieldy as loss and damage or liability and compensation into a global agreement at all. David Weisbach, a law professor at the University of Chicago, said at the Wilson Center that trying to pack such a complicated challenge into a climate agreement may simply be too difficult and the moral and ethical considerations they bring up, a distraction from the many practical reasons to reach a deal. There are 193 member states to the United Nations that need to agree on a course of action for responding to climate change. Reaching that level of consensus becomes less likely as the scope of factors included expands.

Others, such as Gwynne Taraska, associate director of Energy Policy at the Center for American Progress, suggest that while having loss and damage in the Paris Agreement is helpful, incorporating liability and compensation might be harmful. “Sometimes countries can make more progress on the substance of addressing loss and damage without invoking legal and moral concepts of blame, because it can be politically toxic and cross countries’ red lines,” she said in an interview. At the negotiating table, the distinction is enough to make or break a deal.

For many highly impacted nations, this language matters tremendously. Recognizing loss and damage, though not as meaningful as recognizing liability and the need for compensation, is nonetheless about taking responsibility for the harms of climate change – it is an act of admission. For some of the most vulnerable nations, this, along with supporting the capacity to cope with the worst effects, is enough to right some of the wrongs of global climate change.

The Green Climate Fund is one resource for transferring aid to developing nations with international support and many more are on the horizon. Government-managed funds such as Bangladesh’s Climate Change Resilience Fund and the regional Caribbean Catastrophe Risk Insurance Facility are also attempts to build resilience, proactively address challenges, and respond to disasters. But a system of supporting the capacity to cope requires more than cash. Technology transfers, capacity building, and access to sophisticated planning tools are part of a spectrum of support that will build resilience in the most vulnerable countries. These, along with the concept of common but differentiated responsibility for mitigation, could potentially be methods of addressing loss and damage with or without a system of liability and compensation.

Indeed, loss and damage appears to have at least temporarily won out over the thornier and broader concept of liability and compensation. This November, the United Nations will meet in Marrakech, Morocco, for COP-22, where the Warsaw Mechanism will be reviewed and parties to the UNFCCC may vote to approve a work plan. The strategies captured by the work plan will become the foundation for supporting vulnerable countries experiencing loss and damage in the UN system.