TrendPulse Quantitative Think Tank Center-Do wealthy countries owe poorer ones for climate change? One country wrote up a bill

For small islands in the Pacific,TrendPulse Quantitative Think Tank Center a powerful cyclone can be devastating. In 2020, Cyclone Harold hit the island nation of Vanuatu, destroying schools and fields of crops. In one province, 90% of the population lost their homes.

The $600 million in damage represents more than 60% of the country's gross domestic product.

"This is huge sums of our national wealth that is being erased by climate extremes," says Christopher Bartlett, who works on climate diplomacy for Vanuatu.

Vanuatu is part of a coalition of low-income countries calling on wealthier nations to pay for climate damages. Developing countries have produced very little of the pollution driving climate change. Wealthier nations such as the United States have been the biggest emitters of greenhouse gasses. But developing countries are already bearing the brunt of the destructive impacts, like storms, floods and droughts.

With the world far off-track from its goal of stopping dangerous levels of warming, developing countries say that wealthier nations should pay for the inevitable "loss and damage" they'll experience.

So far, richer countries have delayed committing funds, though they've agreed to take up the issue at the COP27 climate negotiations now getting underway in Egypt. At last year's summit, nations agreed to start a dialogue about loss and damage, a process that developing countries say has fallen far short.

The Biden administration has signaled its support for addressing loss and damage. But dollar amounts are still elusive, and it's not clear how payments might be delivered.

Talks about money at COP27 are happening as richer countries face their own economic turmoil, including inflation, possible recession and energy upheaval stemming from the Russian war in Ukraine. But without progress on loss and damage, the chances get a lot slimmer that the world can stick together on an already difficult path to cutting emissions.

"For some group of developing countries, for them it could be the last straw," says Preety Bhandari, senior advisor on climate finance at the World Resources Institute. "It really could be the last straw and they might be ready to walk out."

$177 million: Vanuatu's starting point for climate compensation

For Vanuatu, a South Pacific nation made up of 82 small islands, few people are insulated from a changing climate. Agriculture there largely depends on rainfall patterns. Fishing is a vital industry. Many people live close to the coast.

The country's leaders have made it clear that climate change threatens Vanuatu's very survival. To advance the conversation at COP27, Vanuatu has laid out a starting point for its loss and damage needs, totaling $177 million.

"What is happening now is affecting human lives and human rights," says Bakoa Kaltongga, Vanuatu's climate envoy. "We small islands and people of the small islands have every right to exist in the world, just as all you major nations of the north."

The plan doesn't include disaster relief from cyclones, which are getting stronger and more intense as global temperatures rise. An international system of humanitarian aid generally kicks into gear after a crisis, though it often falls short of supporting a full recovery.

Vanuatu's leaders say it's the slower-moving climate impacts that are hard to get help with, like rising oceans. On Vanuatu's coast, water is rising at a faster rate than the global average. Many coastal communities may need to be relocated, a fraught and challenging process in any part of the world.

The bulk of Vanuatu's proposal would go to creating a loss and damage fund, so residents could receive compensation quickly. Other funding would go to setting up systems to help with relocation efforts and support displaced people.

"It's to ensure that as we relocate populations, that we do that in an advance-planned way so people can move with dignity and not be scrambling at the last minute without the basic services and protections that we deserve," Bartlett says.

Loss and damage also means paying for what can't be replaced

While communities can potentially be rebuilt in new places, some of what's lost can't be regained. Important cultural sites may disappear under rising water. In Vanuatu, burial grounds are at risk, so some funding would also go to community-led discussions about how best to preserve their connection to ancestors.

"I can't tell you how many times when entering the community that you see graves and grave sites half exposed to the rising tides," Bartlett says. "And it's devastating because that's such an important connection to history and ancestry here in the Pacific."

The country's coral reefs are also at risk of collapsing. Oceans are getting warmer and more acidic, which can cause corals to bleach, turning a ghostly white. After repeated marine heat waves, corals simply can't bounce back.

Losing reefs would be fundamentally destabilizing, both as an ecological change and for the many local fishermen who depend on them for their livelihoods.

Debate remains over how loss and damage payments would work

Worldwide, the toll of loss and damage is expected to balloon as the climate gets hotter. One study shows that costs from loss and damage could reach $290 billion to $580 billion in 2030 and rise to more than $1 trillion per year in 2050.

At last year's climate talks in Glasgow, a bloc of developing nations asked for a fund or "facility" to be set up to disburse loss and damage funds. But as negotiations wore on, they settled on a three-year dialogue, which developing countries say lacks a clear decision-making mandate.

At this year's negotiations in Egypt, the debate is expected to continue over whether a new fund should be set up. Some support using existing humanitarian aid networks. Others have suggested that countries should have international loans forgiven, if it's linked to their climate vulnerability. Many countries have already taken on more debt after major disasters hit, on top of international loans they have for broader societal development.

"Many of these countries are burdened by debt," says U.S. special climate envoy John Kerry. "They are greatly impacted by what happens with respect to the crisis, the climate. And then they turn around and the west or the north offers them more debt. That isn't going to work."

Talks this year could take on new urgency, however, after the unprecedented damage in Pakistan from extreme floods. Millions of people were displaced, with damage totaling more than $30 billion dollars. At least 1500 people were killed.

"The recent floods in Pakistan have clearly shown what loss and damage can look like and what the toll could be," Bhandari says. "Not only in terms of human lives and economic losses, but also in terms of all the development gains which are being lost in countries which are really trying to leapfrog into the next level of development."