Two years ago, when the curtain fell on the COP27 summit in Sharm El Sheikh, Egypt, developing nations on the frontline of climate change had something meaningful to celebrate.
The creation of a new fund for responding to loss and damage was agreed after a hard-fought diplomatic effort, spearheaded by a group of small island developing states (sometimes known as the SIDS). The fund would provide much needed support for climate-vulnerable nations faced with a spiraling human and financial toll from sea-level rise, extreme temperatures, droughts, wildfires, and intensifying floods and storms.
Yet two years on, the world’s wealthiest nations – also the largest carbon emitters – are still dragging their feet. They have not followed up their pledges with anywhere near the finance required.
Some nations, particularly the 39 SIDS, which include places like Barbados, Grenada, Fiji, and Vanuatu, are uniquely vulnerable to climate change and are already paying the price.
Sky-high ocean temperatures created the conditions for Hurricane Beryl to develop in July this year, as the earliest-forming Category 5 hurricane on record in the Caribbean. As oceans warm up, climate science tells us that this rapid intensification is becoming more common.
The island nation of Fiji, best known as a tropical paradise, has experienced a frightening series of storms over recent years, linked to climate change. Cyclone Winston in 2016, one of the most intense on record, caused widespread flooding and lead to the loss of 44 lives. This episode reduced Fiji’s GDP growth by 1.4 percentage points.
According to the Asian Development Bank, ongoing losses from climate change could reach 4 percent of Fiji’s annual GDP by 2100, as higher temperatures and more extreme weather hold back growth.
This isn’t an isolated problem. Tropical cyclones and hurricanes have long battered small islands, but what is new is how often the most extreme storms and floods are happening, as well as our improved ability to measure their economic effects.
Our latest research looked at extreme weather events affecting 35 small island developing nations. We first collected information about the direct consequences of these extreme weather events: the damaged homes, the injured people, and the bridges that must be rebuilt.
We then looked at how these events have affected GDP growth and public finances. These changes are not felt immediately, but rather as the economy stalls, tourism dries up, and expensive recovery plans inhibit spending in other areas.
In all, from 2000 to 2020, these direct and indirect impacts may have cost small island states a total of $141 billion. That works out to around $2,000 per person on average, although this figure underplays just how bad things can get in some places.
Hurricane Maria in 2017 caused damage to the Caribbean island of Dominica worth more than double its entire GDP. That amounted to around $20,000 per person, overnight. Almost a decade later, the country is still struggling with one of the largest debt burdens on earth at over 150 percent of GDP.
Of these huge aggregate losses across all the small island developing states, around 38 percent are attributable to climate change. That’s according to calculations we made based on “extreme event attribution” studies, which estimate the degree to which greenhouse gas emissions influenced extreme weather events.
What is clear is that small island economies are among the worst affected by severe weather. These island states have three to five times more climate-related loss and damage than other states, as a percentage of government revenues. That’s true even for wealthier small island states, like the Bahamas and Barbados, where loss and damage is four times greater than other high-income countries.
For all small island nations, the economic impacts will increase, with “attributable” losses from extreme weather reaching $75 billion by 2050 if global temperatures hit 2 degrees Celsius above pre-industrial levels.
Our research helps us to see how far short the richer nations driving climate change are falling in their efforts to both curb emissions and to compensate the nations harmed by their failure to prevent climate change.
One of the key discussions at the forthcoming COP29 climate summit in Baku, Azerbaijan, will be the “new collective quantified goal.” This is the technical name to describe how much money wealthy countries will need to contribute to help vulnerable nations to mitigate and adapt to climate change.
That overall goal must also include a target to finance small islands and other vulnerable countries, with billions more needed per year in the new loss and damage fund. Given the extent of actual and likely losses, nothing less than ambition on the scale of a “modern Marshall Plan” for these states will do.
In addition to this extra financing, the fund will need to work effectively to support the most climate vulnerable nations and populations when severe weather occurs. This can be done in a few ways.
The fund could create a budget support mechanism that can help small island states and other vulnerable countries deal with loss of income and the negative effects on growth. It could make sure loss and damage funds can be released quickly, and ensure support is channeled to those who need it the most. It could also make more concessional finance available for recovery, especially for the most adversely affected sectors like agriculture and tourism.
The world has a troubling history of missing self-imposed targets on climate finance and emissions reduction. But the stakes are ever higher now, and any target for loss and damage finance will need to be sufficient to deal with the challenges posed already by climate change, and in the years to come.