COP28: Kenya’s unhinged luck in the rush for Loss and Damage Fund billions

Having had a series of unforgiving droughts that has seen hundreds of livestock dead, human-wildlife conflict rise, and now soaked in dreaded El Nino rains with the same farmlands that had crops dry up a few weeks ago washed away or flooded, the World Bank may want to rethink listing Kenya as a lower-middle income country in the face of climate change conversation.

Despite the glaring evidence of devastation in the north and the coastal region due to rapidly changing, yet extreme weather condition patterns including drought and destructive rains, Kenya is looking at missing out on payout from the newly operationalized Loss and Damage Fund.

The operationalization of the fund in Dubai on Thursday, saw an initial financial commitment of nearly $300 million pledged by the host, Germany, the US and Japan, is meant for low-income countries, worst hit by climate change effects.

Experts are now turning the heat on the World Bank, the designated recipient of the pledges, to delist Kenya from the countries with lower-middle-income economies, adding that the prevailing status would ostensibly deny the country a substantive chunk of the funds.

This is not just unique to Kenya, parties at the COP27 (in Sharma El-Sheikh, in Egypt last year) and now COP28 in Dubai alike, are split over the autonomous housing of the Fund at the World Bank as well as its role.

For now, the World Bank is the designated interim host of the fund for a period of four years. 

Earlier, World Bank president Ajay Banga, during the biannual meeting of the European member states' said that he was mindful of the need to include a good representation of the G77 countries on the fund’s board.

Already, members of the Transitional Committee have called for the fund to operate in accordance with the principles of the UNFCCC and the Paris Agreement, and as such, the Loss and Damage Fund will have an independent secretariat with a board consistency of members, to run the controversial fund.  

In September during the Africa Climate Summit (ACS) that foreshadowed Africa’s voice on climate change issues, President William Ruto hit out at financial partners for the punitive debt financing models. He joined other African leaders to call for a fair financial system that would treat all nations equally.

"This is the continent with the highest investment potential. We are only limited by two things: high-interest rates for development capital. How do we get Africa to pay five times more? We are not asking to be favored [or] treated differently... We need a conversation,” President William Ruto said in Nairobi, adding that already nine African countries are distressed with debt distress as 13 countries are at high risk.

The World Bank designated Kenya as a lower-middle income economy, a move that could potentially be a stab in Kenya’s back. This, experts say, has a huge impact on the amount due for compensation from the Loss and Damages kitty, operated by the country’s third largest development partner.

Growing skepticism

Environmentalists, conservation think tank leaders as well as activists are now in a renewed fight to have worst hit people, Kenyans in the north and the coast included, benefit directly from the pledged funds, instead of introducing bottlenecks such as accessing the money in form of loans.

Mohamed Adow, the Founder and Director of a climate change think tank PowerShift Africa, reckons that despite reaching an agreement on the framework of running the Fund, the financial pledges should immediately tickle down to boost the ongoing climate action activities in rural communities.

“If the World Bank proves unfit for the task we will need to set up a separate entity to do the job. The most pressing issue now is to get money flowing into the fund, then to the people who need it. We need money in form of grants, not loans, otherwise it will just pile more debt,” Adow asserts.  

Adow’s sentiments immediately echoed by Harjeet Singh, the head of global political strategy at Climate Action Network International, aiming at the Fund’s unsubstantiated sustainability mechanisms, if held at the World Bank, which is slowly becoming at eye of the storm.  

“The absence of a defined replenishment cycle raises serious questions about the Fund's long-term sustainability. Therefore, a robust system, particularly integrated with the Global Stocktake process and the new climate finance goal, is needed to ensure that COP28 results in a meaningful outcome,” he says.

He adds: "The responsibility now lies with polluting nations to meet their financial obligations in a manner proportionate to their role in the climate crisis, which has been primarily driven by decades of unrestrained fossil fuel consumption and a lack of adequate climate finance delivered to the Global South."

Taxation regimes

It is however worth noting that the UN Secretary-General António Guterres, called for the use of windfall taxes on fossil fuel companies and diverting the money to people struggling with rising food and energy prices and to countries suffering loss and damage caused by the climate crisis.

According to the United Nations Environmental Programme (UNEP), there have been calls to institute debts for loss and damage swaps, international taxes and a dedicated finance facility for loss and damage under the UN Framework Convention on Climate Change (UNFCCC). This saw philanthropies and country governments pledge funds for kitty during COP 26 and 27 assemblies.

Mamadou Sylla, 28 from the Loss and Damage Youth Coalition, who is representing the youth at the assembly is upbeat the breakthrough would not only be an enthusiastic pronouncement, but would signal an end to fossil fuel use as pledged by 2030.

"The agreement to operationalize the fund on day one of COP28 is a big news that we welcome. However, it's just one more step toward justice for countries bearing the brunt of the climate crisis. We hope parties can continue with this enthusiasm to fill the fund on the scale needed and to maintain a long-term commitment to the fund,” Sylla says.

Further, Joab Okanda, the Pan Africa Senior Advisor at Christian Aid, faults the operationalized fund for the deliberate exclusion of the clause in the agreement which speak to scale of the finance required to fill the fund, save for the avoided timelines for chasing into the fund.

“We know that the fund needs to be filled, there wasn't an agreement on the scale of the finance required for this, and we need to see countries actually commit real money to this fund. This money should not just go into setting up the secretariat of the fund but should go into funding the fund itself. The secretariat cannot run an empty basket,” he argues.

Amid its operationalization, developed countries, led by the United States, are pushing for the fund to be domiciled at the World Bank, while developing nations argue this would tip the balance of power towards wealthy governments and make it hard for them to tap into the funding. 

Ostensibly, other burning issue that experts want resolved, is how to allocate and provide access to the Fund so that there is balance between extreme weather events, slow onset events, and economic and non-economic L&D, with a geographical balance, is maintained.