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loss and damage fund
Governments Light the Flames As We Pay Billions to Extinguish Them
Since the Industrial Revolution, global economies have been built around the fossil fuel industry. In 2025, the global oil and gas industry's revenue was estimated at $4 trillion. Despite all the devastating warnings, we are still failing to meet almost every target aimed at curbing emissions.
The burning of fossil fuels comes at a massive price for people, the planet, and our economies. Not only are we spending exorbitant amounts on climate damage, but we are also paying more than ever at the pump and on our energy bills.
Policymakers and world leaders need to start thinking longer term and take steps to prevent the huge economic losses from climate disasters in the first place.
As the US-Israeli war on Iran rages, prices are set to rise further. Targeted attacks on energy facilities have all but closed the Strait of Hormuz, a shipping lane which facilitates the transportation of 20% of global oil and gas supply. The price of crude oil is already 20% higher than it was before the first strikes on Iran on February 28.
Despite the known fact that adaptation is far cheaper than inaction, politicians continue to sit on their hands. Meanwhile, they continue to subsidize the fossil fuel industry, fail to adequately invest in the energy transition, and pass the costs of climate change on to taxpayers.
In the last two full years alone, global economic damages reached $451 billion—a 19% increase compared to the previous eight years. An amount significantly more than that needed to close the global climate adaptation gap.
"Climate change will cause massive economic damages within the next 25 years in almost all countries... We have to cut down our emissions drastically and immediately—if not, economic losses will become even bigger in the second half of the century, amounting to up to 60% on global average by 2100," says Leonie Wenz, a scientist at PIK.
2025—One of the Costliest Years on Record
Climate change is not a future problem; it is affecting each and every one of us today.
According to the National Bureau of Economic Research, climate change costs the world 12% in gross domestic product (GDP) losses for every 1°C of warming. This puts the social cost of carbon at around $1,056 per metric ton of carbon dioxide emissions. The report predicts that by the "end of the century, people may well be 50% poorer than they would've been if it wasn't for climate change."
Heatwaves, wildfires, droughts, and storms cost the world more than $120 billion in 2025 alone as 55 billion-dollar weather disasters pounded the Earth. The US bore the brunt with the devastating Californian wildfires, which caused $60 billion of damage and led to the deaths of more than 400 people.
No continent, however, was spared from crippling climate disasters in 2025. It was also noted that disasters are becoming increasingly expensive and their impact underestimated. The Global Assessment Report on Disaster Risk Reduction (GAR) 2025 estimates the annual cost of weather disasters at $202 billion. When other impacts, such as ecosystem costs, are taken into account, the true cost is likely to exceed $2.3 trillion.
Some of the most damaging climate events in 2025 hit poorer nations, including the Philippines, Thailand, Indonesia, Sri Lanka, and Vietnam. These countries have historically contributed little to the climate crisis, have the fewest resources to respond, and are often on the front lines of climate disasters.
Who Should Pay for Climate Disasters?
Climate Action Climate Action Network International and other groups demand money for the Loss and Damage Fund at COP28 in Dubai. (Photo by Mídia NINJA/CC BY-NC 2.0)
"On climate finance, the world must pay up, or humanity will pay the price... Climate finance is not charity, it's an investment; climate action is not optional, it's imperative."—António Guterres, United Nations secretary-general.
In relation to the climate crisis, the Polluter Pays Principle states that those who have historically contributed the most to greenhouse gas emissions should bear the costs of repairing the damages caused and adaptation measures. It also acts as a deterrent to end massive investment and subsidies into the fossil fuel industry and instead promotes the development and integration of clean energy sources.
The Loss and Damage fund was created at COP27, the 2022 climate conference. This fund is to compensate developing countries for losses and damages (L&Ds) from natural disasters caused by climate change, for which wealthy countries are disproportionately responsible. It was hailed as a major milestone at the time, but financial commitments have fallen well short of the $400 billion needed annually to address L&Ds and climate injustices adequately.
The Most Expensive Climate Disasters
Over the past four decades, the costs of wildfires, storms, hurricanes, droughts, and floods have spiraled. These disasters have become more frequent and far more severe. The cost of all disasters between 1985 and 1995 was $299 billion. Yet the same figure for between 2014 and 2025 was $1.4 trillion.
Below, we list the five most costly disasters over the last three decades. The figures provided are estimates, and likely the true cost was much higher. They are adjusted for inflation and, of course, do not include the social costs, such as the devastating human toll, the health crises that follow, the psychological impact, massive displacement, ecosystem destruction, resource depletion, habitat loss, and agricultural fallout.
- Hurricane Katrina, 2005: $125 billion (US & Cuba)
- Hurricane Harvey, 2017: $125 billion (US, Central America, the Windward Islands, parts of South America, the Cayman Islands, Mexico)
- Hurricane Ian, 2022: $112 billion (US & Cuba)
- South Asian Floods, 2020: $105 billion (India, Bangladesh, Nepal, Pakistan, Sri Lanka, Afghanistan)
- Hurricane Sandy, 2012: $98 billion (US, Cuba, The Greater Antilles)
Adaptation Is Cheaper Than Inaction
Climate adaptation is the process of adjusting to the impacts of climate change to reduce damage, prevent loss of life, and protect people and infrastructure before disaster strikes. It also includes reducing global carbon emissions by transitioning to clean energy to prevent climate change from worsening even further.
Adaptation requires upfront investment, but it is far more cost-effective than inaction, which allows the climate crisis to escalate, causing irreversible damage and out-of-control social and environmental costs.
Examples of adaptation measures include flood defences, the creation of urban wetlands, drought-resistant crops and climate resilient agriculture, ecosystem restoration and conservation, and investment in early warning systems.
There is a huge funding gap in climate adaptation, and the longer governments postpone, the greater the need and the higher the costs become. Annual estimates for developing countries alone range from $215 to $387 billion.
Once we reach 2°C of warming, the global annual cost to protect everyone exposed to climate hazards will reach $1.2 trillion, equivalent to almost 1% of GDP. Heat and drought are the most pressing challenges, with more than three-quarters of adaptation funding needed to provide adequate protection.
Estimates indicate that the benefits of adaptation exceed the upfront costs by a factor of seven. Policymakers and world leaders need to start thinking longer term and take steps to prevent the huge economic losses from climate disasters in the first place.
Adaptation investments also have wider secondary benefits such as improved health and social welfare, a more resilient agricultural sector, stable levels of biodiversity, lower levels of migration and conflict, and reduced inequalities.
The 2019 Global Commission on Adaptation Report found that every $1 invested in adaptation can generate up to $7.1 trillion in total benefits globally by avoiding damages and building social and environmental value.
The Cost of Doing Nothing
People rally for climate action in Perth, Australia. (Image by Tanyia Maxted/Flickr/CC BY-NC-SA 2.0)
Climate inaction is already leading to massive economic losses from extreme weather. The International Federation of Red Cross and Red Crescent Societies' 2019 Cost of Doing Nothing report estimates that those in need of annual international humanitarian assistance for climate-related disasters could double to over 200 million by 2050, costing an additional $20 billion annually.
The Climate Policy Initiative estimates the financial cost of inaction to be $1,266 trillion. The social cost is much higher:
- In the US alone, the health costs of air pollution and climate change far exceed $800 billion per year.
- Malnutrition, malaria, diarrhea, and heat stress caused by rising temperatures are projected to cause an additional 250,000 deaths per year between 2030 and 2050.
- The World Bank projects losses of up to $225 billion in GDP by 2030 due to the loss of ecosystems and their fallout, such as reduced pollination and declining timber and marine stocks.
- The number of people suffering from food insecurity will increase from 2 billion to 3.5 billion by 2050.
- The number of people experiencing high and extreme water stress will increase from 2.6 billion to 5.4 billion by 2040. Water-related conflicts have increased by 270% in the last decade.
- There will be 1.2 billion climate migrants by 2050 who will endure unimaginable suffering and become reliant on aid. Climate migration contributes to political instability and has massive economic ramifications.
The two-year Global Stocktake for the Paris Agreement at COP28 confirmed that we are way off track from the targeted 1.5°C target. The window for achieving the Sustainable Development Goals and specific climate goals is rapidly closing.
If governments won't act on climate change for people or the planet, they should at least be motivated by the trillions it will cost them if they continue to do nothing.
Failing to address climate change is a failure for our planet and for humanity. Why pay trillions in disaster relief, conflict mitigation, aid, and migration management when the solutions are at our feet today?
As the Climate Policy Initiative says, "The longer our home remains aflame, the harder and more expensive it will be to extinguish the fire and repair the damage."
What Can We Do for the 250 Million and Counting Displaced by the Environmental Crisis?
Climate refugees are forced to flee their homes as the environment degrades and climate-related disasters take hold. Climate change is now one of the leading causes of mass forced displacement.
Climate change is also increasing rates of poverty, instability, and violence—further drivers of migration.
Climate migrants remain in a murky legal space that neither recognizes nor protects them. In fact, the term is not recognized at all in international law.
Those on the front lines of climate change are often in countries that contributed the least to it. The vast majority of climate migration is internal, which puts an unsustainable strain on the already limited resources of these nations.
"When people are driven out because their local environment has become uninhabitable, it might look like a process of nature, something inevitable... Yet the deteriorating climate is very often the result of poor choices and destructive activity, of selfishness and neglect," said Pope Francis.
A Humanitarian Crisis
- In 2022, climate-related disasters accounted for more than half of new reported displacements.
- Almost 60% of existing refugees and IDPs live in countries that are among the most vulnerable to climate change.
- The demand for humanitarian assistance due to climate-related disasters is predicted to double by 2050.
- In 2023, the countries with the highest numbers of new internal displacements (IDPs) due to environmental disasters were China, Türkiye, the Philippines, Somalia, and Bangladesh.
- Three out of four refugees and displaced people are in countries experiencing both conflict and high risk of climate hazards.
- By 2030, water scarcity could displace 700 million people.
- Up to 75% of Bangladesh sits below sea level. Rising water levels have already affected 25.9 million people.
- Unpredictable rainfall patterns, desertification, and declining agricultural productivity undermine rural livelihoods and force migration to urban areas.
- Climate change perpetuates poverty. The World Bank estimates that without urgent action, an additional 32 -132 million people could be pushed into extreme poverty by 2030.
- Climate migration is not just an issue in developing countries. In 2022, 3.2 million people were either displaced or evacuated due to wildfires, floods, and hurricanes in the US.
- Within Europe, rising sea levels are expected to displace 1.6-5.3 million people by the end of the century.
Expansion of Legal Protections
(Photo by Ramazan B/CC BY 3.0)
Climate migrants remain in a murky legal space that neither recognizes nor protects them. In fact, the term is not recognized at all in international law.
The Refugee Convention, which entered into force in 1954, was established to protect those who had fled persecution from the atrocities of World War II. Its protections extend only to those who must leave their home countries due to war, violence, conflict, or any other kind of maltreatment. It also does not protect those who have been displaced in their own countries.
As the vast majority of climate refugees are not crossing borders nor fleeing violence, their status is outside of the convention's reach. These facts do not mean that these people are less in need of assistance or that their lives are not equally in danger, yet the law overlooks their plight.
Climate migration is a form of adaptation. We can build new pathways for safe and regular migration.
Refugee advocates are pushing for an expansion to the convention to include the rights of those forced to move due to environmental factors, but have met with significant political pushback. Critics argue it would lead to the weakening of protection for those experiencing serious persecution. The difficulty in proving the causal factors of climate migration is a further barrier.
The 1998 Guiding Principles on Internal Displacement help bridge the gap in protecting climate refugees; however, its nonbinding nature limits its practical effect and gives it no legal force. It also does not protect those who must cross borders.
The Global Compact for Migration was adopted in 2018. It was the first United Nations framework on international migration. For the first time, climate change was officially recognized as a driver of migration, but it still does not grant legal protection for climate refugees. Instead, the compact promotes safe, orderly pathways for migrants, including planned relocation, visa options, and humanitarian shelter.
The United Nations Framework Convention on Climate Change (UNFCCC) is both the process and the treaty that help countries mitigate the causes and consequences of the climate crisis. It was signed by 154 countries in 1992. Climate migrants aren't explicitly protected by the UNFCCC.
As it stands, although some countries have enacted domestic laws that provide temporary protection for climate refugees, the lack of recognition under the Refugee Convention means there is still no international, legally binding mechanism for them.
Countries are reluctant to sign up to yet another agreement, especially as it may make them responsible for climate migrants who arrive at their borders and promote larger migrant influxes to favored countries. There are many political obstacles which ultimately exacerbate the humanitarian needs of millions.
We must begin to address internal climate displacement in the most vulnerable countries. Tackling the issue at its root is imperative, and the nations historically responsible for the damage must be made to pay.
Climate migration is a form of adaptation. We can build new pathways for safe and regular migration.
The Loss and Damage Fund was established in 2022 at COP27 to address the financial needs of communities severely impacted by climate change. The money would support rehabilitation, recovery, and human mobility. While a brilliant initiative, as of late 2025, rich nations have delivered less than half of what they initially committed to the fund.
Climate Justice is Migrant Justice
Greta Thunberg and Luisa Neubauer participate in a Fridays for Future demonstration in Berlin on September 24, 2021. (Photo by Stefan Müller / CC BY 2.0)
The climate justice movement recognizes that climate change disproportionately affects marginalized and vulnerable communities. It demands that the Global North, which has massive historical accountability, should bear the burden of the solutions. The movement brings social justice, racial justice, human rights, and economic equality into the climate debate.
In July 2025, years of activism by a bold group of law students from the University of the South Pacific paid off. The Vanuatu ICJ Initiative spearheaded legal action that led to a historic advisory opinion from the International Court of Justice (ICJ).
The following was adopted unanimously by all 15 judges: Nations have a legal duty to combat the planetary crisis.
The ICJ has, for the first time, officially categorized the climate crisis as an "urgent and existential threat" and emphasized that "cooperation is not a matter of choice for states but a pressing need and a legal obligation." The ICJ opinion can now be used to demand more ambitious climate protection measures, to ensure compliance with the Paris Agreement, to implement national and international climate laws, and potentially to help protect climate migrants.
The initiative also highlighted the vulnerability of small island nations and demonstrated that collective action and legal accountability are essential tools on the journey to justice and sustainable development.
Any justice for climate-induced migration must be human-rights focused. Humanitarian visas, temporary protection, authorization to stay, and bilateral free movement agreements would all help to ease the suffering of those forced to leave their homes.
Invisible No Longer
(Photo by Ilias Bartoli/Flickr/CC BY-SA 2.0)
"When we refugees are excluded, our voices are silenced, our experiences go unheard, and the reality of the climate situation in the Global South is blurred" says Ugandan climate justice activist Ayebare Denise.
Climate migrants have remained invisible in climate and migration debates for years. The International Organisation for Migration have been working hard to bring climatic and environmental factors into the spotlight. They are establishing a body of evidence that will definitively prove that climate change, both directly and indirectly, affects human mobility.
The UN Refugee Agency advocates for states' responsibilities and obligations to address the migration crisis caused by climate change. They view climate change as a threat multiplier and are working toward protection frameworks.
Countries must begin cooperating on this global issue and ensure the fair treatment of all refugees.
The debate over establishing a climate refugee status is ongoing, and while a legal definition would be helpful, it would be only a partial solution. The vast majority of climate migrants do not want to leave their homes, their livelihoods, or their communities. Admittedly, this is no easy feat, but we must fix the root of the problem—climate change itself.
Without urgent action, we are all at risk of becoming climate refugees.
While working to address immediate needs, climate discussions should continue to focus on preventive measures. Climate mitigation, adaptation, and a just energy transition are essential.
Countries must begin cooperating on this global issue and ensure the fair treatment of all refugees. We must demand a new comprehensive legal framework for climate refugees to safeguard vulnerable populations and protect those who may be at risk in the future.
Supporting climate refugees is our moral obligation.
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