Energy & Environment — A closer look at the ‘loss and damage’ fund

Rachel Frazin
·6 min read
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COP27’s highly touted “loss and damage” fund still has major uncertainties — including where its money will come from. Meanwhile, the Biden administration is easing some restrictions on ESG investing and Europe is proposing a price cap on natural gas.

This is Overnight Energy & Environment, your source for the latest news focused on energy, the environment and beyond. For The Hill, we’re Rachel Frazin and Zack Budryk. Someone forward you this newsletter?

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Uncertainties about fund lead to skepticism

A newly agreed “loss and damage” fund in which developed countries would pay for climate damages suffered by vulnerable developing counterparts lacks both details and actual funding, raising questions about whether it’s merely a symbolic breakthrough.

Developing nations responsible for the smallest amounts of climate pollution for years have called for such a fund, which has been resisted by the United States and other wealthy countries.

That changed over the weekend when nearly 200 countries agreed to launch a new fund at the United Nations climate change conference (COP27) in Sharm el-Sheikh, Egypt. 

The agreement states that the fund will help developing countries respond to “economic and non-economic loss and damage associated with the adverse effects of climate change, including extreme weather events.”

OK, so what’s still unknown? 

  • The deal provides no money, and no organizational structure, saying such details will be worked out in the coming months. It creates a “transitional committee” made up of representatives from 24 countries who will be tasked with finding funding sources and setting up the fund’s structure and governance.   

  • “A loss and damage fund has been established and that’s important on its own, but it’s an empty vessel,” Morgan Bazilian, a public policy professor at the Colorado School of Mines, told The Hill. 

What about the U.S.?

  • The government divided by the midterms is likely to pose a hurdle for getting U.S. funding. Some Republicans are already expressing opposition.

  • “Insanity. This wasn’t even on my list of the top 1 million things the United States should do with money we don’t have,” Sen. Kevin Cramer (R-N.D.) said in a written statement that his office shared with The Hill when asked for his thoughts on the deal.

Yet, reaching this point at all is a first:

  • “There was just a tremendous breakthrough this time of getting the United States and other traditional blockers to stop blocking,” said Jean Su, the energy justice program director at the Center for Biological Diversity.   

  • She acknowledged that there are still “big questions,” including “whether finance will actually get delivered,” but said that ultimately it gave “vulnerable communities around the world a glimmer of real hope.

Read more about the uncertainties here.

Biden eases ESG restrictions for financial advisers

The Biden administration is making it easier for money managers to consider climate change and other environmental and social factors in retirement investments.

The Labor Department on Tuesday issued a new final rule making it so that these fiduciaries can consider “the economic effects of climate change” in investments that they oversee.

Assistant Secretary for Employee Benefits Security Lisa Gomez said in a statement that the rule was issued to end a “chilling effect” created by Trump-era restrictions on considering environmental and social factors in investing.

In 2020, the Trump administration issued a rule that was expected to discourage the consideration of environmental and social factors in this type of investing.

Read more about the new rule here.

WHITE HOUSE UNVEILS ENVIRONMENTAL JUSTICE SCREENER

The White House on Tuesday unveiled a tool aimed at screening for environmental justice communities – disadvantaged communities that face high pollution burdens.

White House Council on Environmental Quality Chair Brenda Mallory said in a statement that the tool would enable the administration to make sure that these communities particularly see benefits from its climate actions.

“The Climate and Economic Justice Screening Tool identifies communities that have faced historic injustices and have borne the brunt of pollution so we can ensure they’re some of the first to see the benefits of climate action,” she said.

EU proposes gas price cap ahead of winter

The European Commission on Tuesday proposed a temporary cap on natural gas prices, with the goal of taming energy costs and safeguarding supplies ahead of winter.

The so-called Market Correction Mechanism” would serve “to protect EU businesses and households from episodes of excessively high gas prices in the EU,” while reducing volatility on European gas markets, according to the Commission.

“Following the Russian invasion of Ukraine and weaponization of energy supplies, natural gas prices have seen unprecedented price peaks across the EU,” a statement from the Commission said.

At the end of August, Russian state-run energy company Gazprom shut down its main gas pipeline to Europe for what it said would be three days of maintenance, but then never resumed operations.

Natural gas prices reached all-time highs in Europe during the second half of August — a situation that the Commission described as “highly damaging for the European economy, with contagion effects on electricity prices and an increase in overall inflation.”

  • On Tuesday, Gazprom threatened to cut off its last running gas pipeline to Europe, which runs through Ukraine, next week. The company accused Kyiv of diverting gas supplies intended for Moldova and creating a “transit imbalance.”

  • The Gas Transmission System Operator of Ukraine denied the accusations, asserting that all volumes of gas destined for Moldovan customers were being transferred “in full.”

With an uncertain winter ahead, the European Commission stressed that it intends “to prevent the repetition” of August’s price surges by proposing a “temporary and well-targeted instrument.”

How does it work? In the case of extreme gas price hikes, the instrument would automatically intervene — setting a safety price ceiling of 275 euros ($282) per megawatt-hour on month-ahead title transfer facility (TTF) derivatives.

Read more here, from The Hill’s Sharon Udasin.

WHAT WE’RE READING

  • The U.S. Promised Tribes They Would Always Have Fish, but the Fish They Have Pose Toxic Risks (ProPublica and Oregon Public Broadcasting)

  • Nuclear plant along Lake Michigan will not reopen after federal application denied (MLive)

  • Europe’s Wind Industry Is Stumbling When It’s Needed Most (The New York Times)

  • Bison’s relocation to Native lands revives a spiritual bond (The Associated Press)

ICYMI

🦖 Lighter click: Not historically accurate, but we’ll let it slide.

That’s it for today, thanks for reading. Check out The Hill’s Energy & Environment page for the latest news and coverage. We’ll see you tomorrow.

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