Loss and damage associated with Climate Change impacts to reach $1 trillion a year by 2021

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Climate change  is once again under the microscope at COP22 this month and one point in particular will be a review of the previously established Warsaw International Mechanism for Loss and Damage and whether developed countries would be able to fulfil their commitment to provide a total of $100bn a year of financial aid by 2020.

PAL’s view is that the loss and damage attributable to climate change in 2016 is around the $800bn mark, increasing to $1 trillion in 2021. In carbon pricing – or rather carbon cost – terms this equates to about $22 per tonne today, rising to $26 per tonne in 2021. Around 20% of global weather related losses are attributed to climate change, and this figure is increasing at around 0.5% a year.

Moreover we put the case that a 40% share of the funding ($320bn) should go towards adaptation projects. Adaptation is one of the four funding categories in AIMS – Adaptation ($320bn), Insurance ($240bn), Mitigation ($200bn) and Social Impact ($40bn) as explained in Richard Clarke’s recent book ‘Predicting the Price of Carbon: How to crack the climate change code for good’.

AIMS - adaptation, insurance, mitigation and social fund

Figure 1 – AIMS – adaptation, insurance, mitigation and social fund – a possible protocol for allocating carbon-tax revenues.(© Predict Ability Ltd.)

Put simply, the COP pledge of $100bn is a long way short of the $800bn expected cost of damage being caused by climate change. In fact it covers a little over 12% of the total funds that we believe are needed. The current pledges are simply not enough.

PAL’s new climate financing mechanism Carbon Pay, a marketplace bringing together enterprise (business, city corporation, regional and national governments) and AIMS projects, is designed to address this. Contact us if you would like to find out more.

Edward Coe

Author: Edward Coe

Edward Coe is Managing Director and co-founder of PAL. He has extensive experience of systems development and implementation for advanced derivative trading systems utilising a broad range of technologies supporting in house, bespoke and third party software. Edward developed the software behind PAL Carbon.

Loss and damage associated with Climate Change impacts to reach $1 trillion a year by 2021 was last modified: August 8th, 2017 by Edward Coe