Loss and Damage: Talking the Talk but not Walking the Walk at COP27 Classical economists have consistently failed to get to grips with the cost of climate change. Themethodologies of classical economics cannot be used effectively to quantify the losses and damagesinvolved. Where in geographical terms do the parameters of losses and damage begin and end? Howshould indirect events such as fires be incorporated? How should ‘slow onset’ events such asdroughts or biodiversity losses be quantified? How should ‘natural’ catastrophes be distinguishedfrom those driven by anthropogenic influences? Over what time scale should damage costs beconsidered? These are just some of the issues that have bedevilled attempts to persuade thedeveloped world that financial recompense on a large scale is a matter of climate justice due to theglobal south for the climate extremes they increasingly suffer. One of the earliest attempts to price the costs of climate change came from William Nordhaus, awinner of the Nobel Memorial Prize in Economic Sciences in 2018. As far back as the 1990s he wasestimating that a warming of 2.5 o C would result in a loss of income 1-1.5%. This was astonishinglylow, and built on assumptions that a large part of economic activity happened indoors and would beminimally affected by climate change. Such are the breathtaking assumptions that sometimesunderpin economic models! Even at the time it was pointed out to him by climate scientists thattaking a wider perspective would result in estimates 20-30 times higher. We now know just howmuch in error these early estimates were, and can appreciate how much they hindered politicaldecision making. Last year the respected Moody’s Analytics estimated that a warming of even 2 o Cwould cause economic losses of €66 trillion while a recent study by Oxfam and Swiss Re estimatedthat the cost of a 2.6 o C warming would be 13.9% each year. Even today, we hear a lot about the costof taking action to combat climate change, but relatively little about the cost of inaction. It might be logical to surmise that insurance companies were wise to the risks involved in insuringproperties vulnerable to a regime of increasing extremes, and they were aware of the potential forcatastrophic losses that might result for them. It might be logical to assume that they would be inthe forefront of policies to tackle climate change and be applying pressure to decision makers toreduce emissions. But this hasn’t happened and low premium insurance is still available in areas ofknown risk. Even in Ireland, insurance for houses recently built in known flood risk areas is possible.Why this occurred is not clear, but a large part of the explanation is the ability of insurancecompanies to outsource their risk to private investors willing to gamble on an event not occurring ina particular year. The availability of national safety nets guaranteed by governments also helped.Taking a chance that the 1-in-50 year event won’t happen in 2022 is a fair investment gamble forsome. This has echoes of course of the way the global banking crisis emerged from the offloading ofrisky mortgages at the end of the first decade of this century. Ultimately even this strategy has its limits. The fires in California in 2018 cost the insurance industryjust under €12 billion, a fraction of what Hurricanes Andrew or Sandy cost and a tenth of whatHurricane Katrina cost. The realisation that risks can’t ultimately be avoided is slowly sinking in. Thishas been especially clear in recent years. As climate change has increasingly come home to roost inthe developed world, the issues surrounding loss and damage have moved centre stage. Thearguments made by developing countries, where loss of life rather than loss of property is the mainconcern are now better appreciated. ‘Loss and damage’ is the general term used in UN climate negotiations to refer to impacts of climatechange that exceed the adaptive capacity of affected countries, especially when this capacity is limited by finances. Of course, for communities, non-economic losses are the most important: theloss of life, the loss of home places, even the loss of culture that potentially faces the Small IslandDeveloping States. In many ways, loss and damage is the third leg of the stool, after mitigation andadaptation, that must be integrated into climate action. This was recognised in the Paris Agreementand climate finance directing flows from the global north to the global south is in part aconsequence of this. But institutionalising a response at an international scale has foundered due tothe difficulties in answering the questions raised in the first paragraph above. The emergence of new techniques in climate science offer an opportunity to address many of thequestions concerned. Attribution is the tool that can unlock the percentage contribution humanshave made to an individual extreme event occurring. This has been facilitated by the exponentialgrowth in computing power that enables climate models to be run multiple times. One series of runscan be made with the greenhouse gases at pre industrial levels to ascertain how likely an eventwould be under ‘natural’ conditions. A second series then is run with the greenhouse gases added asthey increased over time. By comparing the outputs it is possible to estimate how much more likelya given event is due to human interference with the atmosphere. So for example the floods inGermany, Belgium and the Netherlands this time last year were 9 times more likely, the heatwave inSiberia in 2020 10-100 times more likely, the 2019 heatwave in France 10 times more likely etc.When the modelling is done for this year’s heatwave in Spain and France a similar figure is likely toemerge. If the damage cost is known and the human contribution can be estimated, the culprits can belevied. This is the ultimate objective for the global south, forcing the developed world to beaccountable in financial terms for the climate change burden inflicted on the global south. Naturally,this is not going to be an easy task! Slow onset events such as desertification, biodiversity losses,land and forest degradation, rising sea levels, ocean acidification etc are particularly problematical,not to mention the cultural and population displacement issues involved. At the Glasgow COP26 only limited progress was made in addressing Loss and Damage. Theresistance of the developed world was again demonstrated. As a compromise, a 2-year plan, theGlasgow Dialogue, was established to chart the way ahead in funding terms. Some funding wasprovided to operationalise a scheme, the Santiago Network, to help developing countries with thetechnicalities of coping with loss and damage issues. Minister Ryan announced that Ireland wouldcontribute €5 million to support this technical network. In addition, the Taoiseach committed toraising Ireland’s climate finance contribution to reach €225 million per annum by 2025. But forsome of the world’s big polluters the chequebooks remain tightly closed. There is no doubt but thatLoss and damage will be the main focus of COP27 in November. However, given the health, war andeconomic issues that have characterised the past year, optimism that solidarity with the countriesvulnerable to climate-change related disasters will be reflected in a comprehensive system offinancial transfers must be limited.