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Who should pay for climate damage?

GS Paper 3

Syllabus: Environmental Conservation: Climate Finance


Source: TH

Direction: This article will help to understand why developed countries are bound to compensate poor countries for climate damage and whether India is eligible to get this compensation. Do understand the ‘Carbon border tax’ and why India opposed it.


Context: While rich countries such as the US, Japan and Canada pledged $20 billion to wean Indonesia off coal at the G-20 summit in Bali, much more has to be done to address climate change.



  • At the ongoing COP27 to the UNFCCC in Sharm El-Sheikh, Egypt, countries have agreed to discuss providing financial support to address loss and damage caused by climate change.
  • Loss and damage refer to developing countries’ demand for an institutional framework to compensate countries affected by climate change for current environmental damage.

Why compensation (rich world financing poor) has been considered?

  • Historical responsibilities of the developed world: Between 1751-2017, 47% of the CO2 emissions came from the US and the EU-28.
  • Emissions affecting others disproportionately: For example, a farmer in rural Africa may say that his country has not contributed to emissions in the past, but his agricultural yields are dropping as a result of industrialisation in the US or Russia.
  • Emissions have helped a few countries: For example, Canada would see a rise in GDP of 0.3% (about $9 billion a year) as warmer climates spur agriculture and labour productivity.
  • Calamity is fast-approaching: According to the UNEP’s Emissions Gap Report 2022, the world must cut emissions by 45% by 2050 to avoid global catastrophe.
    • However, there was little evidence of a concerted global effort to keep emissions low enough to keep global warming within the 1.5°C limits at the COP27 summit.


Emissions in India and efforts to reduce them:

  • According to the Emissions Gap Report 2022, India is among the top 7 emitters (others being China, the EU-27, Indonesia, Brazil, the Russian Federation and the U.S.).
  • However, in per capita terms, India’s emissions are far lesser (2.4 tCO2e) than others. For example,
    • World average per capita GHG emissions were 6.3 tonnes of CO2 equivalent (tCO2e) in 2020.
    • The U.S. is way above this at 14, 13 in the Russian Federation and 9.7 in China.
  • For economic development, some GHG emissions are unavoidable. India was responsible for the wording of the agreement on coal in 2021, changing “phase-out” to “phase-down,” which reflects the country’s huge dependence on thermal power.
  • In addition to pledging to net-zero emissions by 2070, India has committed to generating 500 GW of renewable energy capacity by 2030, lowering GDP emission intensity while increasing forest cover.

Related news:

Carbon border tax

Source: TH 

Context: BASIC countries have emphasised the need of avoiding carbon border taxes, which could promote market distortion and worsen the trust deficit among countries at COP27.

About Carbon Border Tax:

●        A carbon border tax is an import duty based on the amount of carbon emissions produced by the goods in question. E.g. using it EU can impose import duty on Cement export by India as cement production is highly carbon-intensive.

●        It discourages emissions as a carbon price. It has an impact on production and exports as a trade-related measure.


●        The BASIC countries are a bloc of four large newly industrialised countries – Brazil, South Africa, India and China, formed in 2009 at the Copenhagen climate summit.

●        The European Union (EU) proposed the Carbon Border Adjustment Mechanism (CBAM) in 2021, which would tax high-carbon commodities like cement and steel beginning in 2026


Insta Links:

Loss and damage funding officially included in the COP27 agenda


Mains Links:

Q. What is climate change ‘Loss and Damage’? Should rich nations compensate the poor countries most vulnerable to climate change? State your opinion. (250 words)