NZ to sign $4m climate reparations deal with Vanuatu

New Zealand will put $4 million towards the establishment of a fund for climate-related loss and damage in Vanuatu, with a Crown agreement to be signed this week.
Nelson Kalo, the acting director of the Vanuatu Department of Climate Change, revealed the upcoming deal while speaking on a panel at COP29 in Baku.
“We acknowledge the support through from [the New Zealand Ministry of Foreign Affairs and Trade] MFAT, which is one of our largest donors in the space of loss and damage and of course other complementary climate interventions that Vanuatu is leading at this point in time. MFAT has pledged an amount of $4 million to support the establishment of a national loss and damage fund and we are hoping to sign the Crown agreement next week, here at COP29,” he said.
Loss and damage, sometimes called climate reparations, refers to funding to help developing nations deal with and recover from the impacts of climate change. It differs from finance for adaptation because it is focused on the losses and damages caused by climate events, rather than boosting resilience to future events.
While developed countries spent decades blocking discussion of loss and damage funding at UN climate summits, that changed at COP27 in Sharm El-Sheikh in 2022, when New Zealand helped unlock the conversation by pledging $20 million for loss and damage. Developments have proceeded rapidly since then, with a global fund for loss and damage announced last year in Dubai.
At COP29, countries have pushed for further progress on loss and damage. The Dubai fund has just US$720 million in it, while annual losses and damages due to climate change in the developing world run into the hundreds of billions, if not trillions, of dollars.
New Zealand’s contribution to Vanuatu will help create a dedicated fund for the island nation to raise further money to cover its loss and damage costs. In 2022, Vanuatu said it would need US$177 million over the next decade solely to respond to loss and damage.
Todd Croad, the head of New Zealand’s delegation to COP29, said New Zealand viewed the loss and damage funding landscape as a “mosaic”.
“The [global] fund is a big part of that, but there’s also other funding arrangements in that space. There is an ongoing role for bilateral or regional-type initiatives. We see that with adaptation at the moment as well. Off the top of my head, I think there are three main things that that could do,” he said.
“One is as a direct source of funding to make the type of work we’re doing ready in the Pacific, in terms of setting up these pilot programmes in a number of areas. The second way is that we can be part of it by delivering things bilaterally and that’s potentially a useful thing for us to have in our toolkit. Thirdly, that role of trying to use bilateral funding to make the countries ready to access larger amounts of funding from a wide range of sources is potentially one of those unlocking things that bilateral assistance can help with.”
Kalo said it was important for recipients to be have agency in how the finance is spent. He thanked New Zealand for its new, flexible approach to climate finance that gives Pacific nations greater control over the aid they receive. Vanuatu is seeking to expand that approach to loss and damage by itself producing a definition for loss and damage.
“Within the space of negotiation, there is yet to be an agreed definition of loss and damage. We believe, in the case of Vanuatu, that we can frame the definition in regards to our present circumstances, in terms of our vulnerability, our exposure,” he said.
“We want to domesticate loss and damage. We want to say, ‘This is the definition’. Not you coming forward, telling us, ‘You have to go this way or that way’. We want to show you the leadership where Vanuatu drives its own intervention, its own intention about loss and damage.”
Although loss and damage has taken a bit of a backseat at COP29, it has still come up in the context of negotiations for a new global finance goal. Developing nations like Vanuatu are pushing for the goal to include loss and damage, while developed countries (including New Zealand) argue the finance goal created by the Paris Agreement includes only emissions reductions and adaptation.
Regardless of the outcome of the negotiations, funding will still flow towards loss and damage. But its inclusion or exclusion in the headline goal could determine how much of a priority it is, or whether it gets overlooked in favour of the other two forms of finance.