Behind Nepal’s compensation demand for devastating flood

Why in the News

Nepal has written to the United Nations fund for responding to loss and damage after a catastrophic flash flood killed more than 1,000 people. The country had already decided to shift its diplomatic position, seeking ‘compensation’ for natural disasters in place of aid. Its Foreign Minister framed the claim as a matter of legal and moral liability rather than charity, and named China, the United States and India as major industrial emitters carrying a historical responsibility to compensate vulnerable nations. The contest is over what a country with negligible emissions is owed and by whom. Aid is discretionary and can be refused; compensation asserts a liability that the international climate regime has never accepted.

What is the loss and damage fund?

1. What it does: The fund was set up in 2022 to help countries respond to the economic hits from extreme events, in addition to financing mitigation and adaptation.
2. What has been promised: Around USD 822 million has been pledged to it.
3. What is actually available: Around USD 350 million is allotted for disbursement.
4. How it is financed: Contributions are voluntary. The United Arab Emirates has provided USD 100 million, and much of the remaining contribution has come from Europe.

What happened in Nepal?

1. The scale: More than 1,000 people are dead and thousands remain missing nearly ten days later, with whole villages, bridges and roads swept away.
2. Two amplifiers: The impact was heightened by heavy infrastructure development by China in Tibet, which has affected the Himalayas, and by climate change.
3. The range as a water store: The Himalayas are referred to as the third pole, given their huge reservoirs of ice and water.
4. A long flagged risk: Melting of Himalayan glaciers has been observed for years, with climatologists warning of severe consequences.

Who has actually caused the accumulated emissions?

1. The United States leads: It is the leading contributor at 25 per cent of the CO2 accumulated in the atmosphere, which is the key cause of climate change.
2. Europe and China follow: Europe is next at around 20 per cent, with China now fast catching up at 15 per cent of the global stock.
3. India’s share of the stock is small: India’s contribution is under 4 per cent.
4. India’s per capita emissions are half the average: India emits around 2 tonnes of CO2 per person a year, against a global average of 4.5 tonnes.

Why has Nepal replaced aid with compensation?

1. The stated ground: Nepal’s greenhouse gas emissions are negligible, and its position is that it is bearing the consequences of a problem it did not create.
2. The causal claim: The rapid melting of glaciers and the resulting mountain floods are presented as direct consequences of global climate change.
3. The legal framing: The Foreign Minister described the claim as a matter of legal and moral liability rather than charity.
4. The practical driver: The size of the rehabilitation requirement makes access to international funding necessary, and seeking solidarity in place of aid suits a young and globally aware government.

Why did the demand name India?

1. The three named emitters: The Foreign Minister named China as the world’s top emitter, the United States as second and India as third.
2. Current output, not accumulated stock: That ranking rests on current annual emissions, which places India very differently from where its share of the accumulated stock places it.
3. A balancing act: The inclusion of India alongside the two largest emitters is read as Nepal’s practice of balancing its two neighbours.
4. The walk back: Nepal’s Prime Minister thanked India and China for their assistance after the floods. The Foreign Minister later said the issue was not about shifting blame to one country or another but about working together.

Does the shift from aid to compensation gain anything?

1. The two words carry different obligations: Aid is offered at the giver’s discretion. Compensation asserts a claim the payer is obliged to meet.
2. The fund is built on the first: Contributions to the loss and damage fund are voluntary, so a liability framing has no forum inside the fund that could compel a payment.
3. The diplomatic cost is immediate: The claim was softened within days, once the neighbours it named turned out to be the ones supplying relief.
4. The gain is agenda setting: A liability framing raises the political price of underfunding the mechanism. It does not create a right to be paid.

Challenges to the loss and damage fund

1. The regime expressly excludes liability: Loss and damage is recognised under Article 8 of the Paris Agreement, and the decision adopting the agreement records that Article 8 does not involve or provide a basis for any liability or compensation. Eg. Small island states pressed for a liability provision in 2015 and accepted its exclusion in order to secure the agreement.
   The Fix: Negotiate an agreed needs based replenishment cycle, so predictable funding substitutes for a legal claim that will not be conceded.
2. The hosting arrangement is contested: The fund was operationalised at the 2023 Conference of the Parties in Dubai with the World Bank as interim host for four years, over developing country objections about the Bank’s governance and its fees. Eg. Developing country negotiators sought an independent secretariat outside the Bank’s board structure.
   The Fix: Fix a firm date for the review of the hosting arrangement and publish the fee and governance terms against which it will be judged.
3. Access is slowest where need is highest: Climate funds require accreditation of a national entity and detailed project proposals, which the least developed countries take years to complete. Eg. National implementing entities in several least developed countries have waited years for Green Climate Fund accreditation.
   The Fix: Create a rapid disbursement window that releases a fixed sum on a declared national disaster, without a project proposal.

Conclusion

The claim Nepal made and then softened will outlast the flood that produced it. The climate regime has built a fund for loss and damage without the liability that would make any claim on it enforceable, and a country facing a rehabilitation bill it cannot carry will keep pressing at that gap. What is worth watching is not whether the demand is repeated but whether the next replenishment round ties contributions to assessed need rather than to donor discretion. Until it does, a small mountain state’s only real leverage is the moral argument it was persuaded to withdraw.

Matching Previous Year Question

“[2022, GS2, 15.0 marks] Clean energy is the order of the day. Describe briefly India’s changing policy towards climate change in various international fora in the context of geopolitics.”