BrazilSwitzerland’s path to more international climate and biodiversity finance
Switzerland is aiming to increase its share of financial support to climate change initiatives in the years to come, much like the rest of Europe. A new report from South Pole, commissioned by the Swiss Federal Office for the Environment, dives into Swiss climate finance.
In line with its agreement to join in on a new international biodiversity finance target, Switzerland is obliged to increase its share contribution to these goals. That is likely to put stress on Swiss finances, which have already been strained since the Covid-19 pandemic and the fallout from the war in Ukraine, which both caused an economic strain on the federal budget.
For that reason, Switzerland will need to find innovative sources of funding their contribution to international climate cooperation.
In 2020, Switzerland contributed €577 million in international climate finance, with 70% of that amount derived from public sources and 30% from private investments. As far as international biodiversity funding, Switzerland spent nearly €128 million in contributions, with almost 100% coming from public funds.
Overall, Switzerland’s spending on international climate and biodiversity finance as a percentage of overall ODA (official development assistance) is 14.5%, mostly on par with leading European economies like the Netherlands (14%) and Denmark (11%), though much lower than Germany (34%) and spending from the EU (32%).
Much of the public-private joint funding for such initiatives comes from special funds, like for example, the EU Global Energy Efficiency and Renewable Energy Fund or other country-specific funds. The South Pole report notes that Switzerland could benefit from adopting or expanding these types of funds in order to boost climate finance spending.
Ways to boost climate finance
The report highlights several other channels and instruments that Switzerland could use to increase climate and biodiversity finance. For example, the Swiss could look to instate a tariff on carbon-heavy goods like steel and cement, increase the existing levy on fossil fuels, or introduce new taxes like a windfall tax or other such taxes.
Introducing new taxes or levies could be complicated though, because it would likely mean a significant change to legislation and thus require a public vote. What’s more, increasing the tax rate or expanding levies requires parliamentary approval, which would also complicate implementation.
One innovative solution that the report puts forward is a so-called ‘debt-for-nature swap’, in which Switzerland allows developing countries that are official debtors to buy back some of their debt at a discount and use the savings to establish ecosystem or maritime conservation initiatives.
Though it seems an out-of-the-box approach, Switzerland has already made a similar move in 1991 and 1992, though then it was aimed at development in general. These types of debt-for-nature initiatives can be especially effective because they target both biodiversity and conservation at the same time.
One additional approach to boosting Swiss climate finance explored in the report is issuing more green bonds. Green bonds are debt securities that are used to fund projects with a positive environmental or climate benefit.
Issuing additional green bonds, much like changes to taxes or tariffs, would require the Swiss government to navigate a complex interplay between parliament, the federal council, and considerations for the national debt ceiling.
Private funding
The South Pole report notes that the Swiss government should “focus on instruments that specifically target the reduction of market barriers that keep the private sector from investing” in climate projects. Mobilizing the private sector should be a major priority going forward, in general.
Overall, one of the main focuses for all developed nations should be in reducing financial flows that are negative for the climate and working to boost those that are positive for the climate and biodiversity.
