Expert panel examines options of international climate finance

“How can pledges by industrialized countries to mobilize $ 100 billion for international climate finance be fulfilled and what is the contribution of carbon markets?” This was the key question of a panel discussion hosted by the Zurich Carbon Market Association (Zurich CMA) at its Annual General Meeting on 13 March 2019. Experts from business, science, administration and development cooperation discussed challenges and options for public and private actors both on the international and national levels. Around 50 participants followed the discussion hosted by ETH Zurich.

Industrialized countries agreed on reaching a goal of jointly mobilizing $ 100 billion annually by 2020 to finance climate mitigation and adaptation measures in developing countries. Climate finance should be mobilized from a wide variety of public and private sources, instruments and channels, and through a variety of actions. Although, Switzerland is a pioneer in international climate finance, there is still a gap between the country’s “fair share” which is estimated by the government between $ 450 and $ 600 million, and by civil society at $ 1 billion minimum – and the actual contribution to climate finance of $ 450 million.

Harald Diaz-Bone, Head of Climate Policy and Finance at First Climate and moderator of the Zurich CMA event, welcomed distinguished experts to discuss the question of how to ensure adequate and sustainable financing.


Mobilizing climate finance and results-based finance

Dirk Röttgers, Policy Analyst at OECD in Paris, introduced the first part of the discussion, delivering an analysis of the current state of international climate financing, calling for a more reliable accounting framework to boost private investment. He pointed out that a fundamental shift in infrastructure finance will be needed alongside the development of tools to minimize risk in order to further incentivize public sector investments in developing countries.
Axel Michaelowa of the consulting firm Perspectives supported this position by emphasizing the importance of methodological convergence to calculate mobilization of private sector finance by international public finance.

In addition, Martin Stadelmann of South Pole, hinted at stark differences in leverage factors that some actors use to calculate their contribution to climate finance – sometimes exceeding their actual contribution up to a factor of 100.

Switzerland leading the way in international climate financing

Stefan Denzler from the Swiss State Secretariat for Economic Affairs (SECO) started the second part of the event with his keynote speech on national aspects of climate finance in Switzerland. In his presentation, he focused on the approach of Switzerland towards mobilizing climate finance and the key instruments that it uses.
Urs Brodmann, CEO of First Climate Switzerland, Tobias Schmidt, Professor of Energy Policy at ETH Zurich, and Jürg Staudenmann of the development policy think tank Alliance Sud participated in the ensuing discussion.

Urs Brodmann referred to the growing importance of carbon markets in international climate finance and suggested a closer cooperation between SECO and the KliK Foundation. KliK is the responsible body for offsetting emissions resulting from the use of fossil fuels in transport. In this sector, offsetting is compulsory in Switzerland. There is potential synergy between results-based finance of KliK foundation and financial support activities of SECO, said Brodmann.
However, Jürg Staudenmann, took a different position on the matter. He described international climate finance as a primarily public sector obligation, due to the lack of a business case for most adaptation needs. In the sense of climate justice assuming responsibility means mobilizing new public finance; in addition to development aid. In order to mobilize additional funding, Jürg Staudenmann suggested the possibility of introducing a tax on air travel in Switzerland on the basis of the polluter-pays principle.

Tobias Schmidt focused on the question on how to enable mainstreaming of low-carbon investments to mobilize private sector finance. In his opinion, implementing a green investment bank following the British Green Investment Bank or the German KfW model could be an important step for Switzerland.

Overall, the Zurich CMA event illustrated the diversity of views and perspectives concerning terminology and concepts, when it comes to mobilizing climate finance. However, all panellists agreed that the financial scope of the task is immense. Concerning the monetary requirements, millions of Dollars will be needed to finance cooperative mitigation approaches (Article 6 of the Paris Agreement), billions for climate financing (Article 9) and trillions will need to be shifted from brown to green to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development (Article 2.1c). “It is evident that climate finance is developing into a stable third pillar of international climate policy, next to mitigation of and adaptation to climate change,” Harald Diaz-Bone concluded.