Finland's 'polluter pays' approach — financing with a twist

At a time when most traditional donors are slashing their foreign aid budgets, how was Finland able to increase its official development assistance spending last year to 0.6 percent of gross national income?

By allocating 100 percent of carbon emissions payments to the government to development cooperation, Pekka Haavisto, Finnish minister for international development, highlighted in a video interview with Devex President and Editor-in-Chief Raj Kumar at the European Development Days in Brussels.

“It has been remarkable [at a time] when we have a very tight budget situation in the country, with almost all sectors cutting, [that] we have been able to increase our development cooperation budget,” he said, adding that emissions trading could contribute even more in the future to ODA.

Haavisto explained: “We are now paying $5 per ton, but one day maybe [it will be] $20. This could be a potentially very good financing instrument.”

Watch the full video above for more insights from the Finnish development minister on what his country is doing on direct budget support, promoting transparency and harnessing innovation in financial instruments in the post-2015 agenda.

Devex was at the European Development Days 2013. Check out our coverage of Europe’s leading global development event of the year.