Svenja Schulze: 'Above all, private capital is needed'

Ms Schulze, German Finance Minister Lindner has proposed cutting Germany's international climate financing. Will Germany's contribution to climate aid be lowered in the next budget?

Last year, we achieved a significant increase in international climate financing on a roughly constant budget. If we stick to our current plans, we will be able to maintain this level. If not, it will be more difficult.

How much resistance is there to the idea of mobilizing German money for development aid? Many surveys say: If we have to save money, let's cut costs there.

The answer would probably be different if one were to ask: As an internationally integrated economy, should we really seal ourselves off? Should we really sever our partnerships with countries that we need to solve our shared problems? Development policy is expanding these partnerships that are vital for Germany. This is not a nice-to-have, but it is in Germany's interest. That is why I am in favor of ensuring that we remain in a position to act even with a smaller national budget.

'Effective climate action can never be achieved with public money alone'

Here at the conference, the Emirates simply announced a climate investment fund of 30 billion dollars. And your government just revoked 60 billion for climate action. How does that make you feel as a minister?

I don't see any connection there. We have a court ruling that we will comply with. But we are now at the COP to advance climate action here. We got off to a great start with the new fund for dealing with climate damage and the first donors. This has triggered what we hoped for, and the first pledges are now coming in, much faster and more substantially than expected. And we need more money if humanity wants to win the fight against climate change.

There is always talk of shifting trillions, not billions, from the fossil fuel economy to renewables. Where is this money supposed to come from?

Effective climate action can never be achieved with public money alone. Above all, private capital is needed. That's why I believe it's right for private investors to invest in climate action and talk about it at the COP. But we have to be careful. Not everything that is labeled climate action is also international climate financing in the narrower sense. At the COP, this primarily means supporting developing countries in their efforts against climate change.

'Cushioning risk with public money'

How do you intend to increase the capital?

Germany has already introduced one idea for public capital: Our hybrid capital to the World Bank, where we provide 300 million euros so that the World Bank can organize up to 2.4 billion euros in low-cost capital for developing countries. These are effective levers because they allow us to cushion part of the risk with public money in order to mobilize private capital. But we need more of that.

Wouldn't it make sense to generate additional income for countries to help tackle climate change, for example, through levies and taxes? There are ideas for levies on air traffic, fossil fuels and shipping.

We have been discussing this for a very long time and I'm very much in favor of it. But unfortunately, the global community is moving far too slowly because we need agreement between everyone. I'm not giving up, these are good ideas. But we know how difficult it was for Olaf Scholz to negotiate a global minimum tax back then. And that would be a new tax, something like that is difficult to achieve.

Climate financing: 'We are finally emerging from the old trenches'

If you want to mobilize private capital for climate action, will it not primarily flow into emission reduction projects and, for example, energy projects that are business models? For instance, won't adaptation measures fall by the wayside?

Exactly. That is why limited public funds must also be channeled more into adaptation. We are trying to divide our German climate financing roughly equally between mitigation and adaptation, which we manage well by international comparison. When it comes to mitigation, achieving a return on investment is indeed easier. If renewable energies are fed into a grid in a country with energy poverty, that could be a business model. We can use public money to help make these deals happen.

But, enabling farmers to build a dam is not a business model. Isn't a big part of the financial debate bypassing the poorest of the poor? Shouldn't this be public money?

We need both. With loss and damage, we are mainly talking about public money, I don't see a business model there, either. But with the new loss and damage fund, we have managed to get the host country, the United Arab Emirates, to contribute. This is a breakthrough, as the UAE is considered a developing country under UN rules. Now, we are finally emerging from these old trenches. So far, it was often like this: The North wanted to talk about mitigation, the South about climate damage. Now, this front is finally breaking down.

'Channeling all financial flows in the right direction'

So far, there is a one-off amount of around 600 million dollars in the loss and damage pot. However, up to 300 billion annually is needed. Is this the infamous drop in the ocean?

We need a lot more capital. That is why getting private money on board is all the more important wherever there are business models. This can relieve the pressure on tight public budgets. Obviously, the 0.7 percent of gross domestic product developed countries have pledged as funding for development will not solve the climate and biodiversity crisis or eradicate poverty and hunger. We must also channel the rest, all financial flows, into the proper, green channels. This must also be discussed at a COP in this way.

Do you see any progress? We only see much enthusiasm for private capital here.

It is still too early to tell. But we must harness the momentum of this conference for more public aid, more private investment and the right framework conditions.