Swiss foundation for climate protection and carbon offset Klik expects the costs for international carbon credits it will purchase towards Switzerland's climate targets to fall by 2030. But it will need to set aside about 900mn Swiss francs (€939mn) as a "risk buffer" to cover a potential default in planned and contracted carbon mitigation projects.
Klik expects average costs per internationally transferred mitigation outcome (Itmo) of SFr35/t of CO2 for the 2022-24 period, and of SFr27/t CO2 for the 2025-30 period, it said in its annual report for 2023. The credits represent emissions reductions or removals that can be transferred between countries under Article 6.2 of the Paris climate agreement.
Switzerland has pledged to reduce its greenhouse gas (GHG) emissions by 50pc in 2030 compared with 1990 levels, of which about a third may come from foreign offsets. Klik uses the funds provided by a surcharge on road fuels to roll out domestic carbon cutting activities and to buy Itmos from host countries.
Switzerland is a frontrunner in co-operative activities under Article 6.2 and has signed bilateral agreements with 13 countries.
The contribution of foreign offsets to Switzerland's climate targets has so far been minuscule, but will rise in the years to come and is expected to exceed domestic mitigation contributions from 2025. And Switzerland has pledged to cancel 2pc of the Itmos as part of the "overall mitigation of global emissions" concept.
Klik has so far agreed on 21 Itmo-generating projects and signed three actual Itmo purchasing agreements. The foundation also signed a contract with the UN's Development Programme through which Klik will receive up to 4mn Itmos from as yet unspecified programmes.
Switzerland had planned to use 2.1mn Itmos for the 2022-24 period, but only 400,000 Itmos will be generated. The shortfall of 1.7mn t CO2 will be covered through domestic activities, Klik said.
Klik estimates a substantially bigger shortfall for 2025-30, with up to 20.3mn Itmos needed against agreements over just 5.9mn Itmos signed by the end of 2023.
It appears "not impossible" that the 14.4mn Itmo gap will be closed in view of its project pipeline, Klik said. The foundation has a total of 15.03mn Itmos either under contract (6.05mn) or in development (8.98mn).
Additional contracts worth around SFr900mn must be signed to cover the risk of an eventual shortfall in delivered mitigation outcomes, either domestic or international, Klik said. The foundation already warned last year that the road fuel levy would have to rise to SFr0.08/litre this year from SFr0.05/l, as the amendment of Switzerland's carbon law scheduled for 2025 is likely to bring tightened compensation obligations.
