1. Federal Department of Finance FDF
Federal Finance Administration FFA
Long-term Fiscal Sustainability
Reporting in Switzerland
Dr. Martin Baur
Head Economic Analysis and Policy Advice
Swiss Federal Finance Administration
Collaborative on Green Budgeting – 2nd Green
Budgeting Experts Meeting
OECD, Paris, 29 April 2019
Session 4 – Long-term fiscal sustainability

2. 2
Federal Department of Finance FDF
Federal Finance Administration FFA
Fiscal Sustainability Reporting in Switzerland
• Demography:
• Report on the Long-Term Sustainability of Public Finances
in Switzerland
Every 4 years since 2008.
Latest version: 2016. Time horizon: 2045
Takes account of future demographic developments.
Sensitivity analysis for different migration and productivity
scenarios.
• Health:
• Healthcare Expenditure Projections
Every 4 years since 2008.
Latest version: 2016. Time horizon: 2045
• Migration:
• Working paper “Impact of Immigration on Public Finances
in Switzerland”
Paris Collaborative on Green Budgeting / M. Baur / 29 April 2019

3. 3
Federal Department of Finance FDF
Federal Finance Administration FFA
Fiscal Sustainability and Climate Change:
What do we know?
Economic impact of climate change
• EPFL (2017), Assessing the impacts of climate change for
Switzerland.
• Federal Council (2017), Message to Parliament regarding the
adaptation of the CO2 law.
• OECD (2015), The Economic Consequences of Climate Change.
• N. Stern (2007), The Economics of Climate Change: The Stern
Review
Budgetary impact of climate change
• Actual and planned expenses of climate policy as published in
financial planning instruments (short-term budgetary impact)
• Qualitative presentation of possible impacts in Long-Term
Sustainability Report 2016
Paris Collaborative on Green Budgeting / M. Baur / 29 April 2019

4. 4
Federal Department of Finance FDF
Federal Finance Administration FFA
Fiscal Sustainability and Climate Change:
What do we know?
Budgetary impact of climate change (rise in temperature & increase of
extreme weather events) via the following channels:
• Prevention of climate change
• public r&d, emission reduction policies, international emission trading
• Damage remediation and adaptation
• public expenditures for protection and repairs
• International commitment
• climate funds, assistance for countries, refugees
• Impact on revenues
• mineral oil and carbon taxes, reduced income and consumption
taxes due to reduced GDP growth, might be (partly) offset by
innovation and positive impact on some activities (e.g. international
tourism)
•  negative impact on public finances might be expected (increasing
expenditures, declining revenues)
Paris Collaborative on Green Budgeting / M. Baur / 29 April 2019

5. 5
Federal Department of Finance FDF
Federal Finance Administration FFA
Fiscal Sustainability and Climate Change:
Challenges
• How to get a quantitative evaluation of the long-term impact of
climate change on public finances in Switzerland:
•  Long-term Sustainability Report of Public Finances including
demography and climate change
• Challenges:
• Impact is difficult to quantify
1) The economic impact is not fully quantified yet
2) Difficult to predict frequency of extreme weather events
3) Difficult to predict impact throughout the rest of the
world (e.g. spillovers for CHE, migration, trade etc.)
• Impact for Switzerland is probably relatively small
Paris Collaborative on Green Budgeting / M. Baur / 29 April 2019

6. 6
Federal Department of Finance FDF
Federal Finance Administration FFA
Fiscal Sustainability and Climate Change:
Challenges
How to proceed from here:
• Review of literature on studies about the budgetary impact of
climate change
• AUT: Bachner Gabriel and Birgit Bednar-Friedl (2018), The
Effects of Climate Change Impacts on Public Budgets and
Implications of Fiscal Counterbalancing Instruments.
• DEU: Infras and Ecologic (2009), Klimawandel : Welche
Belastungen entstehen für die Tragfähigkeit der öffentlichen
Finanzen ?. (Kurzfassung)
• USA: OMB (2016), Climate change: the fiscal risks facing
the federal government.
Paris Collaborative on Green Budgeting / M. Baur / 29 April 2019

7. 7
Federal Department of Finance FDF
Federal Finance Administration FFA
Fiscal Sustainability and Climate Change:
Challenges
• Qualitative and comprehensive description of channels by
which climate change can have a budgetary impact
• List of data needed to compute the budgetary impact
• Survey on research reports, latest published results, data and
work in progress in OECD countries
 Questionnaire of OECD Secretariat for survey within
Collaborative on Green Budgeting
Paris Collaborative on Green Budgeting / M. Baur / 29 April 2019

8. 8
Federal Department of Finance FDF
Federal Finance Administration FFA
Eroding Energy Tax Bases
• CO2 tax
In Switzerland: mostly redistributed, partly earmarked
Will eventually be entirely redistributed
=> Declining revenues are not an issue
• Mineral oil tax
In Switzerland: earmarked for road financing
=> Declining revenues in the long run will have to be offset
(road pricing, other taxes, etc.)
Environmental taxes should (at least partially) be
redistributed to households and firms
• Declining revenues are not an issue
• Redistribution of revenues counteract the regressivity of the
environmental tax  increasing social acceptance of
environmental taxes
•
Paris Collaborative on Green Budgeting / M. Baur / 29 April 2019