## Building Back Better: Finland and Dominica pursue innovative ways of coping with climate change

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### Finland’s wood innovations
- Context and strategy
  - Finland aims to become carbon-neutral by 2035.
  - Finland was the first country to introduce a carbon tax, in 1990.
  - Finland has cut greenhouse gas emissions by about a fifth since introducing carbon pricing.
- Natural endowments and policy
  - 65 percent of Finland’s land is covered by forests.
  - Finland’s Forest Act mandates that four trees be planted for every tree harvested.
- Technological and market developments
  - Finnish companies are developing wood-based alternatives across multiple sectors: clothing, multistory buildings, packaging, sustainable fuels, and battery production.
  - Many wood-based products are made from production by-products and residues or from materials recovered after product use.
  - Wood-based products are described as easy to recycle, biodegradable, and hypoallergenic; CO2 can remain stored in cut wood for decades and even centuries.
  - Molecular wood-based biochemicals are identified as playing a key role in replacing fossil-based raw material components.
- Circular bioeconomy principles (as described)
  - Products are bio-based, shared, reused, remanufactured, and recycled; they biodegrade or are used for renewable energy, with trees regrowing and absorbing CO2.
- Policy gaps and IMF engagement
  - Although carbon emissions in Finland are already subject to significant pricing, additional measures are needed to achieve the 2035 emissions-neutrality goal.
  - The IMF is working with Finland on additional energy pricing and sectoral measures to help bridge the gap.
- Caveats
  - Biomass alone can’t replace all materials produced from fossil and mineral sources.
  - The wood-based approach may not work for all countries given climate differences and trade-offs between agriculture and tree growth.

### Dominica develops resilience
- Vulnerability and recent shocks
  - Dominica’s population is about 72,000.
  - The country has nine active volcanoes and rugged topography with dense mountain rain forests; most people live along the coast.
  - In 2017, Category 5 Hurricane Maria caused catastrophic destruction and $1.2 billion in damage in just a few hours.
  - The airport, inoperable after 2015 Tropical Storm Erika, was operational a few days after Hurricane Maria due to prior resilience measures.
- Fiscal and economic impacts
  - Hurricane Maria’s damages totaled 226 percent of GDP.
  - Rebuilding to climate-resilient standards costs 25 percent more than traditional methods.
  - Benefits from resilient rebuilding materialize over time, complicating financing choices.
- Policy response and strategy
  - The government adopted a mantra of “building back better and becoming a more resilient nation in all aspects.”
  - The government launched a path to become the world’s first nation resilient to hurricanes, earthquakes, and other natural disasters.
  - Investments and priority areas:
    - Upgrading and expanding the road network, including making bridges higher to allow for water and debris overflow.
    - Building resilience into the housing sector.
    - Upgrading hospitals and health centers.
    - Supporting resilient agriculture for food security, education, reforestation, and community preparedness training.
- Institutional and international aspects
  - The IMF began working with Dominica to understand probabilities and intensity of natural disasters and the costs and benefits of building to new standards.
  - Domestic leaders stress that international support is needed: “If we want to make a meaningful contribution to helping small states adapt to climate change, then the international community needs to step up.”
- Evidentiary outcomes
  - Rebuilt communities and infrastructure built to resilience standards demonstrated the ability to withstand severe storms (example: airport operations resumed quickly; communities rebuilt to new standards were still intact).

### Key statistics and dates (verbatim)
- 65 percent (forest cover)
- four trees planted for every tree harvested
- carbon-neutral by 2035
- 1990 (first carbon tax)
- about a fifth (reduction in greenhouse gas emissions)
- molecular wood-based biochemicals
- 72,000 (population of Dominica)
- nine active volcanoes
- 2017 (Category 5 Hurricane Maria)
- $1.2 billion (damage from Hurricane Maria)
- 2015 (Tropical Storm Erika)
- 25 percent more (cost to rebuild to resilient standards)
- 226 percent of GDP (damages from Hurricane Maria)

### Policy implications and recommendations (as presented)
- For mitigation (Finland model):
  - Leverage abundant renewable biomass where appropriate to replace fossil-based chemicals and materials.
  - Implement and strengthen carbon pricing and sectoral measures to meet ambitious neutrality targets.
  - Promote circular bioeconomy practices: reuse, remanufacture, recycle, and biodegrade wood-based products.
- For adaptation (Dominica model):
  - Prioritize “build back better” standards in public infrastructure and housing to reduce vulnerability to extreme events.
  - Invest in resilient transport, health, housing, agriculture, reforestation, and community preparedness.
  - Assess long-run benefits versus short-term financing constraints; mobilize international support for small states disproportionately affected by climate change.
- Cross-cutting:
  - Use country-specific comparative advantages (forest resources, geographic exposure) to tailor mitigation and adaptation strategies.
  - Combine technical analysis of disaster probabilities and cost–benefit frameworks with financing strategies to guide resilient investments.

*Finance & Development, September 2021; Steven Dorst*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/september/finland-dominica-innovation-climate-change-dorst.pdf_