SMCW was coined by the Organisation for Economic Co-operation and Development (OECD) in 2008. It describes an approach to managing chemicals and waste that supports the achievement of Sustainable Development Goals 3 and 15 while protecting human health and the environment.

This approach ensures full life cycle control of chemicals and waste, from effective and timely registration to enforcing legislation, communicating risks to those exposed and implementing risk reduction and prevention measures. Adequate and stable financing is a necessary condition for SMCW.

Sustainable domestic financing refers to a national entity obtaining, raising and managing funding in a way that can be sustained over time. The focus here is not on financing the actual chemicals and waste management activities, e.g. the cost of running a biohazard incinerator, but rather on the institutional structures required to manage SMCW, such as personnel and training costs for a government agency responsible for chemicals management.

This involves shifting the financial burden of management activities from the government to industry – that is, producers and importers of chemicals. Common approaches include registration fees for placing chemicals on the market or taxes on chemicals. However, cost-recovery rates for chemicals and waste rarely exceed 50%, even in high-income countries, meaning some level of national budget funding is expected to cover the costs. Nonetheless, as more cost-recovery mechanisms are implemented, the portion of government funding for management activities is expected to decrease.

The guidance document outlines different criteria for assessing whether a financing mechanism is suitable for a specific country:

• the degree of stable financing provided
• the degree of resources and government capacity required
• the level of industry cooperation and information needed for a mechanism to work

This approach helps countries select financing mechanisms that fit their current situation and complements their existing systems. For example, a country just starting out with management activities related to chemicals and waste may benefit from financing mechanisms closely linked to basic management activities, such as registration fees for chemicals. Meanwhile, countries with established practices in place may find Extended Producer Responsibility Schemes or “cap-and-trade” systems for chemicals use more effective, as these shift more of the financial burden onto producers.

One of the biggest challenges for domestic financing of SMCW is the lack of awareness and political prioritization in-country, making it difficult to mobilize financial resources and justify funding allocation.

Then, specific financing mechanisms present their own challenges. These include difficulties in earmarking or ring-fencing taxes and fees, as well as securing industry acceptance and participation in Extended Producer Responsibility Schemes. Broader challenges, such as corruption risks and weak enforcement capacity, can also undermine financing schemes.

A new aspect of this work was considering if and how existing “green” financing mechanisms from other sectors could be applied to finance chemicals and waste management. We leveraged insights from SEI’s Finance for Sustainable Development Program, applying them to a new context while integrating insights on institutional and policy development.

For example, we discuss how tradable permits – which cap the total amount of a pollution or substance allowed for use through quotas allocated to different emitters, similar to those used in EU carbon emissions trading – could be applied to chemicals to generate revenues for management activities. We also explore how payments for ecosystems services, typically used to fund the protection of relevant ecosystems such as forests, could be used by producers and users of chemicals in LMICs. This aligns with the broader aim of “mainstreaming” SMCW with other sustainable development activities, such as biodiversity conservation.