Climate finance for cities

The sixth biennial Mayors Summit, C40 flagship event on climate change concluded in New Mexico earlier this month. The event attracted mayors and leading thinkers from around the world to advance a shared agenda, through collaboration and knowledge-sharing, about the global potential of climate actions in various cities.

The world’s cities are at the forefront of climate change, both in the fight against climate change and experiencing its impacts. Cities emit more than 70 percent of global emissions and consume around the same proportion of the world’s primary energy. At the same time, they generate 80 percent of the global Gross Domestic Product (GDP). In the face of rising global temperatures and the increased incidence of climate-induced disasters, urban structures and services are particularly vulnerable to the impacts of climate change, such as heat waves, storm surges and rising sea levels.

According to recent estimates, the world’s big cities need a total investment of $375 billion to curb climate change. Paris Mayor Anne Hidalgo, the new president of the C40 network of big cities, said at the summit: “It is a lot, but there is no other option. Together we will seek that money. If that amount is made available, humanity will have a chance of surviving”.

Several cities around the globe, particularly in low-income countries, face a number of challenges: high population growth, limited access to water and sanitation as well as poor housing. These problems are likely to worsen with climate change. Urgent steps are required to build climate resilience in the cities. These include, but are not restricted to, building disaster-resilient infrastructures, improving drainage and storm water collection structures, constructing flood protection embankments, developing green zones and relocating vulnerable groups living in hazardous areas of the city.

To boost mitigation and reduce the greenhouse gas emissions, city governments can promote a number of climate-friendly measures in the energy, transport, waste and land use sectors.  These include reducing the energy consumption in buildings. This can be achieved by installing solar water heaters, adding adequate insulation, double glazing windows, improving architectural design as well as encouraging energy efficiency measures. In addition, low-carbon measures in the transport sector, such as incentivising the use of public and non-motorised transport and reducing private vehicle use can substantially reduce emissions.

Considerable financial investment is required to meet these adaptation and mitigation needs of the cities. However, it is clear that without this form of heightened action at the city level it will be difficult to achieve the ambitions of the Paris Agreement. This accord pledged to keep the average global temperature increase to less than two degrees Celsius above pre-industrial levels and ensure a paradigm shift towards low-carbon and climate-resilient development. 

To finance this paradigm shift, the cities can access funds from a variety of sources, including international, domestic and local sources. Lisa Junghans, a policy adviser on climate change at Germanwatch, believes “the sheer scale of investment needed to transform cities into climate compatible urban spaces makes all three channels relevant”. He adds: “While locally-raised funding is important to strengthen ownership and safeguard the sustainability of interventions as well as the stability of revenue, it will take time to establish governance structures that ensure a steady flow of local revenue dedicated to climate change work.”

National sources are also important and it is the state’s responsibility to allocate resources to implement climate change adaptation and mitigation activities in selected cities. However, in view of resource constraints, particularly in developing countries, these allocations are inadequate to meet financing needs. International funds are required to close the financing gap and fuel climate-compatible development in the cities.

Accessing international climate finance is not without challenges, and, given the sheer scope of financing required, will not suffice in meeting all requirements. Nevertheless, international funds remain crucial not only to meet the stated objectives of a proposed project, but also to act as a catalyst for the deployment of national or sub-national resources.

A project, funded by the Climate Development Knowledge Network (CDKN) and implemented by LEAD Pakistan, aims to assess the climate finance needs and gaps in three cities across three countries – India, Indonesia and the Philippines. Based on research and extensive stakeholder consultations, the assessment has outlined the possible sources of domestic and international sources for cities. This includes the Green Climate Fund (GCF) – the primary fund for channelling a significant part of the $100 billion committed to combat climate change in developing countries.

The project’s recommendations to access funding from the GCF include the creation and innovative access modalities, such as the cities serving as implementing entities or a national city facility that receives GCF funds and coordinates urban climate change projects across the country.

One of the barriers to enhancing the flow of climate finance for the cities is the lack of technical and institutional capacity in city governments. While local authorities understand the problems and the potentially transformative solutions required, turning them into bankable project concepts or proposals remains a challenge.

City institutions may also find it difficult to meet the requirements set by funding institutions on fiduciary standards and social and environmental safeguards. However, concerted efforts for capability-building and training can help the cities overcome these barriers to receiving international assistance. This form of international assistance, in the form of financial and technical support, can be used to fund, build resilience to and fuel low-carbon economic development in the cities of developing countries.

The writer works as team leader,Climate Finance Readiness in the Climate Action Programme of Lead Pakistan. Email: fovais@lead.org.pk