Cities and Climate Change – the Funding Gap

The infrastructure planning and financial decisions made today will determine the world’s climate and development outcomes for the next century. The Cities Climate Finance Leadership Alliance estimates a finance gap of approximately $4-5 trillion per year for sustainable and resilient infrastructure in cities. These decisions can lead to the building of low-emission, climate-resilient infrastructure that increases economic opportunity. If we continue on our current course, we will be locking the world into a carbon-intensive pathway which will lead to disastrous climate change.

Unless effective action is taken soon, the world will heat up to a devastating degree over the course of this century. Storms, floods and other extreme weather will hurt us all, and some coastal or otherwise exposed cities in particular. Many governments use the gridlock in global climate talks as an excuse for inaction. Cities and municipalities will have to drive change instead. In much of Europe, local governments account for the vast majority of public spending on environmental policies.

Nowhere are infrastructure decisions more critical than in cities, which house half the world’s population, consume 70 percent of the world’s energy, and release the most greenhouse-gas emissions. How the world feeds, houses, transports, and powers its cities, will shape our collective climate future. By 2050, up to 70% of the world’s total population, 3 billion more people, will live in cities.The ability to finance this transition is of the utmost importance and poses the greatest challenge to cities. Major cities all over the world have started to issue “green bonds” as a way to solving the funding gap. It is expected that New York will spend over $27 billion on green infrastructure in the coming years.

Private institutional investors, such as pension funds and insurance companies, are another potential source of funding. They should be able to find sustainable urban infrastructure as an attractive addition to their portfolios. But although some private entities are starting to invest in municipal projects for renewable energy or public transport, their number is tiny compared with the need. The area of energy savings should be at the heart of the municipal climate change agenda.

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