Finding the Finance

This guide provides a comprehensive overview of financing mechanisms available to local governments to implement low-carbon and climate-resilient urban development. It categorizes funding into internal revenue sources, external revenue sources, alternative models, and international climate finance, emphasizing the need for a blend of instruments to overcome budget constraints and fiduciary barriers.

• Local governments can utilize internal revenue sources to foster municipal autonomy and accountability, including property taxes, user fees, and development charges. Property taxes are common worldwide, though they may not increase automatically over time as property values respond slowly to economic changes. User fees can regulate climate-friendly behaviors, such as congestion charges in London that reduced traffic by 10% and generated £2.6 billion in gross revenue over ten years.
• Tax Increment Financing (TIF) is identified as a tool for redeveloping blighted or damaged areas by freezing current property tax revenues for 15 to 35 years and using the subsequent 'incremental' increases in tax revenue to fund further redevelopment. In Atlanta, USA, TIF provided USD 167 million of the USD 250 million required for a brownfield redevelopment project.
• Intracting and Energy Performance Contracting (EPC) allow cities to fund energy retrofits in public buildings using the resulting energy bill savings. Intracting is an internal process where a municipal unit organizes savings to pay back start-up financing. EPC involves a third-party contractor who invests in energy-saving measures in exchange for a share of the savings over 5 to 15 years.
• Green bonds enable local governments to raise up-front capital for environmental projects, such as sustainable infrastructure or renewable energy. Johannesburg, South Africa, issued the first green city bond in June 2014, worth USD 143 million with a 10-year maturity, to finance low-carbon projects in power, water, parks, and transport.
• Alternative models for climate-compatible development include community-owned energy systems, where residents co-own plants on public land, and tax abatement schemes that incentivize property owners to install storm water management measures like green roofs. Mainstreaming climate thinking into traditional urban planning is also highlighted as a cost-effective long-term strategy to prevent future adjustment costs.
• International climate funds, such as the Green Climate Fund (GCF), Adaptation Fund (AF), and Global Environment Facility (GEF), are vital but often difficult for cities to access directly due to requirements for national government endorsement or high fiduciary standards. The GCF allows sub-national entities to become accredited implementing entities if nominated by a National Designated Authority.
• Multilateral Development Banks (MDBs) provide long-term and concessional loans for urban development. The World Bank Group offers the Subnational Finance Programme for direct access to infrastructure investments, while the African Development Bank (AfDB) focuses on basic infrastructure, municipal governance, and private sector development in Africa.
• Carbon market instruments, including the Clean Development Mechanism (CDM) and urban cap-and-trade systems, can provide revenue for mitigation projects. In Tokyo, a cap-and-trade program reduced emissions from large offices and factories by 22% over two years, exceeding the required cap of 6-8%.

APA

Junghans, L., Dorsch, L., Brandschwede, A., & Sakofski, R. (2015). Finding the Finance. Climate and Development Knowledge Network. http://cdkn.org/wp-content/uploads/2015/06/FINAL_Finding-the-Finance.pdf

Chicago

Junghans, Lisa, Lukas Dorsch, Arne Brandschwede, and Robert Sakofski. Finding the Finance. Climate and Development Knowledge Network, 2015. http://cdkn.org/wp-content/uploads/2015/06/FINAL_Finding-the-Finance.pdf.

Wikipedia

{{cite report |last1=Junghans |first1=Lisa |last2=Dorsch |first2=Lukas |last3=Brandschwede |first3=Arne |last4=Sakofski |first4=Robert |title=Finding the Finance |publisher=Climate and Development Knowledge Network |date=December 2015 |url=http://cdkn.org/wp-content/uploads/2015/06/FINAL_Finding-the-Finance.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{junghans2015finding, author = {Junghans, Lisa and Dorsch, Lukas and Brandschwede, Arne and Sakofski, Robert}, title = {{Finding the Finance}}, institution = {Climate and Development Knowledge Network}, year = {2015}, month = dec, url = {http://cdkn.org/wp-content/uploads/2015/06/FINAL_Finding-the-Finance.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }