The State of Cities Climate Finance

The report establishes a conceptual framework for urban climate finance, emphasizing that mobilization depends on the alignment of country-specific, city-specific, and climate-specific enabling conditions. It details the five roles city governments play—consumer, provider, fundraiser, regulator, and champion—and argues that a lack of administrative capacity, fragmented authority, and limited revenue sources in developing countries create significant barriers. The document recommends integrating climate considerations into all levels of city planning (strategic, spatial, capital investment, and budgetary) and suggests using carbon pricing, land-value capture, and conditional intergovernmental transfers to close the urban financing gap.

• Cities are central to climate action as they account for 70% of global CO2 emissions from energy use, consume 75% of all natural resources, and produce 50% of all waste.
• Urban areas face extreme vulnerability to climate change, with 90% of coastal cities at risk of flooding from sea-level rise and storms, potentially leading to annual losses of USD 52 billion by 2050.
• The mobilization of urban climate finance depends on three layers of enabling conditions: country-specific (national governance and fiscal systems), city-specific (planning and financing capacity), and climate-specific (climate plans and financing instruments).
• City governments can influence climate outcomes through five distinct roles: as a consumer (green procurement), provider (delivering resilient services), fundraiser (raising revenue/debt), regulator (land use and standards), and champion of systems thinking (convening stakeholders).
• In developing countries, city governments often face severe constraints, including limited authority to plan urban spaces, capacity gaps in preparing bankable project pipelines, and restricted revenue mobilization.
• The COVID-19 pandemic exacerbated the urban financing gap, as cities faced dropping revenues and increased costs for health and social crises, forcing many to suspend capital expenditures for infrastructure.
• Compact city principles—characterized by economic density, morphological density, and mixed land use—can reduce infrastructure costs by an average of 15% every time a city doubles in population.
• Intergovernmental fiscal transfers are often the primary source of local government revenue, particularly in middle- and lower-income countries, providing a key lever for national governments to incentivize climate action through conditional or performance-based grants.
• Carbon pricing instruments, including Emissions Trading Schemes (ETS), carbon taxes, and internal carbon pricing, are emerging as tools for cities to incentivize low-carbon investments and generate revenue.
• Land-value capture instruments, such as development fees, air rights sales, and special assessments, allow cities to generate revenue from the increase in property value resulting from public infrastructure investments.
• Access to borrowing and private finance is severely limited in developing countries; 56% of developing countries do not allow cities to borrow, and only 21% of the 500 largest cities in these countries have investment-grade ratings.
• Cities progress through four stages of mainstreaming climate considerations: Initial Awareness, Reactive, Incorporated into urban planning, and Mandated and mainstreamed.

APA

Climate Policy Initiative (2021). The State of Cities Climate Finance. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/06/SCCF_PART2-FINAL-1.pdf

Chicago

Climate Policy Initiative. The State of Cities Climate Finance. 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/06/SCCF_PART2-FINAL-1.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=The State of Cities Climate Finance |date=June 2021 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2021/06/SCCF_PART2-FINAL-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2021state, author = {{Climate Policy Initiative}}, title = {{The State of Cities Climate Finance}}, institution = {Climate Policy Initiative}, year = {2021}, month = jun, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/06/SCCF_PART2-FINAL-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }