Climate finance receives keen attention in Habitat III funding talks

Last week, a key series of discussions on financing sustainable urban development included multiple sessions on the issue.

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MEXICO CITY — On Friday, on the last day of a major meeting here on paying for future sustainable urban development, news came on an issue that could be a key part of those financing strategies: climate finance.

The meeting here in Mexico City, which took place over three days last week, was being held in the run-up to the Habitat III conference, the U. N.’s once-every-20-years event aimed to setting global urbanization strategy. Yet the news on climate finance was coming out of South Korea, where the board of a new entity called the Green Climate Fund was meeting and announced that the fund would be making available USD 1.5 billion for projects for 2016.

[See: Habitat III must make climate change a top priority]

The Green Climate Fund is meant to channel funding from developed countries to governments in developing countries in order to help them prepare for and mitigate the effects of climate change. As such, it is one of several initiatives that some are increasingly seeing as a potentially important funding stream for facilitating sustainable urban development in poorer countries.

The Green Climate Fund’s announcement didn’t mention cities or local governments. Still, it does open the door for those “subnational” entities to access some new money through their national administrations.

“Financing is critical. There is not enough money, but there are funds that can be used. For some cities, access to financing is not a matter of funding capacity but of knowing how to gain access to the money,” Ronan Dantec, a French legislator and the environment spokesman for United Cities and Local Governments, a global network, said in Mexico City.

[See: Who pays for what? Habitat III ‘finally’ turns to financing New Urban Agenda]

As cities move to the forefront of adaptation efforts around climate change and reducing air pollution, additional funding is becoming increasingly necessary to execute measures on improving energy efficiency, land planning and public transport, among others.

For that reason, the participants in Mexico City emphasized the need to link Habitat III with other international processes, including the global negotiations on climate change, the new Sustainable Development Goals and related discussions known as Financing for Development.

“Habitat III cannot be alienated from the global context. It has to be a part of the process of worldwide negotiation,” said Henry de Cazotte, special envoy of the French Ministry of Foreign Affairs to Habitat III. “It is necessary to transform it into an element that enforces what has been agreed in other places.”

He continued: “Quito must build on what has been negotiated elsewhere from a perspective on climate, Sustainable Development Goals, combating poverty. Otherwise, we will be moving backwards.”

Accessing finance

The Mexico City discussions made up one of several themed meetings taking place ahead of Habitat III, which will happen in Quito. The discussions here centred on how to pay for the new 20-year global urbanization strategy that U. N. member states are supposed to agree on in Quito, known as the New Urban Agenda.

As such, the discussions revolved around issues such as sustainable urban infrastructure, building low-carbon cities and green financing for cities, among many other topics. Multiple events focused on green finance, with participants underscoring the challenge for cities in accessing upcoming climate finance in the face of increasing infrastructure, waste management and utility needs.

“The cities are taking actions against climate change, and that is critical. This is why financing those measures is critical. We will not be able to build the cities of the future without adaptation and mitigation. But financing is a big challenge,” said James Alexander, head of the Finance and Economic Development Initiative at C40, a network of the world’s megacities committed to addressing climate change.

[See: Cities can lead on climate action ahead of 2020 pledges]

In December, C40 launched the C40 Cities Finance Facility, a major project with Germany and the Inter-American Development Bank (IDB). The initiative aims to provide the skills, technical assistance and networking required to fund opportunities needed to unlock up to USD 1 billion in sustainable infrastructure in cities across low- and middle-income countries by 2020. This year, the project will develop an 18-month pilot project with three cities.

Another initiative, the Transformative Actions Programme, has also selected 120 climate-related projects in 87 cities and regions from 41 countries. Funding requirements for the project — developed by 29 organizations and spearheaded by ICLEI, Local Governments for Sustainability — amount to almost USD 9 billion, of which USD 4 billion come from developing countries.

Increasingly, some countries are also experimenting with credit facilities. In January 2014, Mexico announced its first programme through the NAMA Financing Facility, an assistance fund from the German and British governments meant to speed up the execution of strategies that ensure a drop in greenhouse gases in developing countries. This nearly USD16 million initiative consists of building sustainable housing during 2013-20.

Trillions and trillions

Over the next 15 years, a staggering USD 93 trillion in infrastructure designed to be low-emission and climate-resilient will need to be built globally. That figure comes from a recently released report the Cities Climate Finance Leadership Alliance, “The State of City Climate Finance 2015”.

The report suggests that upwards of USD 4.3 trillion per year will need to be spent on urban infrastructure just to keep up with projected growth. And anywhere from 9 to 27 percent more will be required to make these projects low-emission and climate resilient.

Although the IDB, World Bank and Green Climate Fund offer opportunities for urban projects, much of the priority is still placed on funds being directed to climate issues in larger cities. Further, none of the first eight projects approved by the GCF in November for around USD 168 million was local.

[See: COP 21 must encourage climate funding to reach the local level]

Nonetheless, supporters continue to see the Green Climate Fund as a key opportunity to facilitate the broader discussion around financing of sustainable urban development. Indeed, the fund itself understands this opportunity: Its board will be meeting in Quito in October in support of Habitat III.

“Quito can make a difference by deciding on urban actions and applying them. It must decide what needs financing for green infrastructure and amend whatever needs to be amended in order to actualize it,” said de Cazotte, the French special envoy.

Indeed, cities continue to face serious obstacles in moving toward greater sustainability — access to financing, tax revenue generation, urban planning and construction of sustainable housing being just a few such examples.

“Tax revenues from cities offer great opportunities, but it involves building capacities and technical assistance,” said Ellis Juan, general coordinator of the IDB’s Emerging and Sustainable Cities Initiative. Juan believes challenges can be summed up in fiscal sustainability, conditions to attract investments and guarantees to access financing.

“The issue is how to close the infrastructure gap,” said Yunus Arikan, ICLEI’s head of global policy and advocacy. “We need more money, and it is there but in the wrong hands. We have to increase investments in climate change matters. It is time to concentrate on climate change mechanisms.”

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Emilio Godoy

Emilio Godoy is a Mexico-based journalist who covers the environment, human rights and sustainable development. He has been a journalist since 1996 and has written for various media outlets in Mexico, Central America, Spain and Belgium. In 2012, he won the Journalistic Prize on Green Economy and Sustainable Development.