Financing City Sustainable Solutions in Energy Efficiency

by Svetlana Masjutina on December 21, 2014

clip_image002Sustainable, thriving cities have strong economic growth, and offer great places to live and work.

Smart housing and transportation choices, investing in solutions like energy and building efficiency, land use patterns that require fewer car trips can significantly improve health, quality of life and economic opportunities in cities. The Better Growth, Better Climate report finds more connected, compact urban development could reduce global infrastructure costs more than $3 trillion over the next 15 years.

Nowadays world leaders are exploring a range of ways to make climate finance transformational and accelerate progress towards a low-carbon future – and cities, which are the key source of creativity and innovation, are part of the conversation.

At COP 20 International climate talks which took place in Lima, Peru 1-12 of December, participating countries both have reached decisions on a few key issues and narrowed down the options for the negotiating text of the Global Climate agreement to be established in the next meeting Paris in 2015.

It is already obvious that limited capital investment remains a obstruction to implementing sustainable solutions. Investing in business-as-usual infrastructure will only increase economic and social costs in our cities. According to World bank publications, traffic congestion, for example, costs 4% of GDP in Cairo, 3,4% in Buenos Aires and 2,6% in Mexico City. In Beijing, the social costs of motorized transport are as high as 15% of GDP.

That is why in Lima world leaders have been exploring a range of sources for financing low-carbon urban development including multilateral investment banks, private investors, and innovative initiatives like the Nationally Appropriate Mitigation Actions or climate-themed bonds.

Sustainable investment through climate finance and make capital more accessible to cities can be triggered through three possible pathways.

1. Help cities access finance to sustainable growth through increased efficiency and coordination.

2. Shift investment from multilateral development banks and the private sector toward low-carbon urban development

3. Set new partnership models across government, civil society, and the private sector to advance sustainable finance.

Four cities are currently developing their plans to accelerate action on energy efficiency. These cities are Milwaukee, United States; Mexico City, Mexico; Toyama, Japan; and Warsaw, Poland.

Milwaukee was the first city from this list to adopt an innovative financial mechanism called ‘property assessed clean energy finance’ (PACE), which has been successfully tested in dozens of U.S. cities. Investment support of accelerated energy efficiency requires collaborative approach with local governments and financial institutions and brings clear benefits in terms of better performing infrastructure, technology improvements, and lower water, energy use, and waste.

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Sustainable cities create economic, environmental benefits

The journey towards thriving, equitable, and sustainable cities will be long and challenging, but the path forward is clear. It will be necessary to unite public and private entities to help smooth the transition and close the infrastructure gap at Lima conference, at next year’s climate meetings in Paris, and well into the future.

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