Expert Q&A: Climate Change Resilience and Financing Solutions for Local Authorities

In 2009, the Copenhagen climate summit gathered industrialised nations to commit to giving more than 100 million dollars to address concerns of climate change. Eight years on and climate finance remains one important tool in the efforts to mitigate the effects of climate change. From 17 to 22 July, The Hague Academy, in partnership with UNCDF, organised a training titled Climate Change Resilience and Financing to help local authorities identify tools for recognising vulnerabilities to climate change. 

The course gave special attention to Green Public-Private partnerships and climate funds which have played a key part in developing strong climate resilience plans and catalysing joint actions.

In lead up to the course, The Hague Academy met with Fakri Karim and Vito Intini from UNCDF to discuss climate finance and the upcoming course.

Q:  This course was initially offered by UNCDF and The Hague Academy in 2014. Why this topic again and why now?

This topic was designed to improve the participants’ (especially local government officials’) capacity and awareness of the role of the sub-national government in delivering climate change adaptation activities to increase resilience to climate change impact at the local level.

Since the first training in 2014, UNCDF expanded the programme that deals with this area to 12 countries in three regions (Asia, Pacific, and Africa). More lessons learned and good practices in improving sub-national capacity through the Performance-Based Climate Resilience Grant system have been compiled and used to improve the training module. The LoCAL Programme will also facilitate the attendance of local government officials from new local LoCAL countries at the training.

Moreover, since 2014 the global development agenda has been heavily shaped by international initiatives and agreements that have put both climate change and local development finance at the centre following the Addis Ababa Agenda for Action, 2030 Agenda for Sustainable Development, CoP 21-Paris Agreement, and the New Urban Agenda.

Q:  One obstacle in the fight against climate change has been money, specifically the access to funds. Compounding the issue is the fact that local governments are already cash-strapped as they seek to provide every-day services to their citizenry. How can smaller communities finance mitigation and adaptation strategies to combat climate change?

Local governments, and in particular cities, from developing countries are facing multiple challenges arising from a continuous shift of functions and responsibilities at the local level, the fastest urbanisation pace ever seen in human history, additional risks posed by climate change, and insufficient funding and revenue sources to address these challenges. As a result, housing, transportation, water and sanitation, education, energy –most of which have also relevant aspects in climate adaptation – are under pressure and underfunded.

To overcome the obstacles mentioned above, local government needs to have a system and mechanism that allows the national government to transfer climate finance to the local government, to be delivered through the local government planning and budgeting process as part of their long-term sustainable development trajectory. Without a proper mechanism, intervention on climate change adaptation or mitigation at the local level will only be through a project-based approach, which will not be able to transfer capacity to local government to access climate finance and implement it in a sustainable way.

Only with a proven institutionalised mechanism, are both national and local government able to access climate finance and deliver it systematically. In the long run, it will also transform the local government capacity to be a key factor in increasing resilience at the local level.

Moreover, many cities have untapped revenue collection potential that could avail themselves of if they improved their collection systems in the areas of local taxation, license, fee, and tariff collection, on the one hand, while providing better service delivery, on the other.

Finally, local governments increasingly need to have access to long-term financing sources, including accessing capital markets such as by issuing municipal green bonds, that allow them to finance infrastructure projects while spreading benefits and associated costs along the life cycle of these projects so as to address inter-generational equity.

Q:  Besides finance, what are other challenges facing local governments in responding to climate change?

Besides the lack of finance, other main challenges of local governments in responding to climate change are:

• Lack of clarity in the constitutional and legal framework related to administrative and fiscal decentralisation that leaves gaps, duplications, or grey areas in the clear allocation of functions and powers among different tiers of governments. This may also result in uncoordinated policies and actions by these tiers of governments resulting in potentially ineffective and inefficient interventions
• Lack of capacity to access the climate change scientific information to determine their future risk and hazard in their local territories
• Lack of the local government capacity to identify the right investment which will answer the risk in their area.
• Lack of the local government capacity to plan, budget and implement the climate change interventions, especially in LDCs.
• Lack of the local government capacity to monitor and check if the development activities they deliver have produced the result which contributes to the increased resilience of their community.

“In conclusion, besides finance, local governments need more clarity in their relationships with other levels of government and capacity building support to improve their policy and institutions in order to be able to deliver their mandate in increasing resilience at the local level.”

Q:  The private sector has started to recognise the risks of inaction on climate change. What role can and should the private sector play?

Given the scale of the challenge, the public sector will not be able to provide alone the required funding to address climate change. The private sector is, therefore, the other pillar of a coordinated effort that is increasingly needed in this field. The private sector is a provider of commercially viable utilities and services at the local level and can be a reliable investor able to provide private equity and sound management for the construction and refurbishment of infrastructures, services, and utilities that are not related to basic service provision but have more commercial characteristics.

In addition, it can also be a purchaser of long-term debt instruments such as municipal green bonds that can finance climate resilient infrastructures. But in order to contribute effectively, the private sector needs a reliable counterpart on the local government’s side as well as stable policy environment that induce them to extend their investment horizon and reduce their discount rate.

Furthermore, proper project preparation by local governments could induce private investors in investing in local and innovative PPP projects. Indeed, within the private sector, a new fast-rising category of impact investors is increasingly moving to the fore of financing climate-resilient infrastructure projects.

Q:  What is the message that you would like to convey to the participants in this course?

There are several messages for participants to consider in this course.

1. The important role of local government in increasing resilience at the local level. This is in line with the 2030 Agenda and the Paris Agreement which strongly recognise the role of sub-national government in increasing resilience.
2. Local Governments have an unfunded mandate due to a lack of access to climate finance.
3. With a proper system and mechanism, local governments are able to achieve climate adaptation results at the local level.

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