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Update from Bonn: can cities access climate finance?

Written by Sam Barnard


​The leafy German city of Bonn was host this week to the ongoing international climate change negotiations, which are building towards a hoped-for global deal in Paris this December. But in a different building just down the street, city leaders, financial experts and researchers were gathering to discuss how actions by cities can complement national level efforts to tackle and adapt to climate change.

Presentations at the Resilient Cities 2015 congress organised by ICLEI have highlighted the wide range of development programmes intended to help developing country cities overcome the many barriers that prevent them from investing in critical new infrastructure. International climate funds like the Global Environment Facility (GEF) are placing an increasing emphasis on ensuring that cities can plan and finance new investments that are low-carbon and climate resilient.

Despite these efforts, a recurring theme raised by developing countries in Bonn this week is of the barriers they face in accessing support. International climate funds and development banks are generally set up to work with national governments, and local governments are often explicitly restricted from engaging with them directly. This means that the process for municipal governments and other local actors to access international support is often by no means simple.

Nacala-Porto is one of Mozambique’s main urban centres. Its favourable connections, including a major port, airport and train lines, mean that its leaders are optimistic about strong future economic growth. But like many cities in the region, Nakala-Porto is plagued by heavy annual rains that cause severe damage to roads, putting a drag on progress. The local government is locked in a vicious cycle of struggling to put up cash for yearly repairs that are washed away ten months later.

Chakil Aboobacar of the Nacala-Porto Municipal Council said the city wanted to find external funding to invest in new roads fit for current and predicted rain patterns, but as international climate finance projects are brokered in English rather than Portuguese they were blocked at the first instance. They couldn’t decipher climate funds’ requirements and didn’t know how to work with the national government to apply for their support.

Another example is Dakar, Senegal, where the Ministry of Finance recently blocked at the last moment a pioneering attempt by the city government to issue the first municipal bond in West Africa. A representative from Dakar city government here in Bonn argued that they will never be able to access useful support from international climate funds as long as these are set up to deal with the national government, and all the politics that entails.

Our work at ODI highlights the need for climate funds to introduce simple options for channelling money to cities. The new Green Climate Fund (GCF) represents an opportunity in this regard. The fund allows a wider range of organisations to directly access funds than is currently commonplace, creating the potential for a more direct route between the international and local levels.

As Marco Crocco Alfonso, CEO of BDMG, the development bank for the state of Minais Gerais in Brazil, explained that local governments and banks have a better understanding of local capacities and needs compared to their national counterparts. They can often channel money in a faster and more flexible way than is possible through national bureaucracies.

There is no consensus on the best way for international donors to fund local projects. The best solution will vary considerably from city to city and country to country, and attempts to pilot new processes we will inevitably encounter a number of deep-seated practical and political difficulties. National governments must inevitably remain key partners in most cases. Yet if funders can find better ways to bridge the gap between the international and local, their support is more likely to be fit for purpose and meet the needs and priorities of people on the ground.