The EU’s cities and regions are compensating for the lack of climate finance available by issuing their own “green bonds” for sustainable development projects. EURACTIV France reports.
Transport management, waste treatment and energy efficiency in buildings are just three areas in which towns and cities can take action to reduce their impact on the climate. For local authorities, access to capital markets is essential to give them the funds necessary to make the energy transition.
“Green bonds”, a financial tool that allows local authorities to raise capital for environmentally friendly projects, are taking off as a means of funding the energy transition in many local communities.
Previously the reserve of development banks, today’s green bond market attracts a wider range of players, including local and regional authorities. The market tripled in size from 2013 to 2014.
Cities account for “70% of global energy consumption and energy-related greenhouse gas emissions,” according to the United Nations’ Intergovernmental Panel on Climate Change (IPCC). And many local authorities have made voluntary commitments to reduce their CO2 emissions ahead of the Paris Climate Conference this December (COP 21).
The efforts of cities to reduce their impact on the climate often surpass those of their national governments. At the Climate Finance for Territories conference in Paris on 1 October, Patrique Buergui, from the Low Carbon City Lab project, said, “Local authorities are much more responsive than governments in deciding to implement measure to reduce CO2 emissions.”
There is no shortage of examples. In September this year, the mayors of 11 Chinese cities agreed to start bringing down their emissions as early as 2022, eight years before the planned national emissions peak laid out in the Chinese national contribution to the COP 21.
The mayors of Europe’s cities adopted a joint declaration entitled Towards COP 21 in March 2015, in which they too promised to take action on climate change, independently of their governments’ national contributions.
The major challenge for local authorities, particularly those in developing countries, is gaining access to the financial markets to fund their ambitions. “Only 4% of the 500 biggest cities in the developing world are considered solvent on the financial markets,” Patrique Buergui said.
But a city’s ability to meet its emissions reduction targets depends heavily on its ability to borrow money.
In exchange for facilitating the access of these authorities to the capital markets, investors demand evidence that their money is really used to respond to environmental objectives. Authorities that issue green bonds are often required to produce detailed reports on their activity.
Laurent Machureau from the Île-de-France regional council, said, “We have made progress on impact indictors. Our highly developed reporting on green bonds is also an excellent managerial tool that strengthens the culture of transparency.”
French regions leading the way
The Île-de-France region, with Paris at its centre, has already issued three lots of bonds for environmentally friendly projects.
A first round in 2012 exceeded its €200 million target and raised €350 million from 23 investors for a period of 12 years. The region issued a further €600 million of green bonds in 2014 and will finalise its third issuance this year.
The city of Paris itself is also preparing its first green financing initiatives. “Paris is on the verge of launching its first green bond, which will help fund new projects that fit in with the climate agenda,” said Xavier Giorgi, the head of finance for the city of Paris.
But the Île-de-France and Paris are not the only local authorities to have bet on this new financial tool. The French regions of Nord-Pas de Calais and Provence-Alpes-Côte d’Azur have issued €50 million and €120 million of green bonds respectively, to finance sustainable development projects.
Negotiations on climate change began in 1992, and the UN organises an annual international climate change conference called the Conference of the Parties, or COP.
The 20th COP took place in Lima, Peru, in December 2014, and Paris is hosting the all-important 21st conference in December 2015.
The participating states must reach an agreement to replace the Kyoto Protocol, the object of which was to reduce CO2 emissions between 2008 and 2012.
Reaching an agreement, whether legally binding or not, is the priority between now and December.
So far around 90 countries have submitted their national contributions to the COP 21. Regions and cities can make voluntary contributions to the international negotiations.