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UN-HABITAT Issues Policy Note on Cities and Mitigation Finance

UN-HABITAT22 November 2011: The UN Human Settlements Programme (UN-HABITAT), through its Cities and Climate Change Initiative, has issued a policy note on mitigation finance and whether cities in developing countries are having sufficient access to resources. 

The Policy Note, titled "Mitigation Finance: Do Cities in Developing Countries Have Sufficient Access?" underscores that while cities are critical for reducing global greenhouse gas (GHG) and account for more than 80% of global GHG emissions, they have not been sufficiently targeted by existing mitigation finance schemes.

It further underlines that although some local authorities may lack the knowledge about accessing mitigation finance, some cities, either alone or with in alliance with other cities, are beginning to devise innovative approaches to meet mitigation targets. For instance, in the US alone, 1017 cities have agreed to meet or exceed the Kyoto Protocol targets to reduce their GHG emissions. Nevertheless, the Policy Note points out that national governments and the international community are not doing enough to catalyze on the potential for innovative, effective action in urban areas.

It indicates the various modes of how mitigation measures can be funded, including up-front financing such as those from energy effi­ciency programmes; top-ups to revenue streams, which includes carbon markets; and grants such as those from the Global Environ­ment Facility (GEF). Another finance scheme where urban initiatives have been under-represented is the Clean Development Mechanism (CDM). It is estimated that urban mitigation projects represent only 8.4% of all registered CDM projects.

The World Bank notes that the limited number of urban mitigation projects is due to the relatively high administrative and transaction costs of setting up CDM projects in cities compared to the re­turn from carbon finance. Experts also conclude that international climate funding is expected to be channeled through national govern­ments and with the Ministry of Environment often assigned to lead climate change activities. This set up makes it uncertain for cities on how to access funding, particularly if urban mitigation is not a priority on the national agenda.

The Policy Note proposes a set of recommendations to boost cities' access to mitigation finance including: dedicating a portion of the Green Climate Fund to cities; ensuring that the guidelines for developing Nationally Appropriate Mitigation Actions (NAMAs) provide for an explicit role for lo­cal authorities; streamlining CDM methodologies and procedures; calling upon international financial institutions and donors to develop additional mechanisms for upfront financing of mitigation measures by cities; and building the capacities of local authorities to access climate finance. [Publication: Mitigation Finance: Do Cities in Developing Countries Have Sufficient Access?, UN-HABITAT Cities and Climate Change, Policy Note # 2]