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City Climate Finance Gap Fund Launches to Support Climate-smart Urban Development

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Today, the City Climate Finance Gap Fund (“The Gap Fund”) was launched jointly by ministers and directors of the Governments of Germany and Luxembourg together with the World Bank, European Investment Bank, and Global Covenant of Mayors. It paves the way for low-carbon, resilient, and livable cities in developing and emerging economies by unlocking infrastructure investment at scale.   

The Gap Fund will support city and local governments facing barriers to financing for climate-smart projects. Filling a gap in available project support, the Gap Fund offers technical and advisory services to assist local leaders in prioritizing and preparing climate-smart investments and programs at an early stage, with the goal of accelerating preparation, enhancing quality, and ensuring they are bankable.

With a target capitalization of at least €100 million, the Gap Fund will accelerate investments supporting cities in developing and emerging economies, as they determine goals and objectives for low-carbon and well-planned urbanization. The Gap Fund investment is aiming to unlock at least €4 billion of final investment in climate-smart projects and urban climate innovation.

“What cities do today will forever shape our climate tomorrow,” said Mari Pangestu, World Bank Managing Director for Development Policy and Partnerships. “Cities in developing countries urgently need resources to realize their climate ambitions. Through the Gap Fund, the World Bank is supporting low-carbon, resilient, inclusive, healthy, creative, and sustainable communities for all.”

Cities are on the frontlines of the climate emergency and currently account for around 70 percent of global CO2 emissions. Urban centers’ share of emissions is expected to grow as 2.5 billion people migrate from rural to urban areas by 2050. Before the COVID-19 pandemic struck, it was estimated that more than $93 trillion in sustainable infrastructure investment was needed by 2030 to meet climate goals. As cities strive to recover from the economic impacts of COVID-19, investments in clean energy, climate-resilient water and sanitation, and urban regeneration projects will play an important role in eliminating pollution, improving local food systems, and creating green jobs. They will also lead to cleaner, healthier, and more equitable communities – conditions that can help prevent future pandemics.

Climate investment projects are an indispensable opportunity to improve lives of the millions who live in cities around the world. However, cities frequently lack the capacity, finance, and support needed for the early stages of project preparation – especially in developing and emerging economies. This leads to impasses where cities cannot move project ideas to late-stage preparation and implementation. This hurdle is frequently overlooked by national and international support – a challenge the Gap Fund will seek to overcome.

The Gap Fund is an initiative of the governments of Germany and Luxembourg together with the Global Covenant of Mayors for Climate and Energy (GCOM), in partnership with several other key players in the climate finance arena (including C40, ICLEI – Local Governments for Sustainability, and Cities Climate Finance Leadership Alliance). It will be implemented by the World Bank and the European Investment Bank. The Gap Fund was announced at the UN Climate Action Summit 2019 as a key initiative of LUCI, the Leadership for Urban Climate Investment, which promotes financing for ambitious urban climate action until 2025. Core donors to the Gap Fund are Germany (€45 million – including €25 million from the Ministry for the Environment, Nature Conservation and Nuclear Safety, and €20 million from the Ministry for Economic Cooperation and Development) and Luxembourg (€10 million).

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Urban Development

Guterres promotes ‘enormous’ benefits of greener cities

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For the UN Secretary-General, the benefits of making cities more environmentally friendly are “enormous”, and include reduced climate risk, more jobs, and better health and well-being. 

“City leadership in using green materials and constructing energy-efficient, resilient buildings powered by renewable energy, is essential to achieve net-zero emissions by 2050,” said António Guterres in his message for World Habitat Day, marked on Monday. 

The theme for this year’s celebration of cities and towns worldwide is Accelerating urban action for a carbon-free world. 

Cities are responsible for about 75 per cent of the world’s energy consumption and over 70 per cent of global greenhouse gas emissions.  

Two crises 

Urban areas across the globe are facing the dual crises of COVID-19 and climate change, said the UN chief. 

Around 4.5 billion people live in cities today, but that population is projected to grow by almost 50 per cent, by 2050. By mid-century, over 1.6 billion urban residents may have to survive through average summertime highs of 35 degrees Celsius. 

For Mr. Guterres, cities and towns are at the core of climate action to keep the 1.5 degrees goal within reach. 

“Three-quarters of the infrastructure that will exist in 2050 has yet to be built,” he said. “Economic recovery plans offer a generational opportunity to put climate action, renewable energy, and sustainable development at the heart of cities’ strategies and policies.” 

As populations grow in emerging economies, demand for transport, which accounts for nearly 20 per cent of global carbon emissions, is also multiplying.  

The UN Chief said cities are already working on this, trying to ensure that this demand is met by zero-emission vehicles and public transit. 

Mr. Guterres concluded asking for a global moratorium on internal combustion engines to underpin these efforts, saying it should happen by 2040 at the latest.  

Opportunity 

In a message for the day, Executive Director of UN-Habitat, Maimunah Mohd Sharif, said that, unless the world takes urgent action, “the greenhouse gases produced by ever expanding urban centres, will continue to push global air temperatures higher.” 

Ms. Sharif remembered that, this year, the day is celebrated only weeks before the UN climate change summit, COP26, happening in early November in Glasgow.  

For the UN-Habitat Chief, the recovery from the COVID-19 pandemic is an opportunity for the world’s cities to put climate action on top of their agenda. 

“This is a chance to change how we generate our power, construct our buildings, heat, cool and light up our offices and homes, and travel around from home to work,” she said. 

Ms. Sharif asked for “well planned and well managed compact cities”, that allow for non-motorized transport and that reduce energy consumption from cooling and heating. 

“Cities are the incubators of innovation and new technology,” she said. “We must harness this strength for better climate change solutions.” 

For Ms. Sharif, “action will differ from city to city”, but “the green transition must benefit everyone, especially the most vulnerable, and create new jobs.”  

Activities  

Events this year will explore how governments and organizations can work together with communities, academic institutions and the private sector to create sustainable, carbon-neutral, inclusive cities and towns. 

World Habitat Day will also amplify the Race to Zero Campaign and encourage local governments to develop actionable zero-carbon plans in the run up to the COP26. 

This Monday, in a ceremony in Yaounde, Cameroon, UN-Habitat will also present the winners of the Scroll of Honour awards, one of the world’s most prestigious prizes for those working on sustainable urbanization. 

This year, there are five winners: New Urban Communities Authority, from Egypt; Shining Hope for Communities, from Kenya; Baoji City, from China; Let’s do it World, from Estonia; and Ciudad Emergente, from Chile. 

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Urban Development

City Climate Finance Gap Fund completes first year of operation

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The City Climate Finance Gap Fund (the Gap Fund) has approved technical assistance for 33 cities across the developing world since its operational launch in September 2020, filling a critical gap in technical assistance funding to help cities turn their climate ambitions into finance-ready projects.

Marking its one-year operational launch anniversary today, the Gap Fund has received over 140 expressions of interests and approved technical assistance for 33 cities in India, Mexico, Ethiopia, Morocco, Democratic Republic of Congo, Panama, Senegal, Vietnam, Kosovo, Montenegro, Ecuador, South Africa, Vanuatu, Colombia, Indonesia, Brazil, Guatemala, Uganda and Ukraine. An additional 30 cities are currently undergoing a detailed assessment for potential Gap Fund support, with a total target of at least 180 cities.

The Gap Fund is currently capitalized at €55 million, with a target of at least €100 million and the potential to unlock an estimated €4 billion in investments. The aim is to help cities understand their exposure to climate challenges, develop plans and strategies to reduce emissions and vulnerability to climate risks, and identify and prioritize climate-smart urban infrastructure investments.

The Gap Fund demonstrates a unique collaborative model: With funding from Germany and Luxembourg, the Fund is co-implemented by the World Bank and the European Investment Bank in partnership with the Deutsche Gesellschaft für Internationale Zusammenarbeit and works directly with city groups and networks including GCOM, ICLEI, C40 and CCFLA. This concerted effort has helped raise awareness about the importance of cities and urban systems in the climate agenda and could not come at a more critical time, as the latest Intergovernmental Panel on Climate Change (IPCC) report confirms that cities are the hotspots of global warming, with the global urban climate finance gap estimated in the trillions of dollars, especially in South Asia and Sub-Saharan Africa.

The Gap Fund also contributes cutting-edge knowledge, tools and recommendations. For example, by featuring in theState of Cities Climate Finance Report Part 2: Enabling Conditions for Mobilizing Urban Climate Finance, whichprovides critical systems-level conceptual frameworks and recommendations for city, country and climate decision-makers. The Gap Fund has also developed or packaged user-friendly practical tools and notes for operational practitioners and project developers on the ground.

The way cities develop in the coming years, especially in these regions, will influence the trajectory of future greenhouse gas emissions, and the susceptibility of cities to increased flood risks and urban heat island effects. The focus on cities is also reflected in the World Bank’s Climate Action Plan, which has identified cities and urban systems as a focus area on a par with energy, transport, food and industry.

Some of the Gap Fund’s most recent grant activities include:

  • San Miguelito, Panama: Identify climate-smart and energy-efficient urban interventions for new cable car infrastructure, with the potential to cut emissions and reduce vulnerability to floods.
  • Dakar, Senegal: Integrate low-carbon and climate-resilient considerations into the planning, development and construction of affordable and green housing in the greater Dakar region, including piloting  a green building certification incentive for building developers.
  • Mangalore and Kolar, India: Prepare a climate diagnostic report for solid waste management as well as an action plan for improving and financing low-carbon solid waste management services, including a pre-feasibility study.
  • Bogota, Colombia: Provide technical assistance for greenhouse gas and air quality analytics, city-wide coordination and recommendations to incorporate low-carbon and climate-resilient considerations in the Low-Carbon Vital Neighbourhoods in Bogota– the first pilot in Latin America to implement a “Proximity City Urban Development Model” (also known as the 15-minute city model).
  • Chefchaouen, Morocco: Prepare a study on low-carbon solid waste management activities including waste sorting, biogas recovery, leachate treatment and the use of solar energy.
  • Vinnytsia, Ukraine: Support climate change adaptation measures along the Southern Bug River, such as new green spaces along the embankments, development of beaches to improve river transport and the construction of a new bridge to improve walking routes north and south of the city.
  • Campinas, Sao Paolo State, Brazil: Promote climate change adaptation and reduce flood risks through nature-based solutions along the Capivari river.
  • Danané, Côte d’Ivoire: Support the deployment of a fleet of 600 low-carbon, low-cost solar tricycle taxis to meet the city’s most pressing mobility needs for people, including expectant mothers, and cargo.
  • Escuintla, San José and Iztapa, Guatemala: Assess the quality of existing waste generation and characterisation data of municipal solid waste and make any necessary additions, compare organic solid waste treatment alternatives and suggest improvements to the existing organisational structure and governance.
  • Santa Marta, Colombia: Improve and enhance the city’s urban forest and forest management, and identify funding opportunities at regional, national or international level as well as links to other potential natural infrastructure projects along Santa Marta’s ecological corridors.
  • Rio de Janeiro, Brazil: Improve hydrological modelling to assess urban flood risks and economic modelling to assess the viability of restoring wetlands as a natural barrier in flood-prone areas and carry out stakeholder consultations.
  • Makindye Ssabagabo, Uganda: Study existing waste generation, carry out a characterisation study of municipal solid waste using random and seasonal data, and compare organic solid waste treatment alternatives.
  • Palembang, Musi Rawas and Lubuklinggau cities, Indonesia: Prepare a cost-benefit analysis, strategy and action plan for green, resilient construction and energy-efficient affordable housing in these three cities. Project would help inform the national Government One Million Housing program which aims to provide incentives for developers to build 220,000 homes per annum and to upgrade 160,000 affordable homes. 

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Urban Development

WEF Launches Toolbox of Solutions to Accelerate Decarbonization in Cities

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With the percentage of people living in cities projected to rise to 68% by 2050, resulting in high energy consumption, greater infrastructure needs and, carbon emissions, cities have a critical role to play in the race to reach net zero. To help address this challenge, the World Economic Forum, is releasing today the first iteration of its Toolbox of Solutions, designed and built in collaboration with Accenture.

The toolbox is an interactive digital platform containing more than 200 practical solutions to help city leaders, national governments and businesses evaluate and identify optimal solutions for near-term implementation, kick-starting their decarbonization journey. The first-of-its-kind toolbox draws on input and case studies from more than 110 cities, businesses, academics, civil society leaders and other urban stakeholders around the world and across sectors to capture best practices and case studies for urban transformation and decarbonization.

The solutions include policy, business and finance models that result in reduced emissions and other valuable outcomes such as job creation and improved air quality. These solutions are also tailored to specific city attributes including the electricity grid’s health, local population density and income level.

“Decarbonization solutions already exist – we don’t need to wait for the next big innovation. This platform provides examples of policies and business models that have been used successfully around the world. We are starting with 200 solutions and expect to have many more over the course of the next year,” said Kristen Panerali, Head of Energy, Materials and Infrastructure Programme, Net-Zero Carbon Cities, World Economic Forum.

“Urban ecosystems are pivotal in our global journey to net zero, driven by clean and smart electrification. These sustainability initiatives can help accelerate efforts to address climate change with practical and integrated energy solutions for urban transformation for cities of any size around the world,” said Jean-Marc Ollagnier, Chief Executive Officer, Europe, Accenture.

Achieving net-zero emissions at city scale will require a transformation in how energy is produced, distributed, and consumed. A related report shows how the built environment and mobility can serve as a catalyst for urban transformation and decarbonization anywhere in the world.

The Toolbox of Solutions is part of the Forum’s Net-Zero Carbon Cities programme, which brings together businesses with city, regional and national government leaders to accelerate urban transitions to a net-zero future. The programme’s objective is to align and scale efforts across businesses, cities and national-level governments to deliver urban ecosystems that are sustainable, resilient and equitable. The programme aims to enable transformation towards clean electrification and circularity, using integrated energy solutions to address energy, buildings and mobility. The Net-Zero Carbon Cities programme is co-chaired by Jean-Pascal Tricoire, Chairman and Chief Executive Officer, Schneider Electric, and Francesco Starace, Chief Executive Officer, Enel.

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