Climate finance

Financing and delivering low-carbon municipal infrastructure

CLIENT

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalft of Federal Ministry for the Environment, Climate Protection, Nature Conservation and Nuclear Safety (BMUKN)

EXPERTISE

Climate finance

SERVICE

Study on the financing of sustainable local infrastructure, with recommendations for future programmes

01 INITIAL SITUATION

Around 70 per cent of global greenhouse gas emissions are caused by cities. Much of the infrastructure that will shape these emissions by 2050 has not yet been built - making it all the more important to get it right from the start.
Although funding for climate-friendly infrastructure is available, it often fails to reach the local authority level.
Many projects get stuck between the planning and financing stages, for example because local authorities lack the capacity or creditworthiness.
This is where the FELICITY II programme comes in. GIZ is implementing it in partnership with the European Investment Bank (EIB) in Ukraine, Moldova, Uzbekistan and Kazakhstan. The programme is funded through the International Climate Initiative (IKI) of the BMUKN.
With a budget of EUR 22.7 million, the programme has prepared or secured funding in all four countries, including a EUR 100 million EIB loan in Ukraine.
GIZ therefore sought to find out what makes programmes at the interface between technical and financial co-operation successful.

02 APPROACH

STEP 01

Literature review

First, we reviewed the literature on municipal climate finance and on the interplay between technical and financial cooperation. On this basis, we formulated hypotheses as to why projects fail to secure funding.

STEP 03

Comparative anlaysis

On this basis, we have compared the experiences gained from the FELICITY I, FELICITY II and City Climate Finance Gap Fund projects. The case studies extend beyond the four programme countries to include Latin America and sub-Saharan Africa.

STEP 02

Interviews

Next, we conducted numerous interviews with representatives from local authorities, funding partners, implementing organisations and policy consultancies. The aim of these discussions was to test hypotheses and gather insights into implementation experiences.

STEP 04

Recommendations

We have drawn recommendations from the findings. The study sets out design principles for future programmes at the interface between technical and financial cooperation and highlights approaches that can be used to mobilise private capital.

03 RESULTS

Study involving a comparative case analysis

The study shows that local authority climate investments fail not so much because of a lack of capital, but rather because of local conditions. This is demonstrated by case studies from the four programme countries, as well as others from Latin America and Africa.

Six design principles for commissioning organ

The study translates these findings into six principles for grant-based commissioning bodies such as the IKI. These include, for example, taking funding into account from the outset and measuring success not by individual projects, but by the programme as a whole.

Starting points for each programme country

For Ukraine, Moldova, Uzbekistan and Kazakhstan, the study highlights where a programme should focus its efforts. In Moldova, for example, institution-building is preceded by complex financing models, whilst in Kazakhstan credible political signals are sufficient.