Climate Change

Our cities need big funds to fight climate risks: World Bank

The COVID-19 pandemic added strain to cities’ finances in cities in developing countries; the disruption continues to make planning for future difficult

By Madhumita Paul
Published: Monday 05 July 2021

There are huge gaps in needed urban climate finance — resources directed to activities aiming to address climate-related risks faced by cities — especially in rapidly urbanising cities in developing countries. Trillions of dollars will be required annually to address climate risks for urban infrastructure by 2050, a recent report by the World Bank has found. 

The report, released by the Cities Climate Finance Leadership Alliance and the World Bank in June 2021, called for the global community to build new infrastructure compatible with climate goals, which contribute 70 per cent of global carbon dioxide emissions and produce 50 per cent of all waste.

The report,titled The State of Cities Climate Finance, used data from 2017-2018 in the analysis.

If not properly planned and managed, urban emissions activity and resource use will increase: Up to 3 billion people are expected to move from rural to urban areas by 2050. Half the world’s urban population growth is expected to be in Africa and Asia.

An average of $384 billion was invested in urban climate finance annually in 2017-2018. This includes figures from project-level data (corresponding to $75 billion) and estimated capital expenditure data ($308 billion) that relate to the deployment of capital for long-term transport and building infrastructure.

This sum, however, falls far short of investment needs, which are estimated in trillions.

Lack of detailed project-level data — especially in key sectors such as urban transport and buildings — limits a deeper understanding of the most significant actors participating in closing the investment gap for cities.

Implementation of climate goals is becoming increasingly difficult in South Africa due to a lack of climate finance data, the report found.

Highlights of major findings:

  • The largest portion of urban climate finance was invested in and for China and in developed economies.
  • Vastly insufficient amounts of urban climate finance were invested in many developing economy regions, including South Asia and sub-Saharan Africa, which saw an annual average investment of $4 billion and $3 billion respectively.
  • Finance for adaptation projects amounted to $7 billion in 2017-2018, representing 9 per cent of investments tracked at the project level, against the 91 per cent ($69 billion) for mitigation and dual uses.
  • Investment in urban transport represented 53 per cent of total urban climate finance estimated at $202 billion in 2017-2018.
  • Building infrastructure and energy efficiency attracted the second-highest level of finance, with $167 billion estimated for 2017-2018, representing 43 per cent of total urban climate finance.
  • Relatively low levels of financial flows were committed for utility-scale renewable energy generation ($4 billion), consisting primarily of waste-to-energy projects or larger projects that could be attributed to urban areas.

The novel coronavirus disease (COVID-19) pandemic added financing strain to cities; the disruption continues to make planning for the future difficult, the report flagged. While cities are spending more on social protection to address the health crisis, many cities have lost local revenue sources due to the accompanying economic crisis, it said.

The ability of cities to meet their climate action ambitions is, therefore, at a critical juncture and requires the support of national governments, international organisations, civil society and the private sector.

The report called for a systems-level and whole-of-economy approach, whereby country, city and climate policies, data and activities are aligned, well-funded and executed at the local level.

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