Money pledges for World Bank would show way to meet $155tn urban climate bill

While huge amounts of brainpower and hard work are going into making #cities more #sustainable, achieving that comes down to money. New figures show a stark shortfall in the amount of global urban climate finance available.

Catastrophic weather events hitting major urban centres over the summer, such as severe flooding in east Africa and wildfires in the Amazon near Brasilia, have acted as reminder that cities are both a cause and victim of the climate emergency.

Some 4.4 billion people or 58 per cent of the world’s population live in cities, a share that is forecast to rise to seven out of 10 by 2050, while, according to the World Bank, more than 80% of global economic output is generated in cities. For both reasons policymakers believe that cities will need more finance to fund both mitigation measures and innovations to help them adapt.

The challenge is immense at a time when many lenders and donors are squeezed in the wake of multiple crises while accelerating urbanisation means that the need to both cope with climate change and invest in measures to deal with it are increasing.

Analysis published at the turn of the month by Climate Policy Initiative (CPI) shows that while the volume of urban climate finance has shown a strong increase over the last five years, it is well short of what is needed.

According to its State of Cities Climate Finance report, inflows have more than doubled between 2017 and 2022, reaching $831 billion. However, for climate mitigation alone, cities require an estimated $4.3 trillion a year between now and 2030, and more than $6 trillion annually for each of the following 20 years.

A quick bit of maths indicates a bill of some $155 trillion — and that is just to offset the impacts of climate change. This includes the cost of investing in greener  transport such as electric vehicle and urban rail systems, renewable energy, as well as energy-efficient air-conditioning, heating and cooking systems.

The CPI says that working out the financial costs of measures to help cities adapt to the impacts of climate change is much more difficult because of a lack of data. It estimates the needs in emerging and developing market economies (EMDEs) at $4.5 trillion although warns that this may be a significant underestimate.

Interestingly the CPI identifies the sources of current finance with a fifth coming from the public sector, of which most is national governments, and almost half from private finance, which includes households and individuals investing in electric cars and energy-efficient buildings.

More money, and better used

Urban climate finance therefore needs to increase fivefold over the coming years. But as with demands for money, whether within countries to respond to voters’ demand, or to tackle other global needs such as hunger and disease, it is hard to see where it will come from.

There are some gains that can be made with existing resources, such as by using existing money to meet specific needs. There is also a need to make greater use of public money to reduce the risk for other investors and thus leverage in more private finance (as the development banks have been doing for some time).

Improving the monitoring of urban climate finance and increasing access to associated data across both public and private sectors is also crucial. Organisations that report on this topic should adopt standardised classifications of urban climate finance. This would make different reporting systems more compatible and help reduce discrepancies in reporting.

But at the end of the day, it comes down to money. One source is international financial institutions such as the International Monetary Fund and World Bank, which are holding their annual meetings later this month and which together with other bodies made up $26 billion or 3.1 per cent of the total in 2022.

Eyes will especially be on the World Bank, whose new president Ajay Banga has changed its stated mission to “eliminate extreme poverty on a liveable planet”, with the final phrase tacked on to ensure tackling climate change is front and centre.

Its International Development Association arm that provides zero- or low-interest rate loans to the poorest countries is at the final stages of its three-yearly replenishment. Banga is hoping he will secure enough donations for rich governments to leverage a total fund of $100 billion.

He has also worked to implement reforms of the bank’s finances to release an estimated $120 billion over the next 10 years. This only goes a small way towards the multi-trillion dollar hole, and of course only some will go towards climate change, and none will be earmarked for cities.

But the meetings are an ideal forum to raise the needs of cities, especially given the large share of the population in EMDEs that are, or will be, moving into cities. Nevertheless, ensuring that cities are more sustainable in an era of greater floods, droughts and storms will require collaboration across sectors all and between government, businesses and investors. The Bank and Fund meetings are a good place to start.