Introduction

An international round table on financing climate action at city level was held online in November 2023, involving officials from city and regional governments across Europe and North America. The discussion focused on practical financial challenges faced by local authorities implementing decarbonisation plans. This report synthesises shared experiences rather than prescribing solutions, highlighting approaches used to progress climate action under fiscal, political and market constraints.

Fitting the funding approach to the scale of the climate project

The scale of decarbonisation projects strongly influences viable funding models. Projects may be too large for municipal budgets yet too small for institutional investors. Bristol City Council estimated whole-city decarbonisation costs at £7–9 billion against an annual budget below £0.5 billion, prompting reliance on a major private-sector partner. Larger regions, such as Greater Manchester, have segmented climate action into asset classes, including housing and transport, to enable multiple funding partnerships. Smaller projects, such as building retrofits, often struggle to attract private finance due to high transaction costs, sometimes requiring publicly backed lending despite associated risks.

Finding money when budgets are tight

Rising energy and materials costs have intensified pressure on local budgets. National government funding can support local action, as illustrated by US federal support for elements of New York City’s Local Law 97 implementation, which applies emissions limits to around 50,000 large buildings. Cities have also adopted local revenue mechanisms. Oslo’s long-standing road toll, introduced in 1990, has been repurposed from road infrastructure to fund public transport decarbonisation, with all public transport expected to be electric by 2024. These examples demonstrate how regulatory and fiscal tools can supplement constrained municipal finances.

Building financial relationships with external partners to drive climate action

Cities are increasingly working with private and financial actors through varied structures. Formal partnerships can reduce transaction costs and provide long-term stability. Bristol City Leap is a 20-year concession agreement under which Ameresco committed to mobilising over £400 million for decarbonisation, subject to environmental and social performance conditions. Public procurement can also drive change where cities are major clients, as seen in Oslo, where municipal funding represented over 20% of construction projects, enabling the city to embed zero-emission criteria. Regulatory approaches combining penalties with support, such as fines and retrofit assistance under Local Law 97, and softer measures like guidance toolkits, further support market transition.

Balancing the urgency of decarbonisation with the need for long-term thinking and working

While rapid emissions reduction is urgent, transformational change requires long timeframes and trust-building. Participants emphasised phased approaches, learning from other cities, early stakeholder engagement, and piloting initiatives. Bristol City Leap took four years from conception to contract signing, followed by a 20-year delivery period. Oslo’s transition to zero-emission construction began seven years ago and is projected to take another seven years to complete. New York’s Local Law 97 was passed in 2019, with implementation following five years later. Long-term programmes can enable investments with lower short-term returns, such as building retrofits, while delivering social co-benefits including local job creation and skills development.

The long term begins today

The report highlights the role of political leadership in initiating long-term decarbonisation despite delayed outcomes. Seizing favourable political moments, as in New York or Lyon, can accelerate progress, while sustained institutional capacity, as demonstrated in Bristol, supports continuity across political cycles. Although change is gradual, early action is essential to enable cities to meet climate targets and position themselves as climate leaders.