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Priority 5: Build a multilateral system that fosters inclusive, zero-carbon cities

Part of the publication Climate Emergency, Urban Opportunity

Laying a strong foundation:


Ensure that collaborative climate action in cities is reflected in the Nationally Determined Contributions submitted in 2020 and 2025. NDCs should commit to reach net-zero emissions by mid-century, harnessing the power of cities and local action to drive low-carbon innovation and behavioural change. Today, only 23 countries have NDCs that speak directly to climate mitigation in cities (see Figure 13), although many more have made urban-relevant commitments – for instance, to cut emissions from buildings or transport. This is a huge missed opportunity to raise national ambition, since nearly 10,000 local governments worldwide have committed to set emission reduction targets that go above and beyond existing national commitments under the Paris Agreement. In the lead-up to COP26 in 2020, national governments should involve local governments in the design of their NDCs and integrate city-scale actions and targets into their next round of commitments. Effective dialogue and collaborative strategy development can also strengthen implementation, ensuring that different levels of government are aligned behind common goals and that climate actions are matched to their budgets and powers. Mexico, for example, has been systematically recording climate policies and projects by states and municipalities, and will use these to enhance its ambition in the next round of climate negotiations.


Require international public finance institutions to end all fossil fuel financing by 2024. Between 2008 and 2015, 30% of multilateral development banks’ energy financing went to fossil fuels. This investment was worth US$7 billion in 2015 alone – and excludes fossil fuel-friendly investments such as car-based infrastructure in cities. As the primary shareholders and clients, national governments can require international finance institutions to end all fossil fuel financing except in very rare circumstances, where it is the only way to secure energy access for the poor. The next business plans of the international finance institutions should reflect this shift in their energy and transport portfolios in particular, redirecting lending towards low-carbon, urban-relevant infrastructure projects such as metros, electric buses, building efficiency or solar farms. Since these institutions encourage blended finance approaches, that reform should have a multiplier impact by reducing the incentives for commercial banks to lend to or underwrite private companies in the coal, oil and gas sectors.

Seizing the opportunity


Ensure that international development assistance is aligned with national urban strategies, the Paris Agreement and the 2030 Agenda for Sustainable Development. Public climate finance from developed to developing countries reached US$54.5 billion in 2017. This is progress towards the pledge in the Paris Agreement to mobilise US$100 billion per year by 2020. However, even if this goal is reached, it is not sufficient to reach net-zero emissions and adapt to climate impacts. All international development assistance must be consistent with net-zero emissions by mid-century and fully mainstream climate resilience. International development assistance is usually allocated according to country strategies, ideally developed by national governments in tandem with multilateral development banks. National governments can ensure that inclusive, zero-carbon cities – particularly sustainable urban infrastructure projects – are prominent parts of these agencies’ country strategies, and that municipal governments are consulted in their development. Donors can further reinforce the importance of this alignment.


Establish an international carbon price floor from 2025. Although a carbon price is a very efficient way to systematically incentivise compact, connected and clean cities, many national governments are concerned about the perceived economic costs of unilaterally enacting one. An internationally agreed carbon price floor – consistent with Priority 3.2 – could provide reassurance that the near-term economic competitiveness of frontrunning cities and countries will not be affected, while still offering flexibility in domestic policies: national governments could use emission trading schemes, carbon taxes or minimum price auctions to implement the carbon price. If a coalition of large emitting countries were to jointly champion this policy, it would help to overcome domestic political barriers to action – particularly if any revenues are used to ensure a just transition (see Priority 6.3).

Raising the ambition


Help city governments access international public finance for low-carbon, climate-resilient development. While financing for sustainable urban infrastructure exists, there is a critical lack of funding and resources necessary to mature projects from the concept phase through to actual financing solutions. Moreover, many projects are not well-positioned to attract private finance because they do not generate a commercial return and the governments commissioning them are not creditworthy. National governments can help to mobilise much-needed investment in urban infrastructure in two critical ways. First, national governments can provide financial and technical assistance in the earliest stages of project development to support detailed feasibility studies and project planning. This can accelerate capital deployment into urban infrastructure projects, especially where countries have established robust fiscal and regulatory frameworks to reassure investors. Second, national governments can support subnational governments to access international development assistance and climate finance, which is typically lower-cost than private finance. A few international finance institutions, such as the European Bank for Reconstruction and Development, have well-developed lines of lending to municipal authorities and utilities. These arrangements have proven valuable not only for the low-cost capital flowing to sustainable urban infrastructure, but also for building private-sector experience with lending to subnational governments.


Enforce existing trade rules on fossil fuel subsidies, particularly those with the most harmful impacts on cities. Within countries, fossil fuel subsidies exacerbate inequality, exacerbate air pollution (which is concentrated in cities), incentivise costly urban sprawl, take up fiscal space and contribute to the climate crisis. Fossil fuel subsidy reform and carbon pricing could lead to the displacement of production, investment and fuel consumption to cities and countries with lower levels of climate ambition. To avoid this perverse outcome, national governments could use the multilateral trade system to accelerate fossil fuel subsidy reform – for instance, by making a case under the World Trade Organization’s Agreement on Subsidies and Countervailing Measures. Many countries have successfully used multilateral trade systems to reduce harmful subsidies in other sectors, such as agriculture. Indeed, many disputes on renewable energy support have been brought before the WTO, though national governments have yet to initiate legal proceedings against subsidies for oil, coal or gas. Globally, fiscal reform to eliminate subsidies that support fossil fuel consumption – US$41.6 billion in cities alone (see Figure 14) – could redeploy substantial government revenue to support a just transition to zero-carbon cities.