World Bank Support to Cities to Expand – Key Pieces of the Puzzle in Addressing Climate Change

The growing importance of cities as drivers of climate change is hard to miss at COP 21 in Paris, as the conference kicks off its first-ever “Cities Day” today and with climate celebrities Leonardo di Caprio and Robert Redford making a meeting with city leaders a top priority on their agenda. Recognizing this, the World Bank is looking to expand its support to cities in achieving a sustainable, resilient, and lower carbon path.

“The contrast between local and national politicians in Paris for the UN Climate Change Conference has been stark,” notes reporter John Vidal in The Guardian. “What it shows is that much of the power to reduce climate emissions lies now with cities, not national governments.”

Cities are where the emissions are, responsible for more than 70 percent of energy consumption and energy-related greenhouse gases. During the Paris COP, more than 450 cities representing a total of 1 billion people have pledged to reduce emissions by more than 50 percent over about 15 years.

In developing countries – which account for 90 percent of urban growth – there is a window of opportunity to build climate-smart cities. The State of the City Climate Finance report, released at COP 21, which includes input from the World Bank, highlights the challenges these countries face and proposes both innovative and traditional solutions.

“We have a once-in-a-lifetime opportunity to build livable, resilient, low-carbon cities,” said Laura Tuck, World Bank Vice President for Sustainable Development. “We must seize the opportunity. Too many cities today are facing a critical shortage in tapping into the finance they need.”

According to the report, roughly $4.1 trillion needs to be spent on urban infrastructure every year just to keep up with projected growth in a “business-as-usual” scenario, and an estimated incremental 9-27 percent ($0.4-$1.1 trillion) more for low-emission and climate-resilient infrastructure.

The World Bank Group has committed to grow climate work by a third to 28 percent of annual commitments by 2020 with the support of shareholders. This means providing $16 billion dollars per year by 2020 across the World Bank Group.

“Last year, the World Bank provided over $3 billion in urban climate finance and technical assistance to help clients build climate-smart cities,” said Ede Ijjasz-Vasquez, Senior Director for the World Bank’s Social, Urban, Rural and Resilience Global Practice. “We expect our proportion of urban climate finance to grow proportionally with the overall growth of our climate work with the support of shareholders.”

Innovative financing plays a key role in the World Bank’s work with cities. Examples include developing a program that helped the city of São Paulo mobilize local private capital for infrastructure; risk-sharing insurance across countries in the Caribbean and Central America, and in the Pacific Islands; multi-catastrophic bonds in Mexico and comprehensive financial packages for Sri Lanka and the Philippines that include coverage for natural disasters affecting municipal governments.

“But financing alone is not sufficient,” said Ijjasz-Vasquez. “Knowledge and capacity are equally as important.”

The World Bank is lending its expertise to this topic during a special session dedicated to helping cities finance low-carbon growth, during which Ijjasz-Vasquez outlined the Bank’s initiatives to help address infrastructure challenges facing cities, including:

• Working with the Global Facility for Disaster Reduction and Recovery (GFDRR), the Bank supports data collection for climate-informed flood risk management from Colombo, Sri Lanka, and Ho Chi Min city, Vietnam; to Bogota, Colombia and Caribbean cities.
• The Global Platform for Sustainable Cities (GPSC), is a new initiative that helps increase cities’ overall capability and ‘readiness’ for attracting investment and preparing bankable projects. This program will bring to participating cities an integrated, sustainable planning platform and a structured process to share lessons of experience.
• The World Bank’s City Creditworthiness Academy (CCA) is helping cities improve their performance in enhancing own-source revenues, debt management, capital investment planning, and understanding creditworthiness. To date, the program has trained over 500 municipal officials from 185 cities in 25 countries, and will be expanded even further.

“There is no silver bullet that addresses all types of infrastructure financing challenges in a city,” said Ijjasz-Vasquez. “A solid financial basis is an indispensable condition, but innovation and adaptation to local context is equally important. The World Bank is committed to deepening our engagement in climate-smart support to cities and sub-national governments in finance, knowledge, and capacity building.”