Climate Change, Global Governance, Urbanization COP25: Is Climate Financing for Cities Going Mainstream?

December 9, 2019
By Mauricio Rodas | Perry World House

Below is a transcript of PWH Visiting Fellow Mauricio Rodas's talk at the Climate Action Hub, at the United Nations Climate Change Conference. Rodas's talk was introduced by Mark Alan Hughes, Director of the Kleinman Center for Energy Policy at the University of Pennsylvania.

Thank you so much, Mark, for that very, very nice introduction of yours, very flattering. Let me say that for me, it is really a pleasure and an honor to be introduced by you. I always say that Mark was my favorite professor at Penn, and I am not saying that because he's here, but because that's the truth. So I really feel privileged, Mark, by sharing the stage with you and by listening to that very, very nice introduction. It's a great pleasure for me also to be here at COP. I was at COP23 in Bonn, and it's great to be back. So thank you so much to the UNFCCC, to Koko Warner and her team, for this very kind invitation. I really feel honored to be talking to you this afternoon. I'm going to be speaking to you about an issue that I think is extremely relevant for the whole world. I'm referring to cities' climate-resilient infrastructure financing.

And the reason why I think this is so important is because, as you know, more than half of the world's population lives today in cities. It is in cities where more than 70 percent of CO2 emissions are being generated. It is expected that by the year 2050, more than 70 percent of the world's population will live in cities. So with all of these figures, it is very clear that it will be impossible for nations to meet their NDCs, and the Paris Agreement goals, without an effective and very active role from cities. Clearly, it is in cities where the fight against climate change will be defined.

Now, in order for cities to do what they need to do to effectively fight against climate change, they will need a huge climate-resilient infrastructure transformation. It is estimated that the world will need around 93 trillion dollars over the next 15 years in climate-resilient infrastructure, and approximately 70 percent of those 93 trillion dollars—that is around 65 trillion dollars—will be needed for cities' climate-resilient infrastructure. Now, the question is, are cities right now able to access such a vast amount of financing resources? And the answer, clearly, is no. And that's the answer because the international financial architecture was not designed for cities. It was designed for countries. So how would cities be able to access the financing they need, in order to effectively fight against climate change? That's a big question. And that's why we are all here.

Even though some progress has been made in the accessibility for cities of international financing, there are still many challenges pending. For example, in many countries of the world there are legal bans for cities to borrow money, or, cities need a national guarantee to access international financing, national guarantees that very frequently are not granted because of political rivalries. It is scary to think that because of politics, cities may not access the necessary financing to fight against climate change. In some other cases, cities lack the project preparation capacity they need to access financing, or they are not credit worthy. In some other places, public-private partnership regulatory frameworks are extremely confusing and complex to implement, preventing private investment from coming into cities. All of these are challenges, challenges that we are witnessing all over the world, certainly in major cities and even more so in intermediary and small cities, which, as you know, are the ones that will be growing the most over the next few years.

Now, innovation is possible. There are some examples about how even with the tools at our disposal, it is possible to combine different aspects and models to have cities accessing financing resources. In our city, in Quito, for example, we managed to finance our first metro line through an innovative scheme. We have four multilateral banks financing the project together, and they did not only finance the project, but also we combined a very strict set of international procurement regulations, which allowed the project to be developed properly. We were able to meet the schedule and the budget, which as you know, is very difficult in these kinds of very complex projects.

If we look at the issue of cities' climate-resilient financing from a supply and demand perspective, we could argue that, on the supply side, there's a lot going on. There are new players, new financing tools, new bonds, new funds, new facilities available for cities. Still much more needs to be done. But we are witnessing a rapidly changing scenario on the supply side. Now, on the demand side is where we are lagging behind the most, because in most cases, cities are not even aware of these new financing opportunities. And if they are, they lack the capacity, the knowledge, or the tools to access these financing opportunities. So that's why it is so important to help cities develop these capacities and guide them to access these new financing opportunities. If we don't do that, it will be impossible to meet or match demand with supply, and for cities to do what they need to in order to effectively fight against climate change.

This is precisely why at the University of Pennsylvania, through Perry World House, the Institute for Urban Research, and the Kleinman Center for Energy Policy, we launched what we call the Cities Climate-Resilient Infrastructure Financing Initiative. This initiative is aimed at working with cities, developing a knowledge hub that will consolidate the information regarding the very crowded landscape of new financing opportunities for urban sustainable development, and guide cities to facilitate their access to the financing opportunities that are at their disposal. We are doing this through the construction of a very broad partnership with different city networks, development banks, UN agencies, think tanks, and the private sector. And of course, we are very keen on continuing developing this initiative and reaching out to as many cities as possible to help them achieve what they need to, in order to have access to these resources and become a very effective player, making possible the Paris Agreement goals and, of course, the fight against climate change. Thank you so much.

Watch the full speech here.