Almost all city governments receive financial resources from higher-level governments (particularly the national government) either for particular purposes (“earmarked”) or as unconditional grants (“non-earmarked”). In the case of climate finance, these transfers can also come through subsidies (e.g., reimbursement for all or part of the cost of providing water supplies) or Debt for Climate Swaps.
National government transfers
High - much evidence available
Enabling conditions and success factors
- Robust and transparent public financial management systems should be in place to ensure that transferred resources are allocated to appropriate climate action investments.
- If national finances are available, this is a rapid and simplified method of topping up municipal resources.
Challenges and risks to implementation
- Using national and municipal finance as the sole source for a major investment means taking on high risks and possibly losing all the resources if the project fails.