Commonly, local government revenues are insufficient for climate action related projects, and they require additional support to catalyse private sector investment – similar to viability gap funding. The support from different government levels can be made conditional upon achieving certain performance targets of an infrastructure project (e.g. meeting a pre-defined emission reduction or serving a specified amount of people).

Instrument category

National government transfers

Implementation status

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.
Instrument benefits
  • 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.

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