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).
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.