"""""""""""""""" Cities Climate Finance Leadership Alliance

There are several “tax advantage tools” local governments can use to attract developers of projects that enhance low-carbon and resilient development. Investment Tax Credits (ITC) and Production Tax Credits (PTC) are two commonly used tax credits to stimulate investment in sustainability projects. However, many incentives are available and applied in many different contexts globally. For instance, they could apply to building standards incentives, such as energy efficiency and high density.

Instrument category

Municipal own source revenue (OSR) and policy steering instruments

Implementation status

Moderate - tried and tested

Enabling conditions and success factors
  • Decentralized government and a reasonably well-developed taxation system should be in place for cities to implement tax incentives and rebates.
Instrument benefits
  • A flexible tool that can incentivise private sector entities and inhabitants to invest in low-carbon measures such as energy efficiency.
Challenges and risks to implementation
  • Governments cannot give favourable conditions without first taxing citizens to obtain the money. This means that subsidies come with the hidden cost of taxation. Ultimately, taxpayers will have to pay higher taxes to fund government subsidy programs.

Want to share new instruments?

The Alliance is actively seeking updates to the financial instruments library. Please complete the form to suggest additional instruments.

Fill out the form