Deepening the conversation on the access of financing critically needed for climate response action at the local government level

Sustainable Energy Africa (SEA) recently held a dialogue meeting under its Vertical Integration Low Emission Development (V-LED) project to deepen the conversation on accessing climate finance. The discussion interrogated the actual nuts and bolts of this highly sought after aspect required for mainstreaming climate response action into service delivery functions such as the opportunities; innovations and constraints; governance; and institutional issues.

By bringing together a range of stakeholders such as National Treasury, the Independent Power Producer’s Procurement Programme Office; Development Bank of Southern Africa (DBSA); City of Joburg, Ekurhuleni Metro, City of Cape Town and City of Tshwane, George Local Municipality; GIZ; USAID; Palmer Development Group (PDG); OneWorld Sustainable Investments and SEA, key questions on financing low-carbon initiatives were interrogated. These included how do cities finance these low carbon interventions? To what extent can municipalities draw on existing income sources to finance climate change response action? Where are the gaps? What can be done to leverage critical change that is required?

A framing session provided by SEA kick-started the dialogue session by presenting what can be achieved if financing were available. Using the SEA city-wide mitigation potential study conducted using 27 of the country’s large cities, the analysis shows that implementation of feasible emission-reducing interventions at scale by these cities would result in a lowering of GHG emissions by 38% off the Business as Usual trajectory, by 2050. These interventions include energy efficiency in all sectors as well as local electricity generation from large-scale renewable energy and small-scale embedded generation (rooftop PV). The research shows that if no action is taken (under a Business-as-Usual pathway), the energy consumption and emissions will double by 2034 and 2040 respectively - a highly unsustainable option. Funding these interventions is one of the major hurdles to implementation. Questions like ‘Where does the financing come from?’ and ‘who pays the upfront costs?’ were probed.

Although National Treasury and PDG shared information on financing mechanisms which are available for municipalities, it was apparent that there are no intergovernmental transfers/grants that explicitly target and fund climate action at the local level other than the Energy Efficiency Demand-Side Management grant. In part, this may be due to climate response not being mainstreamed into municipal planning and operations as it is perceived to be a stand-alone issue, unlike the employment, development and poverty priorities which are encompassed within all government policies. The only climate specific fund is the Green Climate Fund which is administered by the DBSA. DBSA however, highlighted that the application processes are onerous, and urged municipalities to think outside of the box when developing their funding proposals so that they are robust enough in terms of bankability.
However, despite these challenges, much is happening even without specific financing and without the legislative and policy frameworks in place. For example, the City of Cape Town, Ekurhuleni Metro and City of Joburg have been able to leverage funds for their initiatives. The City of Cape Town has received funding on the strength of its robust climate responsive policy direction, Ekurhuleni’s Council approved their Energy and Climate Change Strategy which enabled them to secure budget allocation,and City of Joburg’s raised levies to fund its large solar water heater programme. Smaller municipalities on the other hand do not have the same level of capacity and resources as the larger metros, however, there is a possibility for them to possibly work at the district level.

While there have been creative ways of financing climate initiatives, taking these to scale in order to reach the required emission reduction target of 38% off the Business as Usual trajectory, by 2050 requires municipalities to engage in local renewable energy production. This is an area that is currently hampered by the regulatory environment which is not explicitly clear about how municipalities can generate or purchase renewable energy from Independent Power Producers. How municipalities can leverage change/opportunities despite all the constraints and challenges becomes then a crucial question.
The discussion led to a potential new way of approaching and framing the problem of climate mitigation. South Africa is faced with the triple challenge of poverty, growth and unemployment and this is perhaps the starting point. For example the question to ask is ‘Will this job creation project be undertaken in a sustainable manner?’ Or ‘how do we find solutions to the unemployment problem in a manner that addresses the green economy?’ By concentrating attention on these areas and working within a sustainable and environmentally benign manner, the emissions target can be realized. This method brings about an integrated approach to solutions.

It was acknowledged that we need a paradigm shift in our thinking. Municipalities need to continue doing their work and pushing the boundaries. In particular there is a need to have climate response mainstreamed into all government work, to align and integrate the issues, to see them as part of government’s mandate and not placed in a silo.
This SEA led dialogue meeting on accessing climate finances at the local level was a productive good practice exchange forum that embraced excellent participation, quality discussions and open engagements from participants. It marked an example of an all-inclusive platform aimed at strengthening national and subnational capacities to promote climate resilient low carbon development at the subnational level.

For more information on accessing municipal finance click here