2. Urban adaptation financing mechanisms

Even if municipalities often claim a lack of funding, financial resources from many different resources are available. For example are 20% of all EU expenditures in the frame of the Multiannual Financial Framework 2014 -2020 earmarked for climate change action both for mitigation and adaptation. Challenges for municipalities and other stakeholders are often to know about all available financing options, finding the option matching their case and to access these, among others (see also section 3).

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Financing for local adaptation measures is generally available through these main sources:

  • Governmental sources – mostly grants, such as international and EU funding instruments, national, regional and local/municipality budgets. These governmental sources are supplied by individuals and companies paying taxes, fees, charges, etc. 
  • Banks and other financial institutions provide loans or guarantees either directly or in partnerships with local retail banks
  • Private stakeholders such as foundations, real estate developers, companies (especially those at risk of climate change), house owners and individuals that invest directly in measures or via crowd funding and green bonds
  • No/low cost solutions through early integration of adaptation needs into urban planning and design, supporting regulations or mainstreaming of adaptation measures into other municipal areas such as water management, health, nature etc.

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Figure 1 shows the different opportunities for financing climate change adaptation in municipalities and the interplay between various involved stakeholders. In many cases, these sources are combined, e.g. by developing Public Private Partnerships or by increasing the overall budget amount by providing city or state co-funding.

Figure 1: different opportunities for financing climate change adaptation in municipalities and the interplay between various involved stakeholders

 

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