Carbon-Free Regions Handbook
Finance cuts across all of the sectors covered in this book, and is a key enabler for all of the recommendations. Regional governments operate at a scale that lends itself well to organizing and delivering financial solutions, and realizing scale benefits. These finance recommendations are highly variable, with…
Land use issues present both a great threat and a great opportunity to climate goals. Some 24% of global greenhouse gas emissions come from agriculture, forestry, and other land use, but this sector can also offset this impact by 20% by removing carbon from the atmosphere.
Buildings account for almost one-third of global emissions, so they’re a critical sector to address climate change.
Transportation currently produces 14% of global greenhouse gas emissions—we can decrease the carbon intensity of transportation while increasing mobility choices and health benefits.
Waste management is part of the basic infrastructure of a community. How waste is managed has huge implications on local health, aesthetics, and economics.
27. CAPITAL AVAILABILITY
Invest capital into the infrastructure and assets of a community. Sources of capital must be secured to make those investments possible and to realize the wide range of benefits that those investments provide to the community.
Public-Private Partnerships/Green Banks
The efficient use of limited public resources can make projects more attractive to the private sector, leveraging much larger amounts of private investment for low-carbon solutions. Judiciously using public resources can help overcome market barriers and increase market activity by crowding in private sources of capital. A good example of public-private partnerships is green investment banks (GIBs). GIBs are public-purpose finance institutions designed to facilitate private investment in local low-carbon, climate-resilient projects by focusing on gaps in the market. They can be used to support small, decentralized efforts or major infrastructure projects. Some entities use a dedicated tax for specific projects to raise infrastructure funds.
- Bulgaria program overview and details
- Connecticut Public Act 11-80 creating the green bank and the bank’s legislative mandate
- Rhode Island legislation creating an infrastructure fund
- Green Bank Network
- Coalition for Green Capital
- Founding Charter for Armenia’s government-created energy financing NGO and general information
- Queensland infrastructure fund
- Armenian legislation for green funds
- NY Green Bank
Some philanthropic organizations provide investment dollars for program-related investments (PRIs). Since the investments are aligned with missions, they can usually offer more favorable terms. Some socially minded venture capital firms offer similar solutions.
- Draft legislation to allow social investment
Green bonds are regular government or corporate bonds, the proceeds of which are earmarked for use only for projects that have positive environmental impacts. These bonds broaden the investor base and are tracked to ensure they are used for environmental projects. As a variation, a revenue bond can be issued against infrastructure projects with a dedicated income stream, such as utility services.
- Green Bonds playbook and resources
- Green Bond Principles 2017
- External review of Quebec’s Green Bond program
- Climate Bonds Standard
- Green Bond project review in France
Local governments often need support to improve the financial design of project plans in order to attract capital investments. Multilateral funds are sometimes provided to developing countries. Preinvestment services can be financed to leverage larger-scale investments.
- R20’s Energy and waste project facilitator programs
- Subnational Climate Fund for Africa
- European Investment Bank
- Public-Private Infrastructure Advisory Facility funds and resources
28. FIRST-COST SOLUTIONS
Develop financing solutions that can cover the up-front costs for carbon-reduction actions that will create financial savings in the long term. These solutions will unlock more action, remove financial burdens associated with new requirements, and deliver greater financial benefits to those private stakeholders. The government’s role in these solutions can vary, with some requiring enabling legislation (e.g., property assessed clean energy programs) and others that are newer innovations needing support and introduction to the market (e.g., green leases).
Energy Savings Performance Contracts
ESPCs are contracts with a private energy services company to evaluate and deliver cost-effective energy upgrades to a facility and pay for those upgrades with the energy savings, providing a guaranteed savings and the private financing to make the upgrades. Regions can organize programs or pass legislation to allow and encourage ESPCs.
- Plan of Energy and Climate Change 2012–2020, which includes provisions for energy contracting with guarantees
- Clean Energy Investment Program
- Sample RFPs and other resources
- All US state laws for ESPCs
- Practices and Opportunities for Energy Performance Contracting in the Public Sector in EU Member States
- Energy Savings Performance Contract Toolkit
- Energy Performance Contracting: Modernizing Buildings with Guarantees
- Report on the Catalan and Spanish EPC Markets
Total Cost of Ownership Procurement Reform
Incorporating a total cost of ownership policy for the government and within the community will drive procurement decisions that include operating and maintenance costs. This approach supports greater energy efficiency, which may be discouraged by status-quo procurement policies that rely on low purchase costs.
- Scotland’s Procurement Strategy
- Massachusetts’ Environmental Purchasing Executive Order 515
- New South Wales’s procurement directive
- Various low-carbon best practice tenders
- National Association of State Procurement Officials Green Purchasing Guide
- Local Government Green Procurement Guide
- Guidance for Leadership in Sustainable Purchasing 2.0
- Institute for Public Procurement’s white paper on total cost of ownership
- Introduction to total cost ownership
Leasing arrangements typically create a “split incentive” where building owners have little incentive to invest in energy-related capital improvements because the tenants pay the utility bills and benefit from the lower energy use. With green leasing (or energy-aligned leasing), tenants and landlords share the costs and the benefits of site energy upgrades, which can include building efficiency and renewable generation.
- UK Green Leasing Toolkit with best practice legal language
- Green Lease Library
- Landlord Tenant Energy Partnership
- Best Practices for Leasing Net-Zero Energy Buildings, Rocky Mountain Institute
- Richard J. Sobelsohn, “Trends in Green Leasing – From the Early Days to Today,” Probate & Property Magazine: Volume 30, No. 02
Property Assessed Clean Energy
PACE programs allow building owners to secure funds for energy-efficiency upgrades, and pay them back through their property tax assessments because of a public-private partnership. The result is that funds can be provided based on real estate values rather than personal or corporate credit, repayment is done through the existing tax mechanism, and the financing stays with the building rather than moving with the individual or company. PACE is active in over 20 US states, and residential PACE programs in only three states have unlocked a $5 billion market. PACE-like instruments are being developed in places like China and Europe.
- Australian legislation, called Environmental Upgrade Agreements
- Updated consumer protections for PACE: Senate bill, Assembly bill
- US PACE laws, market data, and other resources
- Best Practice Guidelines for Residential PACE and Lessons in Commercial PACE Leadership
Financing from public or private sources can be provided to bill-payers through the utility, creating a convenient option for customers, who can see the savings on their bills and pay all their energy-related costs in one place. This approach can also provide a viable business model for utilities to encourage their support of energy improvements in their service territories.
- List of all US state legislation for on-bill financing programs
- Program Design Guidelines from the State and Local Energy Efficiency Action Network
- The American Council for an Energy-Efficient Economy’s On-Bill Energy Efficiency
- Green Deal program in the UK
29. MARKET INCENTIVES
Market structures can help stimulate widespread action in the private sector. Governments can play a key role in supporting or even structuring markets to unlock that potential. These incentives help accelerate adoption and overcome status quo inertia.
Carbon Tax/Greenhouse Gas Trading
Support emissions reductions by putting a price on carbon—a carbon tax or fee—which will drive down emissions as polluting becomes more expensive. Alternatively, support setting emissions reductions targets, capping the total amount of allowable emissions, and allowing the market to determine the price with a greenhouse gas cap-and-trade policy. By putting an economic cost on carbon and creating a market for carbon-saving endeavors, governments can create market conditions that support carbon-saving solutions.
- British Columbia carbon tax legislation
- Alberta Bill 20 Climate Leadership Implementation Act (includes a carbon levy)
- State statutes and legislation for members of the Regional Greenhouse Gas Initiative’s carbon trading policy
- Carbon Tax Center
- Zimbabwe’s Carbon Tax
- Japan’s Carbon Tax
- World Bank/Ecofys State of Carbon Pricing 2017
Investment Tax Credits
Providing tax credits for projects that include renewable energy or energy-efficiency measures. Tax credits can be applied in several areas, including property taxes, income tax, value-add taxes, and others.
- Madhya Pradesh solar tax credit (and other policies)
- Santa Cruz tax exemption and credits for wind and solar
- Recommended Resources
- Taxes and incentives for renewable energy
- Africa Incentive Survey
Incentives for Clean Technology Companies
Create incentives for clean technology companies, including economic development grants, tax incentives, and public venture capital programs.
- Massachusetts law creating a state economic development office for clean technology
- North Rhine-Westphalia program to provide direct incentives to purchasers (in German)
30. REDUCED PROCUREMENT COSTS
Regional governments are well positioned to organize programs that will lower the cost to procure upgrades and assets, such as solar installations, electric vehicles, and air-source heat pumps. By organizing these programs at scale, greater cost reductions can be achieved for constituents across the region.
Reverse Auctions for Procurement
In a reverse auction, the sellers are competing to provide the lowest price, as opposed to a traditional auction where buyers are competing for a higher price. Using this approach for energy-related procurements can effectively secure lower costs, as long as other quality requirements are clearly defined.
- Gujarat Request for Selection
- Australian Capital Region Feed-In Tarrif Act, which creates provisions for reverse auctions
Aggregate Purchasing Programs
Organize aggregate (or bulk) purchasing opportunities for local governments and private businesses or citizens to secure lower prices and create a time-bound trigger to spur action. These can be direct equipment purchases or power purchase agreements.
- Go Green Purchasing for US local governments source
Our goal in North-Rhine Westphalia is to become one of the most climate friendly industrial regions in the world. Therefore, we foster innovation as well as cooperation between start-ups, traditional industry, and our science community.
‐Prof. Dr. Andreas Pinkwart, Minister for Economic Affairs, Innovation, Digitalization, and Energy, State of North-Rhine Westphalia, Germany
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More efficient buildings provide multiple benefits including lower emissions, greater comfort, improved health, and lower ongoing costs.
Regional governments can enable cities to invest in better mobility options, lowering emissions while increasing mobility choices and improving health.
Ensuring that our electricity comes from renewable or zero emission sources is critical to a cleaner and more resilient future.
Regional governments provide the right scale to support industry—the foundation of many regional economies—in transitioning to low-carbon solutions.
Sustainable and regenerative agriculture, forestry, and other land use can help offset some of the large emission impacts that this sector produces.
Managing waste in a sustainable manner can reduce greenhouse gas emissions while also creating economic opportunities.
Regional governments can organize and deliver financial solutions to enable all the recommendations covered in the Handbook.
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