Without climate finance for states and regions there can be no net zero, warns Climate Group

Funding for climate action and policies at subnational level is essential to keep the world on track for 1.5 degrees of warming, especially as state and regional governments represent over 50% of all environment and climate spending.

This is according to new research, published by Climate Group, looking at the mechanisms states and regions can use to raise funds to accelerate to net zero and adapt to climate change: particularly carbon pricing, green bonds, national government funding and taxes and fees. The report also examines ways in which subnational governments can effectively spend government finance and how they can help other groups access that finance too.

While there are clear differences in their level of autonomy, the report makes a number of recommendations about how governments can make better use of climate finance and the support they need to do so. It especially highlights opportunities for:

  • Greener procurement, where subnational governments spend proportionately much more than national governments;
  • Tailored incentives and regulations for private sector investors to align government and business action;
  • Better support for states and regions in accessing existing finance sources and understanding different mechanisms for raising climate finance in a sustainable way.

Net zero goals can’t be reached without proper climate financing – but states and regions still face too many barriers to accessing it. This is despite being the level of government closest to the people they serve and with a critical role to play in reducing emissions and improving communities’ quality of life. 

Our research shows subnational governments don’t have to wait for international institutions or national governments to take action – they can do it now. States and regions can raise funds, allocate green budgets and incentivise public-private investment while driving down emissions. This is clearly a win-win situation.
Dr Champa Patel, Executive Director, Governments and Policy, Climate Group

10 states and regions from the Under2 Coalition were surveyed in 2022-23 as part of a landmark study by Pengwern Associates to understand more about the barriers to accessing and distributing climate finance at this level of government.

These states and regions, accounting for over 8% of the population of Europe and North America – and more than 12.5% of those continents’ GDP – were:

  • Andalucía;
  • Baden- Württemberg;
  • British Columbia;
  • California;
  • Hawai’i;
  • Lombardy;
  • Madeira;
  • Northern Ireland;
  • North Rhine-Westphalia;
  • Québec

Finding innovative ways to raising climate finance is both a challenge and a necessary condition to mitigate the climate crisis. Québec is committed to use every tool at its disposal, be it carbon pricing, incentives or regulations to ensure that investments from the public and the private sectors are oriented toward achieving its climate and sustainable goals.
Benoit Charette, Minister of the Environment, the Fight against Climate Change, Wildlife and Parks at the Government of Québec

Finance will play a critical role in supporting the transition to net-zero emissions. Subnational governments have an important role to play as they account for over 50% of public investment in the OECD. We are pleased to participate in and learn from this study being released by the Under2 Coalition.
Jeremy Hewitt, Assistant Deputy Minister, Climate Action Secretariat, Province of British Columbia

The report, supported by Stiftung Mercator, also makes clear that states and regions can help other actors to access climate finance, through policies, regulations and incentives as well as through their approach to planning and information sharing. This creates a virtuous circle, with government policies supporting businesses and other organisations to make more sustainable choices that benefit both people and planet.

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