Low Carbon Cities : Exploring New Crediting Approaches to Deliver Carbon and Climate Finance

With accelerated urbanization and growing population density, cities have become centers of global economic activity. Also, the urban sector accounts for a considerable share of the world’s greenhouse gas emissions. Reducing cities’ carbon footprint will become an important factor in meeting the climate change goals of the Paris Agreement. In developing countries, rapidly urbanizing areas hold the largest climate change mitigation opportunities in sectors such as urban development, transport, energy, and buildings. To enable such transformative actions, more needs to be done to effectively deliver climate finance to cities. This report, prepared under the Innovation Series of the Carbon Partnership Facility of the World Bank, discusses how new crediting approaches can help cities mobilize financing for climate change mitigation. The report analyzes real-life examples from Brazil, the Czech Republic, Thailand, and Morocco and suggests possible ways to use crediting approaches both under carbon market mechanisms and as a modality to disburse results-based climate finance. Aligned with broader urban policies and investment priorities, such innovative crediting approaches can complement other financing instruments, that shape urban development and influence behavior of service providers, investors, and consumers towards low emissions actions. It can also help drive political and financial support for implementation and tracking of urban climate actions under Nationally Determined Contributions.