Cities and Carbon Market Finance

The importance of cities in climate policy stems from the simple reality that they house the majorityof the world’s population, two-thirds of world energy use and over 70% of global energy use emissions. Atthe international level, global carbon markets have become an important new source of financing formitigation projects and programmes. Yet to date, the participation of urban authorities and of urbanmitigation projects in the global carbon market remains extremely limited. The under-representation ofurban carbon projects can be linked both to the difficulties to implement urban mitigation projects and tothe difficulties for cities to access the carbon market. This paper reviews 10 in–depth case studies of urbanprojects proposed and operating within the realm of Joint Implementation (JI) and the Clean DevelopmentMechanism (CDM) of the Kyoto Protocol. It explores the drivers of success for projects, examining inparticular: types of projects that have been successful and their profitability leadership and other roles ofvarious actors in project initiation development and operation (i.e. local, regional and national governmentsas well as international, private sector or other non-governmental organisations) the role of local cobenefitsand project financial structure and risk management approaches. This paper also considers howthese lessons learned may inform decisions in the future about how to best tap the potential for carbonmarkets to offer increased levels of financial support for urban mitigation projects or programmes.

OECD Environment Working Papers

Cities and Carbon Market Finance

Taking Stock of Cities' Experience With Clean Development Mechanism (CDM) and Joint Implementation (JI)