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Financing Climate Futures

Rethinking Infrastructure

image of Financing Climate Futures

Infrastructure worldwide has suffered from chronic under-investment for decades and currently makes up more than 60% of greenhouse gas emissions. A deep transformation of existing infrastructure systems is needed for both climate and development, one that includes systemic conceptual and behavioural changes in the ways in which we manage and govern our societies and economies. This report is a joint effort by the OECD, UN Environment and the World Bank Group, supported by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. It focuses on how governments can move beyond the current incremental approach to climate action and more effectively align financial flows with climate and development priorities. The report explores six key transformative areas that will be critical to align financial flows with low-emission and resilient societies (planning, innovation, public budgeting, financial systems, development finance, and cities) and looks at how rapid socio-economic and technological developments, such as digitalisation, can open new pathways to low-emission, resilient futures.

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Ensure fiscal sustainability for a low-emission, resilient future

The climate challenge requires governments to align all channels of public finance with climate and growth objectives, while also taking into account medium-term budgetary cycles and longer-term fiscal sustainability. This chapter describes why public budgets play a central role in creating incentives for shifting finance towards low-emission, resilient investments. It describes barriers facing governments as well as the opportunities to be gained from the transition to a low-emission, resilient economy. Four priority actions are identified: diversify government revenue streams away from fossil fuels, align fiscal policies with climate objectives, align incentives and mandates of all public institutions with climate objectives, and anticipate and address the social consequences of the low-emission transition.

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