Date: 25/02/2023

Relevance: GS-3: Biodiversity and Environment

Key Phrases: Cleantech system, Cash-starved, regulatory frameworks, provincial or federal governments, functional flexibility, State of Cities Climate Finance Report, urban local bodies (ULBs).

Context:

• Urban Local Bodies (ULBs) can effectively contribute to and accelerate India’s cleantech system only if a proper financial framework is put in place.

Key Highlights:

• Housing more than half of the world’s population, cities generate 50 percent of the global waste and consume two-thirds of the world’s energy.
• Cities emit 80 percent of greenhouse gas emissions, putting them on the frontlines of climate shocks such as heatwaves, flooding, and health-related problems.
• Moreover, more than 80 percent of the annual global costs of adaptation to climate change are estimated to be borne by urban areas.
• Such trade-offs are especially prevalent in African and South Asian cities.
• Resource gaps act as major impediments to achieving urban circularity and building green infrastructure.

Urban Green Challenges

• As cities recover from the economic disruption of COVID-19, there is a renewed focus on mobilising investment for low-emission and climate-resilient urban infrastructure.
• Investment opportunities in six sectors (waste, water, renewable energy, electric vehicles, public transport, green buildings) in emerging markets alone amount to US$ 2.5 trillion annually through 2030.
• However, urban local bodies (ULBs), particularly in the developing world, often face access barriers to financial support for its implementation.
• They must either rely on fiscal transfers from the provincial or federal governments or make difficult choices that prioritise local needs.
• Insufficient revenues to meet increased infrastructure demands and the inability to access capital due to fiscal dependencies autonomously have made ULBs vulnerable and less efficient.
• Cash-starved, they are rendered further inefficient and ineffective.
• ULBs’ effectiveness and functional flexibility get further complicated due to uncertainties over regulatory frameworks and tax policies,
  • the lack of expertise in project development,
  • lack of control over resources,
  • poor infrastructure planning,
  • high transaction costs and a dearth of effective funding models at the city and regional levels.

Initiatives For Raising Urban Green Financing

• The 2014 Climate Summit by the Cities Climate Finance Leadership Alliance launched one of the initial comprehensive frameworks for tracking urban climate finance.
  • The framework aimed to accelerate investment in low-emission, climate-resilient infrastructure in cities while bridging investment gaps.
• Through mitigation and adaptation strategies, it proposes action-oriented methods and practical tools for assessing green investments based on project-level data and sector-specific capital expenditure.
• The 2021 State of Cities Climate Finance Report : It examined urban climate investment and the barriers and steps for overcoming challenges.
  • Such continuous and in-depth evaluation measures at the national and local levels can provide ULBs with a blueprint for budgeting and channelising urban green investments.
  • For example, the alliance mapped the landscape of urban green finance in Hyderabad and Kolkata for green finance disbursements from public and private sources at both national and international levels.
• The City Climate Finance Gap Fund: It demonstrates a unique collaborative model and works directly with city groups and networks, bringing expertise and financing opportunities for sustainable urban renewal.
  • Such alternate funding instruments can provide ULBs with innovative investment opportunities for implementing projects within and across cities.

Enabling and Empowering ULBS for Green Investments

• Urban green financing follows a multifaceted and multistakeholder approach with global alliances to form a collaborative circular network beyond the centre and state.
• ULBs must partner with multilateral organisations, civil society, social enterprises, communities and private investors to make urban perspectives integral to green investment dialogues.
  • Collective insights will help investors prioritise engagement models and motivate ULBs to mainstream green objectives.
• ULBs must speak to ground realities faced by climate policymakers, climate finance practitioners, local communities, urban planners, and municipal finance officials.
  • Such local conversations can create interlinkages and bridge gaps for catering to home-grown green infrastructure demands, allowing for adaptation and periodic refinement of policies.
• Early to late-stage green funding opportunities will allow ULBs to execute finance-ready projects while regularly evaluating plans, budgets, strategies, and investment programmes.
  • This can help ULBs invest in building green and smart cities.
• Enhancing ULB personnel capability through technical assistance and capacity-building programmes for low-carbon and climate-resilient urban planning and development.
• ULBs must also gain insights from native and local communities through participatory development approaches while planning green investments.
  • This will enable local authorities to circumvent exploitation, implement best practices, and identify financers for high-quality green projects.
• Maintaining a portfolio of proposed and ongoing projects can help ULBs frequently examine the gaps in technical and financial assistance and consider the potential for attracting additional financing.
• In-depth studies of green project concepts, pre-feasibility studies, project financing and late-stage project preparation can help build and sustain an active investment pipeline.
  • This will encourage ULBs to work towards improving the overall urban quality of life and focus on clean air, public health, social inclusivity, circular economy and job creation across sectors.

Conclusion:

• Cities are a nation’s engines of growth, and green investment dialogues will have to be more sensitive towards local urban needs and follow a multistakeholder approach for raising unique and diverse green finance flows.
• India is in a race against time in meeting its climate goals and greening all finance has Financing India's Green Transition become an imperative.
• This requires concerted efforts, a cohesive approach and the collective vision of policymakers, regulators and actors in the financial system.
• The way forward is to accelerate the dialogue at the highest level and initiate a narrative around sustainable finance.

Source: ORF-Online

Mains Question:

Q. India’s 74th Constitutional Amendment Act of 1992 (74th Amendment) prioritized decentralization and urban self-governance of Municipalities or Urban Local Governments. Yet, India’s ULBs are among the weakest globally. Critically examine the statement. (250 words).