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Finance Fit for Change

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

27 March 2023, 9:00 UTC 3 min read

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 today 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.

Notes to editors:

For any media enquiries, including interview requests, please contact Sophie Benger, Senior Communications Manager, Climate Group, [email protected]

About the Under2 Coalition

Climate Group is the Secretariat to the Under2 Coalition, which is the largest global network of states, regions, provinces and other subnational governments committed to achieving net zero emissions by 2050 at the latest. Follow us on Twitter and LinkedIn @ClimateGroup, #Under2Coalition.

About Climate Group   

Climate Group drives climate action. Fast. Our goal is a world of net zero carbon emissions by 2050, with greater prosperity for all. We focus on systems with the highest emissions and where our networks have the greatest opportunity to drive change. We do this by building large and influential networks and holding organisations accountable, turning their commitments into action. We share what we achieve together to show more organisations what they could do. We are an international non-profit organisation, founded in 2004, with offices in London, New Delhi and New York. We are proud to be part of the We Mean Business coalition. Follow us on Twitter @ClimateGroup.   

About Pengwern Associates

Pengwern Associates is a UK-based consultancy specialising in the economics of climate change, the environment, international development and the linkages between them. Across these areas, it provides advice to support strategy development, decision-making and implementation, drawing on both quantitative and qualitative analysis.

About Stiftung Mercator

Stiftung Mercator is a private and independent foundation. Through the projects it supports and through its own activities, it is committed to a society characterized by openness to the world, solidarity and equal opportunities.

Since 1996, Stiftung Mercator has dedicated itself to establishing the social prerequisites for people of different backgrounds, convictions and social situations to live together in peace.

To this end, Stiftung Mercator makes it possible for young people to obtain a comprehensive education and enhances their self-fulfilment. In addition, it supports mutual understanding and exchange between people of different cultures and stands up for democracy and the rule of law in a unified Europe. The foundation promotes science and research relating to the objectives it pursues for the benefit of everyone. In a new area of thematic focus, the foundation will be exploring the impact of digitization on democracy and society. Stiftung Mercator wants to preserve nature and the environment, and supports projects that highlight ways of achieving climate neutrality.


Finance Fit for Change_Climate Group_March 2023.pdf

Size: 36.33 MB

Date added: 27/03/23