A recent report on low-carbon city finance by South Pole Group in collaboration with the Swiss Federal Institute of Technology finds that the monetization of development co-benefits significantly improves financial viability.
The report examines the fact that urban areas account for 70% of carbon emissions, but only a small share of Clean Development Mechanism (CDM) projects under the Kyoto Protocol and only 30% of public climate finance are invested in urban areas. Suggesting that the main reasons for this is that most urban climate change mitigation projects provide development rather than climate benefits, it questions whether alternative mechanisms can mobilize urban mitigation projects.
By analyzing a set of three case studies — representative urban waste and transportation projects in Indonesia, Kenya, Sri Lanka — the study compares the market and economic value of climate and development co-benefits. By examining the monetary value of co-benefits accruing in local communities, they find that while climate benefits have little effect on projects' financial viability, and can be effectively ignored, by contrast, the monetization of development co-benefits significantly improves financial viability.
These findings highlight the importance of local, national and international financing and policies that monetize such development co-benefits. In the broader context of the UN Sustainable Development Goals outlined by the Paris Agreement, it shows that integrating social development and climate mitigation is a holistic way to ensure the sustainable development of developing communities, and the establishment of a strengthened low-carbon economy.