For cities across Europe tackling climate action and energy efficiency, the need for innovative financing grows ever more acute. The first Prospect+ policy dialogue webinar, held in late 2023, centred on reducing dependence on public subsidies and exploring alternative financing models such as green bonds, crowdfunding, and public-private partnerships. The discussion provided a platform for over 100 participants and 11 expert speakers to discuss innovative strategies to finance urban sustainability efforts. You can watch the full dialogue and read about some key insights below, or read the detailed summary here.
The primary theme of the webinar was the gradual shift from reliance on traditional public subsidies toward innovative financing mechanisms. Cities are increasingly exploring financial tools that leverage private capital, particularly as national and EU-level subsidies fall short of covering all the financial gaps in climate and energy initiatives. The webinar underscored that diversifying funding sources is critical for cities to achieve their climate goals. A significant takeaway was the need for cities to develop internal capacity to engage with innovative financing models effectively, with 96.7% of public authority representatives emphasising the need for additional knowledge and resources to explore these new avenues.
Several barriers persist, including the complexity of regulatory frameworks, particularly at the national level, and the difficulty in building partnerships with private investors, as noted by 53.3% of respondents in the accompanying survey. The role of EU-level programmes in supporting capacity building was also highlighted, suggesting that cities must have the opportunity to actively engage in such programmes to drive progress.
Regulatory reforms
One of the critical barriers identified was the misalignment between national regulations and local financing needs. Vlasta Krmelj, Mayor of Selnica ob Dravi in Slovenia, highlighted the need for collaboration between energy and finance ministries to create clearer guidelines for local authorities. The lack of such frameworks is slowing progress, especially for municipalities aiming to implement innovative projects like green bonds or crowdfunding.
The need for more support in capacity building, both in terms of financial advisory services and peer learning, was a recurrent theme. Various speakers, including Alicia Villazan Cabero from Valladolid City Council, emphasised the value of inter-city learning networks like Eurocities that share legal frameworks and strategies. Such collaborative efforts across European cities can foster innovation by creating consortia for joint projects, thereby enhancing access to grants and other financing opportunities.
Case studies
A series of practical case studies presented during the webinar illustrated the potential of alternative financing mechanisms.
In Spain, Miguel Ángel García of CARTIF Technology Centre discussed the success of blending public funds with private investments through Energy Service Companies. A key takeaway from his presentation was the importance of early community engagement, which helps build trust and ensures citizen buy-in for projects aimed at improving energy efficiency.
Sanela Mikulčić Šantić of the KLIK Cooperative in Croatia introduced an innovative crowd-investing project in Križevci. This project, which raised €54,000 for a photovoltaic installation, demonstrates the potential of mobilising citizens’ investments in local renewable energy initiatives. Her case exemplifies how even smaller municipalities can leverage crowdfunding to finance sustainable energy projects while offering residents attractive returns on their investments.
Sandrine Deternay from the City of Albertville shared the city’s strategy for financing energy-saving measures through an internal revolving fund. This approach involves reinvesting the savings from energy efficiency projects into future initiatives, thereby creating a self-sustaining cycle of funding that reduces reliance on external subsidies.
Multi-level action
While cities are at the forefront of implementing climate and energy initiatives, national-level support remains indispensable. The webinar brought attention to the disconnect between local needs and national regulations. In Poland, for example, Kraków has experimented with various financing models, but the slow pace of national regulatory reform has hindered broader adoption of innovative instruments like energy performance contracting. Director Andrzej Łazęcki of Kraków’s Municipal Economy and Climate Department stressed that managing renovation processes by external entities, rather than building owners, could help streamline complex urban renewal projects.
Speakers from smaller cities, such as Jolein Schorel of Amersfoort, also highlighted the regulatory challenges in implementing energy-efficient home renovation projects, which are often hampered by outdated consumer credit regulations.
Opportunities for cities
The webinar concluded with a call to action for cities to engage more proactively with EU funding mechanisms. Representatives from the European Commission outlined several key initiatives that cities can tap into, including the Covenant of Mayors, Smart Cities Marketplace, and the European City Facility. These platforms not only provide access to funding but also offer critical technical assistance, peer learning opportunities, and frameworks for implementing large-scale energy efficiency projects.
Moreover, the discussion highlighted the growing importance of private capital in financing urban sustainability efforts. Allison Lobb of Bankers Without Boundaries, stressed that for city projects to attract private investments, they must be ‘bankable,’ meaning they need clear financial viability and risk mitigation strategies. Municipalities must work toward creating enforceable contracts and transparent financial models to ensure investor confidence.
Shaping the next dialogue
Your experience and opinions can shape the next policy dialogue about access to innovative financing instruments when subsidies are limited. By sharing your needs, ideas and recommendations, you can ensure that they will be part of the conversation with decision-makers, adding to the evidence base for policy across Europe. You don’t need to be a senior expert in the field, as long as you have been involved in climate and energy-related projects and can share your observations about the impact of public authorities’ access to appropriate funding and financing. Click here to take part.
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