Multilevel Governance and Innovations in the Financing of Urban Climate Change Strategies

Abstract

Cities have become key policy actors in the global fight against climate change. Local climate change initiatives, however, generally come with a cost and for policies to be successful, appropriate revenue sources and financing mechanisms are necessary. Decentralization theories and municipal finance literature provide guidance on how most municipal services should be financed, yet encounter challenges when it comes to the policy area of climate change. Models based on aligning the benefits of a given municipal service with those who pay for it are of limited use, as the beneficiaries of urban climate change efforts are simultaneously local and global. Cities have been able to tailor traditional financing mechanisms (such as property taxes and user fees) to incentivize citizens to reduce their carbon footprints while generating the resources necessary to fund local climate change projects. However, given the unconventional and global nature of climate change as an urban policy area, cities will likely benefit by looking beyond the formal intergovernmental institutions that structure cities’ financing abilities. This chapter advocates applying a multilevel governance lens that recognizes the importance of new, outside actors that operate at both the local and global scales to climate change financing solutions. By acknowledging the important relationship between municipal finance and the broader multilevel frameworks that govern climate change policy, cities have the opportunity to pursue innovations in municipal finance to support their climate change objectives.