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the local governments, local funds or fund management organizations
to provide joint financing models in their efforts to promote a low
carbon economy.
Box 2.1: Cooperation between Central Financial Organization
and Local Government
The European Investment Bank (EIB) cooperated with the European Commission in 2.2
adopting the EU Structural Funds to leverage the private investment in the low carbon
city projects. A relatively typical financing mechanism in this respect is shortened as
JESSICA. JESSICA ensures that the public sector makes investment in a paid way and
provides fund for projects which cannot obtain fund from the commercial sector. It
does not replace other existing financing forms in the public sector, such as grant, but
is a supplement to them and balances the risk and return in a better way for investors.
JESSICA requires participation of the government decision makers, so it can provide the
local governments with greater policy space and obtain more professional information
from the commercial sector.
From the partnership between JESSICA and the British government, we see that the
organizational structure of JESSICA can be divided into two parts: the Holding Fund,
which is managed by the EIB and is responsible for formulating overall strategies;
Urban Development Fund (a general reference rather than the exact name), which is
responsible for receiving the fund from the Holding Fund to handle specific projects by
using the fund management experience and skills of the private sector for the purposes
of promoting low carbon growth and maximizing the benefit of the projects. By applying
for fund from the Urban Development Fund, the applicant of a project ensures normal,
smooth implementation of the project concerned.
One of the funds which participate in the management of JESSICA is London Green
Fund. The Fund was founded in November 2009 with registered capital of 100 million
pounds to hceolpnttrhibeuCteOd2 emission reduction in London. Of the capital, the ERDF project
of London 50 million pounds; London Development Agency contributed
32 million pounds; and London Waste and Recycling Board contributed 18 million
pounds, all aiming to help London in the carbon dioxide emission reduction projects.
As manager of London Green Fund, the EIB provides different urban development funds
with capital to support their cyclic economy and energy efficiency programs.
Fiscally-supported Guarantee Funds
Providing guarantee for projects with fiscal support can effectively
lower the risk and raise the expected rate of return of projects. As
shown in Table 2.8, the practice of providing guarantee with public
fund is already present, although it has seldom been used in the low
carbon growth area. We propose that the local governments adopt
similar guarantee mechanisms to provide guarantee services for the
low carbon economic sectors in their investment activities.
Chapter 2 Innovative Financing for Low Carbon Development 99
to provide joint financing models in their efforts to promote a low
carbon economy.
Box 2.1: Cooperation between Central Financial Organization
and Local Government
The European Investment Bank (EIB) cooperated with the European Commission in 2.2
adopting the EU Structural Funds to leverage the private investment in the low carbon
city projects. A relatively typical financing mechanism in this respect is shortened as
JESSICA. JESSICA ensures that the public sector makes investment in a paid way and
provides fund for projects which cannot obtain fund from the commercial sector. It
does not replace other existing financing forms in the public sector, such as grant, but
is a supplement to them and balances the risk and return in a better way for investors.
JESSICA requires participation of the government decision makers, so it can provide the
local governments with greater policy space and obtain more professional information
from the commercial sector.
From the partnership between JESSICA and the British government, we see that the
organizational structure of JESSICA can be divided into two parts: the Holding Fund,
which is managed by the EIB and is responsible for formulating overall strategies;
Urban Development Fund (a general reference rather than the exact name), which is
responsible for receiving the fund from the Holding Fund to handle specific projects by
using the fund management experience and skills of the private sector for the purposes
of promoting low carbon growth and maximizing the benefit of the projects. By applying
for fund from the Urban Development Fund, the applicant of a project ensures normal,
smooth implementation of the project concerned.
One of the funds which participate in the management of JESSICA is London Green
Fund. The Fund was founded in November 2009 with registered capital of 100 million
pounds to hceolpnttrhibeuCteOd2 emission reduction in London. Of the capital, the ERDF project
of London 50 million pounds; London Development Agency contributed
32 million pounds; and London Waste and Recycling Board contributed 18 million
pounds, all aiming to help London in the carbon dioxide emission reduction projects.
As manager of London Green Fund, the EIB provides different urban development funds
with capital to support their cyclic economy and energy efficiency programs.
Fiscally-supported Guarantee Funds
Providing guarantee for projects with fiscal support can effectively
lower the risk and raise the expected rate of return of projects. As
shown in Table 2.8, the practice of providing guarantee with public
fund is already present, although it has seldom been used in the low
carbon growth area. We propose that the local governments adopt
similar guarantee mechanisms to provide guarantee services for the
low carbon economic sectors in their investment activities.
Chapter 2 Innovative Financing for Low Carbon Development 99
