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Local Finance Platforms 2.2
The establishment of local financing platforms can effectively facilitate
and convenience the local governments in their efforts to develop
new financial instruments. Given the popularity of the practice of
financing the infrastructure construction through urban development
investment companies, in this section, we will focally analyse the issue
of facilitating local governments in issuing low carbon bonds and the
establishment of local low carbon centres.
It is important to ask how cities can be enabled to obtain low carbon
growth loans in better and more convenient ways that can finance low
carbon development via the issuance of bonds. This is an important
part of innovation in low carbon financing in the traditional financial
market. At present, the local governments, including those of the OECD
countries, still have a rather limited use of both the loans and bonds to
serve this purpose. Some countries expressly ban local governments
from raising fund through bonds, while others allow them to seek
short-term loans yet prohibit them from seeking long-term loans in
fund raising. However, a study by Della Croce et al. (2011) shows that
infrastructure development can leverage the size and efficiency of the
financing through loans or bonds more effectively. In fact, the size
of a city’s borrowings and the revenue of the city have the following
relationship—the more (expected) revenue the city has, the more credit
the city can obtain, hence, the more convenient it is for the city to finance
via loans and bonds. With respect to the low carbon financing via the
issuance of bonds, a financing form of relatively greater referential
value to China is that the central and local governments jointly issue
green bonds to finance the low carbon projects at the local level. For
instance, the World Bank facilitates cities in middle- and low-income
countries in their green bond financing efforts, but on the condition
that the central governments of these cities cooperate and provide
guarantee for them.
A study of the Climate Bonds Initiative shows that, considering
the relatively wider area of emission reduction and climate change
response, there are more than 1,000 climate themed bonds at present
across the world; these bonds are created by 207 issuers in the size
of about USD 174 billion. Companies (including listed companies and
non-listed SOEs and private enterprises) account for 82 per cent of
these bonds, followed by banks and financial institutions (13 per cent),
project bonds (3 per cent), and municipal bonds (2 per cent). In addition,
there are 204 billion US dollar worth bonds of which 50 per cent of the
income and activities are related to the climate economy. Except the
Chapter 2 Innovative Financing for Low Carbon Development 101
The establishment of local financing platforms can effectively facilitate
and convenience the local governments in their efforts to develop
new financial instruments. Given the popularity of the practice of
financing the infrastructure construction through urban development
investment companies, in this section, we will focally analyse the issue
of facilitating local governments in issuing low carbon bonds and the
establishment of local low carbon centres.
It is important to ask how cities can be enabled to obtain low carbon
growth loans in better and more convenient ways that can finance low
carbon development via the issuance of bonds. This is an important
part of innovation in low carbon financing in the traditional financial
market. At present, the local governments, including those of the OECD
countries, still have a rather limited use of both the loans and bonds to
serve this purpose. Some countries expressly ban local governments
from raising fund through bonds, while others allow them to seek
short-term loans yet prohibit them from seeking long-term loans in
fund raising. However, a study by Della Croce et al. (2011) shows that
infrastructure development can leverage the size and efficiency of the
financing through loans or bonds more effectively. In fact, the size
of a city’s borrowings and the revenue of the city have the following
relationship—the more (expected) revenue the city has, the more credit
the city can obtain, hence, the more convenient it is for the city to finance
via loans and bonds. With respect to the low carbon financing via the
issuance of bonds, a financing form of relatively greater referential
value to China is that the central and local governments jointly issue
green bonds to finance the low carbon projects at the local level. For
instance, the World Bank facilitates cities in middle- and low-income
countries in their green bond financing efforts, but on the condition
that the central governments of these cities cooperate and provide
guarantee for them.
A study of the Climate Bonds Initiative shows that, considering
the relatively wider area of emission reduction and climate change
response, there are more than 1,000 climate themed bonds at present
across the world; these bonds are created by 207 issuers in the size
of about USD 174 billion. Companies (including listed companies and
non-listed SOEs and private enterprises) account for 82 per cent of
these bonds, followed by banks and financial institutions (13 per cent),
project bonds (3 per cent), and municipal bonds (2 per cent). In addition,
there are 204 billion US dollar worth bonds of which 50 per cent of the
income and activities are related to the climate economy. Except the
Chapter 2 Innovative Financing for Low Carbon Development 101
