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After the Pandemic, Green Municipal Finance will be Flourishing
18 May, 2020

With the spread of COVID-19, politicians in several countries have been tested positive and quarantined; the trading in the US stock markets has been halted again and again; the telework model has been encouraged across the globe ..., the epidemic has truly become a pandemic, globally contagiously wide-spreading. In the face of this crisis, cities around the world are fighting hard against the pandemic. However, rather than responding passively, perhaps should we reflect on how we can prevent its outbreak from the source?

Ignoring “green development” philosophy may be the source of the pandemic

Looking back on human beings’ history of struggles with viruses, we see for each sudden outbreak of a new virus epidemic, human being’s fighting against it had to start from scratch, again and again. So, we can only hope to take pre-empt actions to nip off unknown epidemic crisis in the future, that is, to prevent new outbreak from the source.

Some researchers have done statistics and found, currently, 70% of new infectious diseases originated from wild animals. Moreover, modern scientists have verdict that climate change has four ways to make infectious diseases easier and more prone to spread: changing pathogens, altering disease transmission modes, weakening the autoimmune system of animals and humans, and affecting ecologic environment.

If we look beyond the micro-virus world of gene research, we will eventually find that avoiding human beings’ damage to the ecological balance of nature, adhering to the concept of green development and maintaining the balance and health of the ecological environment are the fundamental ways to prevent outbreak of new viral infectious diseases from the source.

Green municipal construction calls for more funding support

While modern medicine has proven a close link between infectious transmission and climate change, the trend of global warming has not stopped. Instead, it is dramatically intensifying. In the ten years from 2010 to 2019, global greenhouse gas emissions increased at a rate of 1.5% each year and were only temporarily halted in the years between 2014 and 2016. In 2018, the emissions even reached a record high. According to experts' predictions, the increase in global temperature may reach or exceed 3.2 °C at the end of this century, and it will bring inestimable negative impacts on human socioeconomic development and human health. 

Although many financial institutions, government agencies and private companies, in China and overseas, provide funding to support climate initiatives and actions, the climate funding at this stage is still not sufficient to achieve the goals set in the Paris Agreement. According to estimates, with China’s economic transformation and upgrading, the average financing demand for green projects such as energy conservation and environmental protection will reach RMB 2 trillion to 3 trillion annually in the next five years, while the governmental fiscal funding can only provide less than a quarter of that.

Encouraging green municipal Finance is a necessary way for cities to achieve green development

Faced with such a huge funding gap, China improved its standard system for green finance from time to time and researched green financial policies and tools to support environmental improvement, respond to climate change, and promote conservation and efficient use of resources. Among them, guiding funds to invest in green municipal projects to intensify the

 construction of green municipal infrastructure is one of the key directions in addressing climate change.

The key development direction of new-type urbanization is “green and low-carbon”. The coordinated development of Beijing-Tianjin-Hebei region, the development of the Yangtze River Economic Belt, free trade zones, and cities all demand green investment, as they see green municipal infrastructure construction will not only promote regional connectivity, but also can improve people’s livelihood, stimulate economic development and promote employment, and can also ensure sustainability of development. Therefore, green municipal finance is widely used in the green municipal infrastructure constructions such as energy conservation, environmental protection, clean energy, green transportation, and green buildings.

Internationally, the municipal finance tools can be well deployed to solve the funding shortage of local government’s urbanization and infrastructure construction. In the US, a large proportion of municipal bonds are used for environmental projects and energy construction; while in Japan and the United Kingdom, many funding sources for sewage treatment come from municipal bonds. In China, there are already cases of green municipal finance.

Qingdao Practice of Green Municipal Finance  

The Europe-China Eco Cities Link Project (EC-Link) and Qingdao City Government reached a cooperation agreement, securing funds from Shandong Green Development Fund (a fund which was jointly established by Asian Development Bank, KfW, French Development Agency (AFD), Green Climate Fund, etc., and Shandong provincial and municipal governments), to further enhance and expand Qingdao’s cooperation in municipal green finance, help the city achieve green development and effectively reduce urban greenhouse gas emissions.

Transportation and buildings are the primary factors that contribute to the growth of greenhouse gas emissions. Not only do they account for a large proportion of the total

terminal energy consumption, but they are also the main sources of air pollution and greenhouse gas emissions.

 If we can well-plan and design green transportation and energy efficiency of buildings, we can not only reduce billions of tons of carbon emissions, but also drive development of the upstream and downstream green industries.

In this cooperation, EC-LINK Project (http://www.eclink.org/eclink/zh/frontpage) made use of the advantages of municipal finance tools and introduced sufficient funds for Qingdao’s green bus corridor project and the comprehensive energy-saving renovation project of existing buildings. It replaced 953 traditional diesel buses with new pure electric buses that are equipped with a route optimization system, so as to optimize public transportation energy consumption, and achieve zero greenhouse gas emissions during the bus run. The project is expected to meet the demands of about 170 million out-trips per year by Qingdao people, and greatly improve the energy consumption structure of public transportation.

In the comprehensive energy-saving renovation project of existing buildings, it plans to retrofit facade and upgrade heating system for 15 million square meters of public buildings and old residential buildings in 5 years. It will use green building technologies to improve building energy efficiency and cut down electricity consumption, to ultimately achieve the purpose of reducing building energy consumption. 

Obviously, similar urban green solutions, such as green buildings, green bus corridors, and clean energy, are all necessary ways for cities to achieve green development and will greatly help limit climate change in the long run. In the process, green municipal finance will be very promising and flourishing.