On 6 November 2024, PROSPECT+ hosted a session at the Smart City Expo World Congress in Barcelona to highlight both the opportunities and challenges in using innovative financing instruments as traditional subsidies are not enough for all.  

The session underscored the importance of proactive, collaborative efforts between cities, private investors and decision-makers on the EU and national levels.  

The panelists explored practical ways public authorities and investors can collaborate, and what support they need, to overcome financing challenges and bridge funding gaps for energy transition. These, for example, include improved access to information on and promotion of the various available support in the local languages, which has not been the case for many EU-level initiatives. 

Moderated by Sylwia Slomiak (Eurocities/PROSPECT+), the session featured insights from: 

Marcin Gradzki (City of Warsaw), who shared local-level reality of continuing energy transition without traditional subsidies when access to alternative attractive financing options is still limited due to many barriers. He emphasised the need for addressing the municipal dept caps and regulations that prevent cities from taking loans and setting up certain financing instruments, such as bonds. He discussed the types of national and EU-level support that cities need to accelerate their shift to climate neutrality (e.g. Technical Assistance tailored to cities’ needs that addresses existing regulatory bottlenecks in respective countries). He also explained why City Climate Contracts are useful for long-term planning and stressed that cities need faster decisions and more efficient access to existing support. 

Georg Houben (European Commission's Directorate-General for Energy - DG ENER), who provided insights into EU programmes and initiatives that cities can tap into, such as the Covenant of Mayors and the Smart Cities Marketplace – the latter offering help with identifying investors and improving project bankability. Georg also highlighted the benefits of joining international consultations and how cities can bring local perspectives into broader policy discussions (example). 

Tommaso Buso (Bankers Without Boundaries), who outlined the mutual benefits of public-private partnerships, including investors’ focus on ESG targets. He encouraged cities to develop long-term investment plans that are transparent, detailed, and aligned with investor expectations. He stressed the need for cities to present clear, bankable projects that meet investors’ priorities and highlighted the importance of risk assessments in attracting investors’ interests. Tommaso also explained the benefits of City Climate Contracts for investors, and of the new Climate City Capital Hub which will support cities in finding capital for energy transition. 

Shifting away from subsidies: the reality on the local level 

To set the scene for the discussion, Sylwia shared an overview of preliminary results of PROSPECT+ consultations on public authorities’ attitudes to innovative financing instruments.  

The consultations have revealed a complex landscape in cities’ transition to less traditional financing options, with major barriers stemming from restrictive national regulations and limited local capacity.  

Respondents have said they need better national regulations, clearer guidance and targeted capacity-building.  

Interest in innovative financing instruments 

Many cities are interested in using alternative financing options to meet the funding gaps, yet face challenges due to insufficient expertise and resources, particularly with instruments like green bonds and guarantee funds. The heavy reliance on subsidies persists as cities navigate complex legal frameworks, which often restrict the options they actually have.  

Doubts and needs 

Political support and success stories serve as significant motivators, though many cities still hesitate due to bureaucratic complexity and perceived risks, including doubts over transparency of choosing private sector partners and capital providers. Additionally, cities are frustrated by inconsistencies between national and EU regulations, which create bottlenecks and leave them dependant on public funding.  

Respondents have noted that accessing external expertise and building staff capacity are essential. Some cities are beginning partnerships with experts, but they stress the need for more coordinated support and knowledge-sharing to make these efforts impactful. 

Need for rapid action on national level to improve regulations 

The findings highlight an urgent need for regulatory reforms and policy incentives on national level to prepare cities and the local markets to the new reality where access to traditional subsidies will soon be significantly reduced.  

Join the consultations 

The discussion in Barcelona also opened doors for participants to contribute to policy recommendations for the 2025 Policy Dialogue, providing a platform to shape support mechanisms for cities transitioning from traditional subsidies.  

More information:

• Join the consultations: add your contribution here. 

• Join our Community of Practice: click here 

• Learn more about Policy Dialogue on public authorities' attitudes to innovative financing instruments: click here