How will Philadelphia finance climate change?

The world has likely failed to achieve the global goal of limiting temperature rise to 1.5 degrees Celsius. As nations have reported their efforts to limit greenhouse gas and to adapt to the effects of global warming, they have largely neglected to take cities into account, despite the fact that cities are responsible for 70% of the world’s greenhouse gas emissions and are home to more than half of the world’s population.

But a bit of good news is emerging from COP28, the U.N. climate conference in Dubai, United Arab Emirates. This glaring neglect of cities is on course to be remedied thanks to the work of such important mayoral advocacy groups as C-40, of which Philadelphia is a founding member, Bloomberg Philanthropies, and business groups including the Sustainable Markets Initiative, a coalition of major insurance companies.

One notable development is the launch of a new effort to support multilevel partnerships to address climate change that brings together national, regional, and local governments. The Coalition for High Ambition Multilevel Partnerships encompasses over 60 nations’ commitments to a new reporting process that will account, for the first time, for cities’ contributions to climate adaptation and mitigation.

Second is a recognition of the scale of funding required to facilitate cities’ climate action and the first steps to bringing much-needed resources to local-level programs. The Cities Climate Finance Leadership Alliance — a coalition of more than 80 public and private finance institutions, governments, and research groups — announced its recent findings that across the globe, cities will need $5.4 trillion annually through 2030 to adapt to changing climate realities. Yet today they are receiving only 1% of those funds.

Philadelphia offers a telling example. The city has recognized the local impact of climate change and is developing integrated strategies and programs to adapt.

The 2021 “Philadelphia Climate Action Playbook” offers a series of plans to “reduce carbon pollution” and “prepare Philadelphia for a hotter, wetter future.” Building on this plan, city departments and utilities have developed their own guidance and programs. The Philadelphia Water Department’s 2022 “Climate-Resilient Planning and Design Guidance” finds that “climate impacts pose significant challenges to maintaining our core services” and offers guidance to ensure the long-term viability of the city’s water systems.

The Philadelphia Energy Authority’s Solarize Philly program helps Philadelphians reduce their dependence on fossil fuels by installing affordable solar energy. Parks and Recreation’s 2023 Philly Tree Plan offers a program to reinvigorate the city’s urban forest, which can help alleviate the extreme heat brought on by climate change.

These programs are a good start but represent just a small fraction of the investments needed.

The Pennsylvania climate cost study released earlier this year by the Center for Climate Integrity estimated the cost of climate adaptation for Philadelphia at $3.3 billion through 2040, or close to $200 million per year. Philadelphia’s 2023 budget is $5.8 billion. Put another way, the cost of climate adaptation over the next 17 years will require more than half the city’s entire revenue per year.

City revenues — even with state and federal financial support — cannot possibly finance needed investments.

How can cities like Philadelphia marshal needed resources? We, at the University of Pennsylvania, serve as the secretariat of a new global commission convened by Paris Mayor Anne Hidalgo and Rio de Janeiro Mayor Eduardo Paes that seeks to raise the importance of urban investment and offer concrete recommendations to direct more resources to cities.

Of particular note for Philadelphia is the commission’s work to enhance funding for cities through new and expanded financing mechanisms. For example, the United States has an active green bond market that can make capital available at lower costs for climate-friendly initiatives.

But at under a trillion dollars, this market is a small fraction of the $133 trillion global bond market, and inadequate to the scale of financing needed.

Philadelphia entities like the Philadelphia Energy Authority, the Board of Education, and Comcast have been active in using green bonds, but an expanded and more systematic approach is needed.

Subsidies and tax incentives provided through the federal government offer another promising avenue. Philadelphia should take a more focused look at the funds and opportunities in the Biden administration’s Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and other climate-focused federal legislation, which collectively offer the most significant financial commitment to climate change in U.S. history.

Drawing on these funds and incentives, Philadelphia will need to develop blended finance approaches that bring together public and private climate financing to help our community adapt to ever-growing climate risks.

Eugenie Birch is the Nussdorf Professor and codirector of the Penn Institute of Urban Research. William Burke-White is a professor of law at the University of Pennsylvania Carey School of Law. Mauricio Rodas is a visiting scholar at the Penn Institute of Urban Research, the former mayor of Quito, Ecuador, and the secretariat of the SDSN Global Commission on Urban SDG Finance.