London Councils evaluate net zero financing options

Although London boroughs are committed to reaching net zero targets, there are significant barriers in their way. These include: a lack of clarity around their role and the framework of support, insufficient resources worsened by long-term austerity, capacity constraints related to long-term budget cuts, fragmented national funding for net zero ambitions, and supply chain bottlenecks especially skilled workforce for net zero projects.

Consequently, London Councils has partnered with economics from Herfordshire Business School at the University of Herfordshire to produce a policy paper, 'Financing Local Net Zero', which explores public finance routes available to councils to address barriers to climate action.

The policy paper evaluates local borrowing and national funding as financing options for net zero measures in the context of available financial frameworks for both national and local government.

The paper concludes that local borrwing, although a common practice in local government and the premise of most existing net zero financing offers, is unlikely to provide viable financing, due to many local authorities having reached their borrowing limits, the funds needed for net zero investment exceeding the borrwing options for local authorities, and because councils may be required to maintain any flexiblity for borrowing for investments in statutory services.

Thus, the reserach highlights the urgency of additional need-sbased and non-competitive funding from the UK government for local authorities to scale up net zero investmetns in retfrofit, transport, and energency decarbonsation projects, and calls on the government to incrase funding support for locla authority climate investmenst through scaled-up grants and where possible a mix of grants, public lending equity, in line with the levels recommended by the Climate Change Committee.

The second phase of the research examines private and blended finance options, and will be the subject of a future paper.