A study of local governments' challenges and processes in financing their greenhouse gas abatement initiatives

Local government has the potential to lead the transition from a high to low carbon economy. As a tier of government, it holds responsibilities for urban planning, building approvals, waste management, transport, street lighting and managing its own buildings and facilities. It is subject to the vertical interdependences with other tiers of government and horizontal pressure by its community for delivering services and facilities. Both factors directly impact on its financial capabilities and decision-makings. This research has identified institutional capacity constraints as a major barrier to the investment in alternative energy projects. By examining the financial evaluation and alternative energy investment decision-making processes of five urban councils, it found: most of the initial financial assessments for alternative energy projects were undertaken by environmental staff in isolation from those with specific financial expertise and without accessible financial-evaluation tool; institutional and political leadership to achieve committed greenhouse gas emission targets is inconsistent; and the lack of national guidelines in tracking and reporting of alternative energy projects and emissions reduction progresses for the sector, which has rendered meaningful comparative analysis between councils and quantifiable aggregated-progress reporting impossible. To address these constraints, a simple financial evaluation model was constructed to support investment decision-making process. This model included investment-criteria of NPV, IRR, discounted payback period and LCOE which are commonly used by financial managers in their assessment of medium to large capital investment decisions. A standardised national tracking and reporting platform is also recommended to enable local government in realising its potential as a leader in alternative energy investment and policy.