Almada’s Climate Fund

In 2009 the “Almada Less Carbon Climate Fund” was set up. It aimed to reduce Almada’s carbon footprint by financing energy efficiency and renewable energy investments. After the first seven years of successful operation, and leveraging over € 1.5m of investment for energy efficiency and renewable energy, in 2016 it became a revolving fund.
The most important innovation of the fund is the ‘shared benefits’ approach which encompasses different sharing schemes linking the fund and the “client department” based on the characteristics of the project. This ensures that the fund is replenished and gives extra motivation for different departments to invest in energy efficiency projects. It is also important to ensure monitoring of the measure since a non-compliance procedure is included, and the client departments can lose the shared benefit or even have a penalty imposed on their budget if they fail to operate the system correctly.

Almada’s Climate Fund (r)evolved

Almada’s Local Strategy for Climate Change contains a number of measures targeted at reducing the energy consumption of buildings and the transport sector. To support these measures, the “Almada Less Carbon Climate fund” was created in 2009 and it is supported by a specific budget line for energy efficiency and renewable energy investments dependent on an evaluation of the CO2 emissions from the municipal activities from the previous year (not a compensating mechanism but linking and making the connection between emissions, energy and investment). It supports local energy efficiency investments, serving as a benchmarking instrument for the measures of other key players in the mitigation of GHG emissions, from both the public and private sectors. After seven years of successful operation, the fund is now being redesigned and upgraded to become a revolving fund. This means that the cost savings resulting from implemented energy efficiency measures will be returned directly to the Fund, ensuring leverage of the fund and boosting further investments in a clean energy transition.

The most important innovation of the fund is the ‘shared benefits’ approach which assumes different sharing schemes between the fund and the “client department” based on the characteristics of the project. The main assumptions and objectives are to ensure the sustainability and a leverage effect of the fund, automatically prioritising the most cost-efficient projects, and to directly benefit the “beneficiary department”. This will be done by increasing the budget of the “client department” on year+1 investment and increasing the fund in a shared proportion in line with the savings. The need to directly benefit the “client department” comes from the fact that the energy bills are paid for by the financial department and not directly by the “client department’s” budget. Conversely, the financial department will see its budget decreased in the same proportion as the savings. For a project with a very high return on investment the proportion of savings to the fund and client department will be 50/50 until the end of the project lifetime. This ensures that the fund is reimbursed and gets extra funds if the payback time is small and the project lifetime is longer.The basic idea of the scheme is to maintain the initial structure to ensure continuity of the existing mechanism and financial flows, whilst including a revolving procedure. In order to build upon the work already developed and also to minimise risks from projects where energy savings do not generate large amounts of savings in monetary terms, a hybrid solution has been developed. This solution uses the existing mechanism but mimics the inflow to the fund of energy savings and an outflow to “client departments” based on the result of the projects. Everything is based on the same dedicated budget line for the fund which is used exclusively for energy efficiency and renewable energy investments.