Almada Less Carbon Climate Fund [PT]

As part of a community with a drive to reduce carbon emissions Almada faces many challenges, including a high population density (c. 2,500 people per km2), proximity to a much larger city (Lisbon) and a high demand for energy in the transport, buildings (houses and offices) and industrial sectors.

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). 

The fund is managed by the Energy Agency of Almada (Ageneal) who also provide the expertise to ensure that the projects save money and reduce the municipalities carbon footprint. Since the fund was established many projects have been undertaken including the energy certification of all municipal buildings and LED installations in traffic lights, historical monuments and public lighting. Solar PV has also been installed in all municipal sports facilities.

The total investment by the municipality in the Less carbon Climate Action fund is €1,900,000. This has helped to reduce the carbon footprint by 1000 tCO2/yr, reduce energy consumption by 3,000MWhr/yr and saves the municipality €375,000 per year on energy costs.

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.

Innovative financial scheme

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 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 main 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 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.

Key Success Factors (Replication Potential)

As it was remarked before, the results were quite successful with a reduction the carbon footprint by 1000 tCO₂ per year, reduction of energy consumption by 3,000 MWhr per year and savings of the municipality €375,000 per year on energy costs. The total investment by the municipality in the Less carbon Climate Action fund is € 1,900,000. The capacity of replicability is potentially high.