Publications Local authorities

Climate: how French local authorities are financing their investments? 

Report only available in French


According to I4CE‘s research, to meet European and international commitments made by France to carbon neutrality, French local authorities need to more than double their annual climate-related investments (from €5.5 billion to €12 billion annually), to around 20% of their current total capital expenditure.  


The aim of this study is to decipher how local and regional authorities finance their investments, across all sectors, and to highlight how the current macroeconomic context is likely to impact the need to accelerate climate-related investments.


The primary lever for financing local authority investments is their self-financing capacity 

The primary lever for financing investments made by French local authorities is their self-financing ability, generated by the surplus between their operating revenues (taxes, grants and service revenues) and their operating expenses (payroll, operating expenses, subsidies, services and interests on debts). Of the €67 billion in capital expenditure scheduled for 2021, €39 billion, or 59% of the total, will be self-financed from operating cash flow.


Subsidies and grants received by French local authorities from third parties (French State the European Union, other local authorities) represent the second source of funding, the share of which is stable over time (€25 billion, or 37% of capital expenditure in 2021). Subsidies and grants from the State, which are directly dedicated to local authorities’ climate actions, have been quantified by I4CE in this publication: totaling €2.7 billion in commitments in 2023, they are rising sharply, due in particular to the creation of the “Green Fund” (Fonds vert) (which nevertheless includes expenditure on other environmental issues).


Debt is the final lever for financing local authority investment programs. Net borrowing by the local sector (new loans – repayments made) represented a total of €3 billion in 2021, or 4% of capital expenditure, after peaking at 8% in 2020 due to the health crisis. 


Click here to see the visual “Subsidies from the State and public agencies specifically earmarked for local authorities’ climate investments” in French


The acceleration of climate-related spending is threatened by the high level of uncertainty in all levers for financing local public investment.  

The ability of French local authorities to finance themselves in the coming years will be affected by a growth in operating expenditure that could outstrip that of their revenues, due in particular to the energy crisis, inflation, pressure on the wage bill and rising interest rates. At the same time, government grants for both operating and capital expenditure are set to remain stable in value. Against this backdrop, the major risk is that local authorities will anticipate a contraction in their savings, leading them to take cautious decisions today in programming their investments, including those dedicated to climate. 


Although on the rise, subsidies and grants from the State (and public agencies) directly earmarked for local authorities’ climate actions represent only a small proportion of the sources of funding for their investments. Consequently, while the “Green Fund” sends out a positive signal to project developers, it cannot provide a response that meets the challenge of accelerating local authorities’ climate actions. In addition, there is no guarantee that the Green Fund will continue in the future. 


Increased borrowing by local authorities is another possible lever for accelerating climate investments, especially as banks are developing their offer specifically dedicated to the ecological transition. However, the initial version of the Public Finance Programming Act for the years 2023 to 2027, still under discussion in French Parliament, sets out a debt reduction trajectory for local authorities, without any specific levers being put forward to implement it and in contradiction with an increased borrowing. 


Lastly, capping operating expenditure could compromise local authorities’ ability to recruit the staff they need to implement the transition and support an ambitious investment program. I4CE evaluates the need for human resources to implement these actions at €1.5 billion a year, representing 2% of the total wage bill for French local authorities.


As part of the government’s ecological planning initiative, the “Green France” and French “Territorial Agenda” projects should therefore include among their objectives the development of a financial framework that supports and guides the acceleration in investment, which is essential to achieve carbon neutrality on a national scale. 

Climate: how French local authorities are financing their investments?  Download
See appendices
  • Appendix costing – Quanti-Adapt June 2022 Download
I4CE Contacts
Senior Research Fellow – Local authorities, Public Finance, Green Budgeting Email
Marion FETET
Marion FETET
Research Fellow – Local authorities, Public Finance, Green Budgeting Email
Morgane NICOL
Morgane NICOL
Local authorities Programme director – Local authorities, Adaptation, Public finance Email
To learn more
  • 10/12/2023
    Green Budgeting: feedback from local authorities

    Time to take stock, 4 years after the first experiments   Report only available in French   A momentum for green budgeting is gaining ground within local authorities: In the space of four years, around a hundred of them have embarked on the green budgeting process or have plans to do so. This includes nearly […]

  • 10/03/2023 Blog post
    Climate: five key debates from the French marathon budget

    Climate change and ecological planning are taking centre stage in this autumn’s budgetary measures. The public finance programming act, which has yet to be discussed with the Senate, now requires the government to set out a multi-year funding strategy for planning. The finance bill for 2024, which will go through Parliament soon, earmarks an additional €7 billion in transition support for households, businesses and local authorities. This €7 billion does not, however, resolve the issue of financing the climate transition, and in this post we provide an overview of the key climate debates that will take place, or ought to take place according to I4CE, during this veritable marathon budget.

  • 06/02/2023
    Local authorities: the need for investment and human ressources for climate neutrality

    Local authorities have a major role to play in achieving France’s 2050 carbon neutrality objectives, as set out in the National Low-Carbon Strategy (Stratégie Nationale Bas Carbone, SNBC). Due to their assets and areas of expertise, local authorities must make numerous climate investments, implement strategies and action plans, and take measures to encourage stakeholders within their territories. This study aims to estimate the cost of such climate action for local authorities. 

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !