How can municipalities access and use funding to finance their climate transition more quickly and efficiently and with less bureaucracy?

For municipalities, securing funding for climate action and infrastructure projects is often a slow and complex process, tangled in bureaucratic red tape and fragmented funding streams. Instead of accessing flexible, needs-based financing, cities must often apply for multiple small-scale grants, each with its own set of regulations and administrative burdens. This inefficiency delays critical projects, burdens local administrations, and prevents the billions allocated at the federal level from making an impact quickly where they are needed most.

One solution could be thematic budgets, instead of fragmented, small-scale funding programmes, allowing cities to direct resources more efficiently for infrastructure and climate protection and ensure that billions allocated at the federal level make an impact sooner. The state of Saxony has been pioneering such a budget approach over the last years, led by its Social as well as its Environmental Ministry, where municipalities were allocated a budget based on their population size, to fulfill their tasks in social services or environmental protection respectively. The approach was assessed positively by municipalities for having simplified implementing their planned actions.

These examples and other solutions were explored at a workshop in Leipzig in February 2025, attended by around 40 people from German state and federal ministries, municipalities, audit institutions, development banks and academia. A summary of the event is available here and a longer version with presentations here (both in German).

Perfectly timed, after the workshop the state of Lower Saxony is setting examples on better municipal finance with its "Pact for Municipal Investments", which builds on similar practical approaches, confirming the high relevance of the workshop outcomes.
As the organisers, ICLEI Europe and the Fair Finance Institute extend a huge thank you to the speakers, partners, and participants – including Sächsische Aufbaubank (SAB), Deutsches Institut für Urbanistik (Difu), and the Federal Ministry for Urban Development – for making this a dynamic and solution-driven discussion.

This workshop was part of the project Turnaround Money II – Rethinking Municipal Finances, funded by the Federal Ministry for the Environment under the EURENI programme, and you can read the update from the previous meeting in the project here.