Second, sustainable cities should limit the use of energy, raw materials, and greenhouse gas emissions in transport. Importantly, current practices show that the goals of environmental and financial sustainability are often not incompatible. In fact, current climate finance practices allow cities in the developing world to raise additional revenue for climate friendly infrastructure through the sale of clean development mechanism (CDM) carbon credits to more advanced nations. As an example, the bus rapid transit system in Bogotá—often praised for its green, flexible, and cost effective transformation of the city’s public transportation—is also expected to raise over $25 million in additional funds from CDMs<sup>20</sup> . Congestion taxes have also been implemented in cities like Milan, Singapore and London, raising city revenues from vehiclebased transportation while facilitating the efficient use of space and energy in central (and previously congested) urban areas. Finally, many feel that green bonds, which are currently used by institutions like the World Bank and the European Investment Bank to raise private capital for environmentally-friendly infrastructure investments, have great potential as a tool for urban governments to raise capital for similar projects<sup>21</sup> .

Finally, ensuring that city authorities are politically, fiscally and administratively autonomous and accountable is a critical step towards making sure that funds are both raised and spent in a manner that is sustainable and representative of the needs of their constituents. As Broadway and Shaw (2009) explain, political decentralization—reflected through popular and competitive elections—ensure that local governments respond to local needs. Of equal importance, fiscal and administrative decentralization—measured through the financial and discretionary independence of local officials—enable local governments to raise and allocate funding towards sustainable and inclusive investments.

Interestingly, Ivanyna and Shah (2012) have developed an interesting index of “closeness” of local decisionmakers to their people and show that the countries in which decisionmakers are closest to their people tend to be also those that have successful cities. In order, these are Denmark; Switzerland; Sweden; Finland; United States; Norway; Iceland; Japan; Hong Kong; Singapore; Austria; Korea and Canada.

Developing countries are also pioneering innovative ways to bring local citizens closer to urban investment decisions. In Brazil, a legal mandate requires popular participation in determining municipalities’ capital expenditures (usually comprising between 5 and 15% of total budgets<sup>22</sup> ). This participation takes many forms, ranging from budget presentations to direct involvement of citizens in allocating capital. Since its introduction in Porto Alegre in 1989, this mandate has proven a powerful mechanism promoting political inclusion and economic prudence, and its successes have inspired similar policies in almost 180 Brazilian municipalities, as well as cities in Argentina, Uruguay, Peru, Ecuador, Colombia, Bolivia, Mexico, and Chile.

> 20 United Nations Environment Program, 2012 21 OECD 2012 22

> Serageldin et al 2008

21