While there can be financial barriers to development of sustainable infrastructure, these can often be overcome. In some cases, creative thinking can produce good returns on investment for local governments. A good example from the building sector is the revolving loan fund for energy efficiency retrofits. Harvard University’s fund, for instance, has had an internal rate of return as high as 28 percent.
Different participants in the market may need different financial solutions. For example:
- Local governments may need help financing large infrastructure projects.
- Service companies may need temporary (end-user) incentives to make a business case work initially, helping overcome market resistance to a new service.
- End-users may need encouragement to invest in capital-intensive, but highly efficient technologies.
Furthermore, local governments are uniquely positioned to take a leadership role in piloting sustainable infrastructure:
- Cities and counties can initiate projects that can’t be undertaken by the private sector because infrastructure costs are too high for the expected returns.
- With lower profit expectations and longer-term cost benefit considerations, cities and counties can push for sustainable infrastructure where a private developer would not.
- Municipalities may be able to obtain land from other levels of governments (state, federal, school) at reduced or raw-land values on the premise that they be developed with sustainable infrastructure.
- Where municipalities have programs with other government levels or agencies for cost sharing, the municipality can use serviced land values as their contributions.
