Fiscal relations in multilevel climate governance: how conditional project grants shape local climate action

This article investigates the fiscal underpinnings of multilevel climate governance (MLCG) by examining how competitive project grants shape local decarbonisation efforts in the United Kingdom. While MLCG literature has focused on institutional structures and regulatory authority, we argue that intergovernmental fiscal relations constitute a critical but underexplored dimension of climate governance. In particular, the literature has neglected that much of local climate action in Western countries gets financed through conditional, short-term, and competitive project-based grants. Drawing on a mixed-methods study, including 45 interviews and a survey of local authority officers, we show how the UK’s centralized and fragmented funding regime imposes ‘rules of the game’ that prioritize upward accountability, short-term deliverables, and visibility over locally grounded, long-term strategies. These dynamics fragment local bureaucracies, constrain strategic planning, and exacerbate regional inequalities in climate governance capacity. Our findings challenge assumptions about local autonomy and leadership in climate action, revealing how fiscal instruments function as tools of centralised control. We call for greater attention to the political economy of public finance in multilevel climate governance.