The federal government is promising new funding for environmental projects with municipal grants and loans to 20 cities and towns across the country.

Environment Minister Catherine McKenna announced the funding in a speech to about 400 delegates of the Federation of Canadian Municipalities.

The Liberal minister said the $31.5-million in federal money will help communities improve local standards for air, water and soil quality.

"I will help [us] do our part to help fight climate change," said McKenna. "In order to be successful we're going to need innovative local strategies."

Among the projects McKenna cited for funding were a net-zero-emissions library being built in Varennes, Que., and a Halifax project to install solar hot-water systems in local homes.

The funding will be used to pay for capital projects and also to support planning, field tests and studies related to future green projects.

"Canada has the potential to prosper in green energy," said McKenna.

The minister also announced the creation of the Low Carbon Economy Trust, which will pledge $2 billion over the course of four years to projects that "materially" reduce emissions.

McKenna said the trust will also support projects in clean energy that can be commercialized, scaled-up and exported. 

"We'll help to put good ideas and solutions into action for the benefit of all," said McKenna. "This will create good middle-class jobs, grow our economy and reduce pollution."

She said cities have direct control over 40 per cent of the country's greenhouse gas emissions while being on the front lines of climate risks posed by global warming.

"This is the moment when we all agree that climate change is the challenge of our generation."

with files from Ramisha Farooq