Green budgeting refers to the use of budgetary policy-making tools to progress climate and environmental objectives. This includes integrating and evaluating the climate and environmental impact of budgetary and fiscal policies and considering the path towards national and international commitments. Green budgeting is defined by four building blocks that are relevant to all stages of the budget cycle: (1) institutional arrangements; (2) methods and tools; (3) accountability and transparency; and (4) enabling environment in budgeting (OECD, 2020). In 2022, two-thirds of OECD countries surveyed had implemented green budgeting mechanisms (24 out of 36), compared to 14 out of 35 countries in 2021 (40%); almost twice as many countries implemented green budgeting in such a short period (Figure 6.1). The eleven OECD countries that introduced green budgeting since 2021 were Chile, Finland, Greece, Israel, Korea, Lithuania, New Zealand, Slovak Republic, Spain, Switzerland and Türkiye.
The 2022 OECD Green Budgeting Index shows the varying degrees to which OECD countries have adopted green budgeting (Figure 6.2). It is designed to reflect the adoption of green budgeting practices, based on the four building blocks of the OECD Green Budgeting Framework, to help policy makers with the design and development of green budgeting.
Regarding the components of the index, Methods and tools used to implement green budgeting remain widely adopted (Figure 6.3). The average score of this subcomponent is 0.12 ranging from 0.05 in Colombia and Türkiye to 0.23 in the United Kingdom. Most countries have carbon pricing mechanisms (22 out of 24, 92%), environmental impact assessments (18 out of 24, 75%), and sovereign green bonds (18 out of 24, 75%) as tools to implement green budgeting. Emerging tools include green elements in medium-term budgets (8 out of 24, 33%), green perspectives in spending reviews (6 out of 24, 25%) and setting carbon budgets for specific sectors in an economy (5 out of 24, 21%).
OECD countries have strengthened their institutional arrangements. On average this building block in the index amounts to 0.15 but there is wide variation across countries from 0.04 in Israel to 0.21 in Norway and the United Kingdom. Countries with developed practices have passed legislation on green budgeting, as is the case in Norway. Most countries have developed frameworks through administrative practices (see Online Figure G.3.1). The Accountability and transparency arrangements are an emerging practice, and it is the building block with the lowest score. The involvement of civil society, monitoring of green budgeting and the submission of a green budget statement to parliament are not widespread practices; at present only adopted in Ireland and Korea (see Online Figure G.3.2). Green accounting standards and oversight mechanisms are at an early stage of development. The building block on the Enabling Environment displays an average score of 0.14 ranging from 0.00 in Switzerland to 0.25 in Greece and the United Kingdom. Countries that fare comparatively well are those that have implemented programme and performance budgeting with relevant links to green initiatives, as is the case in France and Sweden. Many countries have also put in place capacity building initiatives, with 10 out of 24 countries initiating training and skills development for line ministries (42%) in 2022 (see Online Figure G.3.3).
