The process and arrangements for allocating public funds are key levers for achieving sustainable development. In recent decades, countries all over the globe have committed to domestic and international objectives for sustainable development, including the Paris Agreement on Climate Change and the Sustainable Development Goals (SDGs) - with the implication to advance national policy responses. To support governments in this context, the OECD is engaging in new approaches to budget planning and preparation, promoting transparency and engagement with citizens and advocating for monitoring and evaluation processes that can support the achievement of national and international commitments. The Paris Collaborative on Green Budgeting is one of these initiatives, working closely with countries to align public revenue and spending processes with environmental and climate goals.
Green budgeting aims to provide decision makers, parliament and public with a clearer sense of the potential environmental impacts of budgeting choices. Having complete information on the long term effects of policies could shape revenue raising and resource-allocation decisions by incorporating the interests of future generations and considerations on the sustainability of resources. Still, the availability of data on environmental impacts of budget choices can be limited or not systematically used. In 2018, 20% of surveyed OECD countries published the environmental and climate impact of individual budget measures. Only Germany and Italy followed a more comprehensive approach by disclosing the impact that implementing the budget as a whole would have on the environment. Information on the effects of the budget on societal wellbeing indicators is equally rare (26% of surveyed countries). In the case of capital investments, such an environmental assessment is more common. Most OECD countries conduct environmental impact assessments at the beginning of the development of public infrastructure projects, but only 12 OECD countries estimate a project’s potential carbon dioxide emissions.
Integrating environmental considerations across all policy domains of the budget, ranging from environment and climate to transport, health and finances, would support the alignment of incentives and lead to a coherent environmentally informed approach to policy making supported by budgetary decisions. In most OECD countries, climate change is reflected in the budget programmes of the ministry with the lead responsibility (e.g. Ministry of Environment). A few countries, such as Canada, Finland and Ireland reflect on climate change systematically across budgetary programmes). Performance information associated to the budget could contribute to a more systematic reflection on sustainability, as well as increase transparency and accountability of progress towards environmental goals and other international commitments. Only 25% of surveyed OECD countries have started to systematically reflect (6%) or closely align (19%) the SDGs in performance budgeting systems. For example, in Norway, each of the 17 SDGs is assigned to one co-ordinating ministry that needs to report on the follow-up of various targets under the goal of the budget documents since 2016. In Mexico, the systematic alignment of budget programmes with the SDGs through the performance evaluation system was introduced in 2018.
