Green Budget Tagging

6. Bringing it all together: Ten principles underpinning an effective approach to green budget tagging

Many countries are still at the early stages of green budget tagging. This report has set out detailed guidance for countries on how to take budget tagging forward most effectively, drawing together the lessons from the international budgeting community, and benefiting from insights from other PFM reforms. The following principles synthesise this guidance. They provide a reference tool for those designing, implementing and improving green budget tagging systems that can meet the challenges of the future. The overall intention is to provide a useful reference tool for policy makers and practitioners around the world, seeking to develop green budget tagging systems that help track how budget measures impact on national climate and environmental objectives. This can help to ensure that public resources are planned, managed and used effectively to make a positive impact on national goals.

The ten principles underpinning an effective approach to green budget tagging

1. To foster national ownership, the decision to start green budget tagging should be driven by national priorities. Countries can benefit from the study of existing models, experiences and international standards, using these to guide an approach that fits their own national context.

2. In designing the tagging system, categories should align with country-specific climate or environmental goals (such as those relating to biodiversity, water and air quality). This allows evidence to be collected on how budget measures contribute to national goals.

3. A weighting system can help address the reality that some budget measures only partially contribute towards climate or environmental goals.

4. Countries should work towards tagging both positive and negative budget measures across the whole budget, or at least priority sectors, such as agriculture, transport, energy and the environment if capacity is insufficient. Where possible, disaster risk management and adaptation measures should be tagged separately from mitigation measures.

5. Green budget tagging efforts benefit from political commitment, strong leadership and clarity of the roles and responsibilities of different actors across government so that a whole-of-government approach is in place. Training and capacity development are crucial in supporting the public administration in incorporating the tagging exercise into the annual budget process and ensuring that the practice is sustainable.

6. Tagging is subjective by nature, and to ensure consistency, there needs to be clear guidance as well as processes for review and validation. This helps to ensure the robustness of data and allays concerns about “greenwashing”.

7. Green budget tagging is one of a number of tools that support green budgeting (such as impact assessments, cost-benefit analysis and green performance indicators) through gathering evidence to facilitate more informed decision making. However, using the evidence for awareness raising alone is unlikely to achieve substantial results, and the focus should be on ensuring the use of this evidence in decision making across key stages in the budget cycle (planning, approval, implementation and audit), and to improve the performance of budget interventions.

8. Green budget tagging is supported by a modern budgetary governance framework, which includes programme budgeting and strong links between planning and budgeting. Any approach should be consistent with the broader budgetary framework and coherent with other PFM initiatives, such as gender budgeting and SDG budgeting.

9. Where the information and analysis drawn from green budget tagging is presented in a green budget statement or citizens’ budget, this can support greater transparency, accountability and public engagement on how the government is using budget policy to ensure that national climate and environmental goals are prioritised and achieved.

10. The budget is not the only public policy intervention to support progress towards climate and environmental goals. Tools such as regulations and laws are also important and so green budget tagging should not sit alone, but alongside a wider set of reforms to achieve national goals.

Annex A provides country case studies which illustrate green budget tagging practices in greater depth, and shows practices in respect of these ten principles.