The OECD’s Green Budgeting Framework (2020) sets out the building blocks underpinning an effective approach to green budgeting, including tools that can be used to help build an evidence base and support policy coherence. There is growing momentum for the use of green budget tagging as one of the core tools of green budgeting. Countries see its potential to help mobilise a more targeted fiscal response to climate and environmental challenges. However, putting green budget tagging into practice can sometimes be rather daunting. How do you design a tagging framework? What elements of the budget should be tagged? How should the information gathered through tagging be reported and used in decision making?
Green budget tagging is still a relatively new practice. The United Nations Development Programme developed useful guidance on climate budget tagging, Knowing What You Spend, drawing significantly on early experiences in Asia. However, there is now a growing body of experience across Africa, Latin America, the Caribbean and the OECD in relation to green budget tagging.
This introductory guidance builds on existing work and draws together lessons from this wider range of experiences in response to calls from the Paris Collaborative on Green Budgeting to the Coalition of Finance Ministers for Climate Action. It also expands the existing discussion beyond climate budget tagging to green budget tagging, giving insight into how tagging can help support the achievement of environmental objectives beyond those related to climate. It aims to help countries seeking to establish new green budget tagging practices by addressing a set of initial questions when considering options for the design and implementation of an effective approach.