Monitoring progress towards meeting the Paris Agreement requires improving the tracking and measurement of public climate-significant expenditure, including investment, at all levels of government.
Sub-national finance for climate
Given the urgency of the climate crisis, it is more important than ever to improve our understanding of the financial role of subnational governments in the net-zero transition, to track the progress regions and cities are making towards achieving the Paris Agreement commitments and other green objectives. It is also critical to identify areas where further action is needed for regions and cities to align their expenditure, investment, and revenues with their climate goals, and to mobilise additional sources of finance to support investments that will be needed to mitigate climate change and adapt to its localised impacts.
Key messages
Supporting subnational government climate actions requires unlocking financial resources for sustainable policies, including investments, in regions and cities. This requires having a better understanding of the diversity of climate-related revenue sources available to them and gaps that exist.
Mobilising additional financial resources for sustainable investment is not sufficient – available financial resources also need to be used effectively towards the achievement of sustainability objectives. Budgeting processes are emerging practices at subnational level, taking into account country specificities and environmental objectives and commitments. Regions and cities must be supported to adopt green budgeting as a concrete, practical tool to integrate climate and environmental considerations throughout the budgetary process.
Context
The financial role of subnational governments in the carbon neutral transition
Regional and local governments in the OECD and the EU play a key role in achieving climate and environmental objectives, being responsible for the majority of total public spending significantly contributing to climate change adaptation and mitigation. In seven countries, 70% or more of climate-significant expenditure occurred at the subnational level, and in Japan the ratio exceeded 80%.
Subnational Government Climate Finance Hub
The Subnational Government Climate Finance Hub (the Hub) was launched in 2022, in the framework of a joint project between the OECD and the European Commission DG REGIO on "Measuring and Enhancing Subnational Government Finance for Environment and Climate Action in OECD and EU Countries".
The Hub enabled to compile all the outputs from the OECD-EC project and works that followed on the topic of subnational climate finance, structuring them around three main pillars: at the macro-level, it covers subnational climate expenditure tracking and subnational climate revenue tracking; at the micro-level, it dives more granularly into the topic of subnational green budgeting.
Get in touch
For more information, please contact Isabelle Chatry (isabelle.chatry@oecd.org)
Related policy issues
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Subnational governments - states, regions, and municipalities – play a key role in public investment, particularly in essential infrastructure projects essential for economic development and well-being. Across the OECD, subnational governments account for nearly 60% of total public investment on average.Learn more