About Green Budgeting

What is green budgeting?

Green budgeting is a policy innovation which can support integrated approaches, coordinated policy design and proactive mindsets towards environmental sustainability. It is a tool that can facilitate policymaking and innovations within existing schemes and programmes through systematic mapping and tracking of outlays and expenditures that contribute to environmental sustainability related sustainable development goals

Why green budgeting?

While environmental regulation is the principal responsibility of environmental ministries, their locus standi in the budgetary process is weak as budgetary allocation for them is weak and hence it is essential that environmental sustainability initiatives are mainstreamed across ministries, departments, and sectors. Such a mainstreaming will help shape attitudes and commitments of various department officials and actors.

Broadly speaking, Green Budgeting can provide deeper insights and pointers to policymakers and other stakeholders for environmental sustainability initiatives, resources available, and delivery reforms. Further branching of the state’s general budget in terms of green budget is important to enable mapping of public funds flows to environment centric schemes.

Objectives of green budgeting

The need for realizing sustainable development goals, and addressing threats of climate change, biodiversity loss, and other environmental degradation requires urgent actions, concrete, coherent, and systematic planning approaches strengthened institutions and budgets. All of these are necessary tools in this context but none by itself is sufficient in making a significant and lasting difference. Therefore, there is a need for the change in mindset through dialogue around environmental sustainability in a multi-stakeholder setting such as budget-making processes. The four objectives of green budgeting are as follows:

Objective 1

Strengthen the inter-departmental planning processes to be able to better respond to environmental issues in the short- and long-term.

Objective 2

Enhance policy coherence for meeting sub-state, state, national and international commitments by mainstreaming climate action and sustainable development by raising awareness and strengthening capacities of departments/ bodies to innovate in existing programmes.

Objective 3

Develop a framework that will enable assessment the state’s performance against various environmental targets/commitments and identify areas of improvement through resource allocation and mobilization.

Objective 4

Send policy signals for making initiatives and markets more responsive to the objective of sustainable development and climate action in the long-term.

Issue-based budgeting

Green budgeting is a budgetary policy making tool that can help in systematic mapping and tracking schemes, outlays, and expenditures which, in turn, can support coordinated policy design and identification of periodic and continuous finance needs to achieve green objectives, i.e., those relating to the climate and environmental dimensions. The approach can transform budgeting exercises into an effective coordination mechanism of sustainable development so that economic, social, and environmental aspects are duly considered. It does not change the existing policies by itself, but it provides decision makers with a clearer understanding of the overall environmental and climate impacts of budgeting choices.

Gender budgeting

Gender budgeting is perceived as a potent tool for accomplishing gender mainstreaming so as to ensure that women reap the benefits of the development activities for which budget allocation is made as much as men. This is apart from enforceable laws and regulations for protection and enforcement of women’s rights that are within the mandate of several ministries and other arms of the government. In India, since 2005-06, the Expenditure Division of the Ministry of Finance has been issuing a note on Gender Budgeting as a part of the Budget Circular every year. Gender budgeting in India is not only practiced at the national level but also at the sub-national level. In the Union Budget, Statement 13 is on ‘Gender Budget’. This GB Statement comprises two parts- Part A and Part B. Part A reflects Women Specific Schemes, those which have 100% allocation for women, while Part B reflects pro-women Schemes, those where at least 30% of the allocation is for women.

Child budgeting

Much like under issue-based mainstreaming tools, ‘child budgeting’ is an attempt to disaggregate the government’s budget to estimate how much the government intends to spend (or has spent) on addressing needs of children. The rationale of child budgeting is premised on the reason that it is important to increase expenditures to promote child rights. In India, child budgeting is used as a strategic planning tool by the Department of Women and Child Development at the national level for self-assessment. Child budgeting is also practiced at the sub-national level in states such as Odisha and Bihar. In the Union Budget, Statement 12 is on the ‘Allocations for the Welfare of Children’. Child budgeting is seen as a public finance management strategy, which analyses and endorses responsiveness of government budgets to the rights and needs of children.

Pillars of Green Budgeting

    Green budgeting is envisaged to have six pillars:
  • Mainstreaming for environmental sustainability
  • Resource allocation for environmental sustainability
  • Planning and coordination for environmental sustainability
  • Evaluation and monitoring for environmental sustainability
  • Transparency and accountability for environmental sustainability
  • Policy signals for greening initiatives

How is it different than climate budgeting?

Climate budgeting is specific to climate change activities. Climate budgeting is a part or subset of green budgeting wherein climate change activities are accounted for in the annual budget making exercise. Climate budgeting should not be conflated with climate costing or needs determination which considers the longer-term climate needs beyond annual budgetary exercises.An example of climate budgeting, as implemented in Odisha can be accessed from here.

What is not green budgeting?

Green Budgeting should not be confused with carbon budget, natural resource accounting, green accounting, or green gross domestic product. Green budgeting is a part of the annual budget and planning process.

Thus, green budget is NOT:

Carbon budget

A carbon budget is the maximum amount of cumulative net global anthropogenic carbon dioxide (CO2) emissions that would result in limiting global warming to a given level with a given probability, considering the effect of other anthropogenic climate forcers.

Natural resource accounting

Natural resource accounting is an accounting system that deals with stocks and stock changes of natural assets, comprising biota (produced or wild), subsoil assets (proved reserves), water and land with their aquatic and terrestrial ecosystems.

Green accounting

Environmental accounting, also called green accounting, refers to modification of the System of National Accounts to incorporate the use or depletion of natural resources. Environmental accounting is a vital tool to assist in the management of environmental and operational costs of natural resources.

Green GDP

The Green Gross Domestic Product, or Green GDP for short, is an indicator of economic growth with environmental factors taken into consideration along with the standard GDP of a country. Green GDP factors biodiversity losses and costs attributed to climate change.