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Economy and Finance

Green budgeting in the EU

Green budgeting means using the tools of budgetary policymaking to help achieve climate and environmental goals.

Overview

Why is Green Budgeting important?

Greening national budgets is key for climate action and the green transition. This is because budgets are one of the main expressions of how a government intends to implement its political ambition. The 2019 European Commission’s Green Deal Communication highlights that “a greater use of green budgeting tools will help to redirect public investment, consumption and taxation to green priorities and away from harmful subsidies” 

Communication on The European Green Deal

Tools

EU Green Budgeting Reference Framework (GBRF)

The European Commission, jointly with the EU Member States, has developed a EU Green Budgeting Reference Framework (GBRF) as a toolkit for Member States willing to implementing or upgrade green budgeting practices.

European Commission Green Budgeting Reference Framework
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European Commission Green Budgeting Survey 

The European Commission launched a survey that aims to gather information on green budgeting practices in Member States and plans for future developments. Where green budgeting practices are in place, this survey aims to gain a better understanding of the design of these practices, their implementation and the remaining challenges.

Green Budgeting Database European Commission 2021 survey
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2021 European Commission Survey on Green Budgeting
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Green Budgeting survey key findings
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Green and Brown budgetary items lists

To support Member States in developing their own green budgeting practices, DG ECFIN has produced two lists of budgetary items whose net environmental impact could be considered broadly as ‘green’ or ‘brown’. These lists are only indicative and not comprehensive, in that they provide some key examples of ‘mostly’ green and ‘mostly’ brown measures. They could serve as a starting point for those Member States that wish to develop their own green budget tagging methodology.

List of broadly 'brown' budget items
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List of broadly 'green' budget items
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Explanatory note - Green and Brown Lists
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Training

The European Commission has developed a technical support initiative to help Member States build administrative and technical capacity for developing a green budgeting framework at a national level. The training supports the alignment of the current or planned national green budgeting practices with the European Commission’s Green Budgeting Reference Framework. In 2021, 23 Member States joined this training. The training comprises three modules:

  • Module 1 defines green budgeting and provides an overview of existing green budgeting frameworks and national practices. It also provides some basics on performance budgeting and green tagging.
  • Module 2 consists of case studies tailored to the specific needs of each Member State. It provides an understanding of the main methods and challenges of identifying expenditure, tax expenditure and revenue that are relevant to climate and environmental objectives.
  • Module 3 is a country-specific guided diagnostic/self-assessment of institutional settings and capacities, and concludes with recommendations on areas of improvement.

Supporting the Implementation of Green Budgeting Practices among the EU Member States

Publications

Green Budgeting: Towards Common Principles

This paper presents common elements of green budgeting, main underlying principles. It reviews the different tools and provides examples from the EU Member States. It is joint work of the European Commission, the International Monetary Fund and the Organisation for Economic Cooperation and Development.

Green Budgeting: Towards Common Principles

Green Budgeting Practices in the EU: A First Review

This study presents green budgeting experiences in selected Member States, based on a review of budgetary documents across the EU countries. Overall, it shows an incipient development of green budgeting and large heterogeneity of practices across countries, partly explained by different underlying concepts regarding the environmental objectives.

Green Budgeting Practices in the EU: A First Review

Events

Green budgeting at Cop26: How can public money contribute to a clean transition? - YouTube

2021 EU Green Budgeting Conference

Other relevant material

2020 European Commission – OECD joint survey on green budgeting

Green Budgeting Database

OECD work on green budgeting

Green Budget Tagging : Introductory Guidance & Principles | OECD iLibrary

Green Budgeting in OECD Countries | OECD iLibrary

Paris Collaborative on Green Budgeting - OECD

IMF work on green public finances

Climate-Sensitive Management of Public Finances—"Green PFM” (imf.org)

Strengthening Infrastructure Governance for Climate-Responsive Public Investment (imf.org)