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Session 3 - OECD - Andrew Park


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Green Budgeting Virtual Meeting - 5 October 2020

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Session 3 - OECD - Andrew Park

  1. 1. PUSHING THE BOUNDARIES FOR GREEN BUDGET TAGGING Green budget tagging: introductory guidance & principles
  2. 2. 2 Background • Increased political support – Growing interest in green budgeting approaches across the Paris Collaborative on Green Budgeting and the Coalition of Finance Ministers for Climate Action. • To capitalise on this, the OECD has led a project with other international organisations (IADB, IMF, UNDP, World Bank) to develop Introductory Guidance for Green Budget Tagging, based on: • Technical engagement with: • Paris Collaborative members (e.g. France and Ireland) • Roundtable discussions with Coalition members in Africa, Asia, Latin America and Caribbean and Central Asia. • Guidance on Climate Budget Tagging by UNDP,(2019) Knowing what you Spend • Recent outputs from Principle 4 of the Coalition of Finance Ministers: • World Bank report (forthcoming) Climate Change Expenditure Tagging: an overview of current practices. • IADB report (forthcoming) Climate Change Public Budget Tagging: Connections across Financial and Environmental Classifications Systems.
  4. 4. Developing green budget tagging Decide what budget measures to tag Take decisions in relation to what will be tagged: • Sectors • Type of budget items • Administrative level Develop a classifications system • Linked to the definition of “green” • Clear definitions of each category • Accompanying guidance Define what is “green” Consider emerging public and multilateral definitions and identify scope: • Existing international definitions • National green objectives Identify information needs • Develop a weighting system (i.e. binary versus scaled approach) Why do green budget tagging?
  5. 5. Country examples of different approaches Conservative approach to classification: tag programmes where it is evident that all, or at least the majority of investment in question supports emissions reductions Ireland Activities relevant to 11 climate change categories are classified along three categories: • Highly relevant (>60% relates to climate activities) • Relevant (20-60% of budget) • Neutral (less than 20% of budget) Nepal Expenditure tagged according to its impact on six environmental objectives: • Very favourable • Favourable • Favourable but controversial • Neutral • Unfavourable France
  6. 6. Implementing green budget tagging Strategic framework What supports effective implementation? Clear roles & responsibilities Quality assurance Roadmap for implementation Capacity across government Internal budget systems Linkages with international standards
  7. 7. Key challenges Appropriate level of granularity Categorising disaster risk management and adaptation Ensuring consistency and quality of tagging Balancing environmental, social and economic objectives Common challenges
  8. 8. End goal: using the information from green budget tagging in policy and budget decision-making
  9. 9. 9 Bringing it all together: Ten principles underpinning an effective approach to green budget tagging 1. Foster national ownership, the decision to start green budget tagging should be driven by national priorities. 2. In designing the tagging system, categories should align with country-specific climate or environmental goals. 3. A weighting system can help to 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 measures across the whole budget or at least in specific priority sectors. 5. Green budget tagging efforts benefit from political commitment, strong leadership and clarity of roles and responsibilities. 6. Tagging is subjective, clear guidance and a process for review and validation is necessary. 7. Green budget tagging is just one of a number of tools to support green budgeting. 8. Green budget tagging is supported by a modern budgetary framework. 9. Information and analysis from tagging can support greater transparency and accountability. 10. Complementing budget measures with wider reforms, e.g., regulatory reforms, will help speed progress towards green objectives.
  11. 11. Questions for Discussion What are the main benefits and costs of green budget tagging? How important is it for green budget tagging to cover harmful budget items as well as the positive ones? How do countries ensure information from green budget tagging feeds into budget decision-making?
  12. 12. THANK YOU More information: 12