One Planet Summit: three notes of caution on Green Budgeting

A little less than a year ago, France organized the One Planet Summit and, among many commitments, joined the OECD’s Green Budgeting initiative, along with Mexico. A first assessment of these commitments was held on 26th September in New York, and the next steps on this particular initiative unveiled. This includes case studies to assess the potential scope and limitations of green budgeting in all OECD countries, including France.

What is Green Budgeting?  

The overall objective of all this is to support those countries in ensuring that their budget is a lever for the transition to a carbon neutral economy. In practical terms, Green Budgeting should take the form of a document that collates data that has previously been scattered throughout numerous budget reports. This document should focus on the climate issue – ultimately being extended to include other environmental issues or even all of the Sustainable Development Goals – and should list:

• Tax systems that have a positive – but also a negative – impact on the reduction of greenhouse gas emissions; such as the climate-energy contribution as an example of “pro-climate” taxation, or the exemptions granted to several sectors that illustrate the tax loopholes that work against emissions reductions.
• Budgetary expenditure, which is again favourable or unfavourable to the climate. For example, state investments in public transport and aid for energy efficiency improvements can be regarded as favourable expenditure.

Beyond the enumeration of these budgetary measures, each should be assessed in terms of its cost to the state budget, and its contribution to the decrease – or increase – of greenhouse gas emissions.

Three notes of caution

Such a document should enable an annual stocktake to be carried out regarding the alignment of the budget with the country’s climate objectives, and inform the national debate while enabling comparisons – and thus the sharing of experiences – between countries. At this stage, we highlight three notes of caution.

First, care should be taken to avoid simply evaluating the efficiency of budgetary measures for climate in terms of the sum of euros spent per tonne of greenhouse gas avoided today. This short-term approach could lead us to miss the objective of carbon neutrality by 2050: indeed, certain measures enable short-term inexpensive emissions reductions, but are incompatible with the aim of carbon neutrality. An example would be low-cost energy efficiency improvements to buildings carried out today, that require a complete overhaul a few years down the line to raise the level of ambition. “Cheap” measures in 2018 could therefore be very costly in future. To achieve carbon neutrality, we need to adopt measures, as early as today, that are relatively costly but are the only ones that can enable us to reach the goal, and which, through their multiplication, could become profitable. This could be the case for certain technologies such as electric or hydrogen-powered vehicles, or for deep organizational changes such as city planning to provide more space for soft modes of transport.

The second note of caution: public investment alone will be insufficient to achieve the transition to a carbon neutral economy. The efficiency of a national budget to drive change must therefore be measured as much by the public investments implemented, as by the private investments triggered: this is the whole purpose of the Landscape of Climate Finance initiative that I4CE has spearheaded for several years.

Finally, the challenge must be to ensure that Green Budgeting provides a moment of consultation and debate, rather than simply being a well-meaning report that ends up gathering dust on a shelf. A suitable political process still needs to be devised if such a report is to become a genuine tool for assessing and debating the national budget. Which must be linked, obviously, with the development of the finance bill. In this respect, in France, the intentions of the President, that he expressed to NGOs, to make an annual assessment of the progress regarding climate, an assessment in which Green Budgeting would have a rightful place, represents a very encouraging development.