Socio-climate budget tagging

20 January 2022

Context 

Many climate-related public policies have important social impacts, and vice versa. For example, carbon pricing mechanisms can increase income inequality if not accompanied by appropriate redistributive measures. Conversely, energy subsidies for poorest households often contribute to increasing greenhouse gas emissions.

These “secondary effects” are not always negative, as exemplified by investments in public transport. Additionally, social measures can contribute to the fight against climate change. This is the case of taxes on vacant dwelling, which facilitate access to housing in areas of real estate tension and avoid the emission of GHG associated with the construction of new housing units.

Failure to take these joint issues into account can lead to deadlocks, such as the violent French “Yellow vest” protests in 2018, or their counterparts in Ecuador in 2019. Civil society echoed these concerns, with, for example, the Pacte du Pouvoir de Vivre proposed by 50 French NGOs, or the Citizens’ Convention on Climate set up by the French government. However, it remains difficult to perceive all the joint climate and social effects of public policies.

Environmental budget tagging tools, which are studied at I4CE, can contribute to address this problem, by providing a starting point for an exhaustive identification of budgetary measures with proven climate impacts.

Objectives

Socio-Climate Budget Tagging: a method proposed by I4CE to highlight joint climate and social effects of government budget measures.

In response to the need identified above and with the support of the European Climate Foundation and Expertise France, I4CE developed the Socio-Climate Budget Tagging (SCBT), a methodological tool aiming to facilitate the identification of budgetary measures with both climate and social effects among climate budgetary measures pre-identified by environmental budget tagging exercises. This tool is detailed in an article published in the OFCE journal (cf. “Jointly tackling the climate crisis and social issues integrating social considerations into climate budget tagging exercises”).

The SCBT considers five social dimensions: income inequality, poverty, employment, health, and access to basic needs and services (energy, clean water, food, infrastructure). A study currently underway aims to apply this tool to the French and Indonesian green budgets. It will also augment the SCBT with an assessment of decision-making processes and case-by-case impact analyses of a limited basket of selected budgetary measures.