Climate budgeting puts climate at the heart of decision-making, alongside other priority areas, helping to drive the short-term action that is so desperately needed. This article defines exactly what climate budgeting is, what it isn’t, and introduces how it works. For more on the benefits of adopting one, read Climate budgets: Why your city needs one.
Climate budgeting is a governance system for delivering climate targets
A climate budget is a governance system that mainstreams climate commitments and considerations into decision-making on policies, actions and budget. This is done by integrating climate targets from the city’s Climate Action Plan (CAP) into the financial budgeting process and assigning responsibility for implementation, monitoring, evaluation and reporting across the city government. It creates transparency and accountability, and highlights deviations from targets.
A climate budget establishes a city’s short-term targets and actions, typically every year or two, to deliver the long-term climate targets of the city’s CAP. As part of the financial budgeting process and in line with the budgetary cycle, the city proposes, adopts, implements, monitors and reports on climate measures to meet short-term targets. The climate budget should state clear targets and actions. It should also state, wherever possible, the estimated emission reduction effects over time, as well as the costs and financing involved.
The climate budget should initially cover actions financed by the budget. It should then be expanded to include actions implemented by using all instruments at the city government’s disposal (for example, regulation and policy). The climate budget also identifies action areas that are the responsibility of national and regional governments, business communities and residents, providing a basis for horizontal and vertical integration and collaboration.
The climate budget should initially cover city-wide Global Protocol for Community-Scale (GPC) BASIC-level emissions and could be built out over time to include consumption-based emissions, climate adaptation, equity and inclusivity, and more.
Climate budgeting and climate action planning
To develop a climate budget, a form of climate strategy that sets medium- and long-term targets is needed. Ideally, this will be a CAP, in line with the ambitions of the Paris Agreement, establishing a high-level political commitment to climate action and evidence-based climate goals, strategies and priority actions. A CAP does not typically include a detailed year-by-year costed strategy for implementing the actions it identifies. A climate budget operationalises the CAP or equivalent planning document, turning its strategies and priorities into short-term, granular, feasible, funded measures to be implemented within the next financial year. It may build and draw on governance structures established for the CAP to support this.
What is climate governance?
Climate governance refers to the formal and informal rules, structures, processes and systems that define and influence action on climate change. It is a multi-level decision-making process with interaction between and within different levels of government – local, regional, national and global – and various other actors.
What is climate mainstreaming?
City climate action has typically been siloed as the responsibility of a single climate or environmental department, leading to a lack of ownership of climate action across other government departments and a lack of resources and financial support that critically undermines the ambition and effectiveness of climate action. Climate mainstreaming is the systematic integration of climate considerations throughout a city’s entire strategy and operations. It makes climate mitigation and adaptation considerations routine and integrated into department’s day-to-day work. Climate budgeting is an effective approach to mainstreaming. Read How to use climate budgeting to mainstream climate action across the city government to learn more and How to mainstream climate action into your city’s financial system for other ideas.
Climate budgeting sits under the broad umbrella of green budgeting
Green budgeting uses the tools of budgetary policymaking to further environmental and climate goals. This includes evaluating the environmental impacts of budgetary and fiscal policies and assessing their coherence with the delivery of national and international commitments.1 Green budgeting involves a range of methodologies that interact with governance on different levels.
One prevalent method of green budgeting is a budget climate assessment (BCA). A BCA is a form of budget tagging that evaluates budget lines to determine their mitigation and/or adaptation impact. BCAs are a valuable assessment of the climate impacts of expenditures, highlighting areas that may be responsible for large proportions of emissions. They have been deployed by Barcelona and several French municipalities, including Paris.
A project climate assessment (PCA) is a similar approach, which is used to assess the climate impacts of a single action, such as a budget proposal, investment or plan. PCAs have been deployed as a decision-making tool in cities including Berlin and Montréal.
A PCA can be used when developing a climate budget to assess the mitigation impacts of budget lines or projects and to support the prioritisation of action, while a BCA can provide a baseline and show changes in the greenness of the city’s spending over time. Data and tools for climate budgeting includes examples of BCAs and PCAs. In contrast to climate budgeting, however, a BCA is primarily used for budgets that have already been adopted and gives no guidance on how expenditures should be modified to reduce emissions. To date, it has not been used in the budget development process.
A climate budget is not a carbon budget
They are related, however. A carbon (or emission) budget is the cumulative amount of carbon dioxide (CO2) emissions permitted within a specified timeframe to keep within safe limits of global heating. It is a technical assessment that produces science-based annual caps on GHG-emissions over a period of time. If your city has established long-term emission reduction targets as part of a climate action planning process, this will determine the long-term carbon budget, which can then be broken down into annual emission limits – giving the city something to ‘budget towards’. Stockholm, for example, has taken this step. A climate budget then ensures that a carbon budget or emissions reduction target is integrated into a city’s daily operations and policies.
Source- C40 Cities Climate Leadership Group, Inc.
