The document discusses the OECD's initiatives to strengthen climate and environmental considerations in infrastructure and budget appraisal tools. It outlines methods to enhance budget appraisal through cost-benefit analysis, carbon footprint modeling, and life-cycle assessments, focusing on integrating these factors into project selection and long-term planning. Additionally, it emphasizes the need for clear criteria, transparency, and public input in the appraisal process to develop effective green budgeting practices.

1. OECD Paris Collaborative on Green Budgeting
18 April 2023
Strengthening climate and environmental considerations
in infrastructure and budget appraisal tools
Margaux Lelong, Public Management and Budgeting Division
Ana Maria Ruiz, Infrastructure and Public Procurement Division

2. Overview on budget appraisal
2
• The use of budget appraisal tools to include climate and
environmental considerations increase in OECD countries
• Budgetary tools are being adapted to include additional features
•Help identifying the
most cost-effective
measures for
mitigating the impacts
of climate change
Help assessing the
true costs and
benefits of projects,
programs and
policies
Help integrating
green tools with
existing decision-
making processes to
ensure that green
measures are
economically viable
and socially equitable
Help developing new
indicators to measure
progress and
effectiveness of
green policies and
programs

3. How to strengthen climate and environmental considerations budget appraisal tools
3
•Incorporate climate and environmental considerations to evaluate capital expenditure in the budget
•Integrate life-cycle considerations into appraisals to assess the total environmental impact
•Ensure that the appraisal process considers the changing nature of the climate
Establish clear criteria and targets for climate-related investments
Guarantee that climate and environmental considerations are incorporated into the risk assessment
Integrate climate and environmental considerations into the long-term planning of the budget
Establish clear reporting requirements
Ensure that the appraisal process is transparent and open to public input and scrutiny

4. Development of methods and tools
4
• Cost-benefit analysis
• Carbon footprint modelling
• Life Cycle Analysis
• Carbon Offsetting
• Carbon pricing
• Impact assessment

5. A focus on Cost-benefit Analysis
5
•Consider the costs associated with climate change and environmental degradation
•Reflect potential environmental benefits
•Include the cost of any additional environmental protection measures that would be required
Calculate the net present value of benefits considering the costs of climate change
Compare the net present value of the benefits with the estimated costs
Factor in the cost of any potential unforeseen consequences budget measures
Analyse the project over its lifetime
Consider the costs of inaction

6. 6
Governance for green, resilient, and clean infrastructure
6
Measuring and collecting good
practices to enable green, resilient,
and clean infrastructure in OECD
countries

7. 7
7
Enabling green, resilient, and clean infrastructure
Note: The score for Belgium (Flanders) is not included in the OECD average.

8. 8
More can be done to integrate environmental and climate considerations into the project selection and prioritisation

9. OECD International good practices

10. OECD good practices
Impact Assessment Act
“one project, one assessment”
Scoring Mechanism for
Sustainable Infrastructure
(SIMS)
Green Budgeting & New
Methodological Approach to quantify
emissions impact
Biodiversity Points Method in CBA
Green Book’ supplementary guidance

11. 1. Long-term strategic planning in Ireland
2. Public investments appraisal in Ireland
3. Budgeting practices in Ireland
4. International/OECD best practices to integrate environmental
and climate considerations in budgeting and project
appraisal
5. Methodological approach to assess the environmental
impacts of infrastructure projects [carbon mitigation]
6. Methodological approach to evaluate climate uncertainty and
risks of infrastructure projects [climate adaptation]
7. Integration of the proposed approach in the appraisal of
public investments in Ireland
The case of Ireland: Main outputs
Detailed overview of the Irish framework for
planning, appraisal and budgeting of
infrastructure projects to identify the main
challenges and opportunities for integrating
environmental and climate considerations
Proposed methdological approach to
integrate climate chage mitigation and
adaptation in infrastructure planning and
appraisal in Ireland

12. The Irish framework
Long-term Strategic Planning
• Project Ireland 2040
• National Planning Framework (NPF)
• Focus Box on Transport Sector (i.e.,
NIFTI)
• National Development Plan (NDP) 2021-
2030
• Environmental assessments in the
preparation of the NPF (i.e., SEA, AA,
SFRA);
• Environmental qualitative self-
assessment under the NDP review
Public Investment Appraisal
• Public Spending code (PSC)
• Focus Box on the Transport Sector
(i.e., CAF)
Environmental and climate
considerations
• The 2019 reforms to the PSC;
• Economic appraisal (i.e., CBA, MCA);
• Assesment of environmental impact in
the planning/permit process (i.e., EIA,
AA)
Public Budgeting
• Irish Budget cycle
• Ongoing reforms to the budgetary
framework
Environmental and climate
considerations
• Green Budget Tagging;
• Carbon Budget developments

13. Methodology to assess the
environmental impact of infrastructure

14. Methodology to assess the environmental impact of infrastructure (mitigation)
• Phase 1: Construction
• The methodology has two options for assessing the impact of the construction
phase:
• Option A: Direct estimation of emissions (scope 1-3)
• Option B: Environmental I-O model
• Phase 2: Operation
• During the operation phase, the analyst has to estimate the carbon emissions of two
different items:
• Operating expenditure (OPEX)  as in Phase 1 (Scope 1, 2, 3)
• Externalities generated by demand  sector-specific parameters
Evaluation of the carbon footprint in two phases:

15. The carbon footprint of the construction phase
Emissions of the building site
Scope 1 Direct emissions generated by the building site
Scope 2 Indirect emissions generated by the production of the energy used
Scope 3 Indirect emissions generated by suppliers of the site

16. General evaluation of climate mitigation phase
- Extension of the standard Cost-Benefit Analysis to include (direct and
indirect) externalities from the construction phase:
• 𝑁𝑃𝑉 = 𝑡=0
𝑁 𝐵𝑡−𝐶𝑡
(1+𝑟)𝑡
- Assessment of mitigation policies in terms of “sensitivity analysis”, that is
altering the costs (e.g. for installing solar panels), observing the benefits
and the relative change in NPV (social welfare change)

17. Methodology to assess the environmental impact of infrastructure (adaptation)
Step 1: Vulnerability analysis
• The sensitivity of the project (in terms of on-site assets, inputs, outputs, access and
transport links) to specific climate hazards;
• The exposure of the investment project to such events.
Step 2: Impact analysis and adaptation strategies.
• Assessment of the likelihood of an even to occur;
• Assessment of the impact of the extreme event in terms of asset damages, safety and
health, environment, cultural heritage, social, financial, reputation.
Step 3: Adaptation strategies
• For projects ranked from “medium” to “extreme” impact, strategies and measures for
adaptation should be identified.
Evaluation of climate adaptation in three phases

18. www.oecd.org/environment/green-budgeting/
www.oecd.org/gov/infrastructure-governance/
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