The Paris Collaborative on Green Budgeting - Katia Karousakis
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The Paris Collaborative on Green Budgeting - Katia Karousakis As part of the OECD side event at CBD COP 14, Sharm El Sheikh, November 2018
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The Paris Collaborative on Green Budgeting - Katia Karousakis
- 1. THE PARIS COLLABORATIVE ON GREEN BUDGETING Katia Karousakis Biodiversity Team Leader OECD Environment Directorate CBD COP14, October 22, 2018 OECD side event: Are we on track?
- 2. – Biodiversity, water quality, air pollution, climate mitigation and adaptation – International agreements: • Paris Agreement • Aichi Biodiversity Targets • related Sustainable Development Goals • … 2 Domestic and international commitments on climate and environment Action is needed to comply with our commitments - nationally and collectively
- 3. 3 Why do we need Green Budgeting? The way governments choose to raise and spend their money will be decisive
- 4. Range of actions in many areas, including expenditure tracking for climate and biodiversity, targets for renewable energy, carbon taxes … Systematic and co-ordinated approach to the range of existing policies needed to: – aid monitoring process – mainstream an environmentally informed approach across all policy domains – highlight linkages between budget, fiscal and environmental issues, interdependencies, externalities and co-benefits 4 Implementing our sustainable development agenda
- 5. ….using the tools and processes of budgetary policy-making - by evaluating and improving the environmental impact of budgetary policies - assessing their coherence with national and international commitments help achieve environmental goals 5 “Green Budgeting”
- 6. 6 OECD work relevant to Green Budgeting • Budgeting for inclusive and sustainable growth • Climate and biodiversity public expenditures • Reform of potentially harmful tax expenditures and other budgetary support • Environmental fiscal reform and carbon & biodiversity pricing • Long-term fiscal sustainability
- 7. 7 Green (Biodiversity) Budgeting in OECD countries • Comprehensive reporting structure for climate economic analysis ― Ways and Means Report (an assessment of revenues from energy and environmental taxes) • Green Planning and Budgeting Strategy 2015–2020 • Implementation in Medium Term Expenditure Framework • Green Economic Weight • Biodiversity and climate mainstreaming in the 2014-2020 EU multi-annual financial framework • Biodiversity and climate expenditures tracking • National Biodiversity Expenditure Review
- 8. The Paris Collaborative on Green Budgeting Launched at One Planet Summit, 12 Dec 2017 in Paris as one of the twelve commitments An open research platform to: - work in close partnership with governments, OECD working groups and experts - advance the analytical and methodological groundwork - propose, develop and test potential tools needed to support green budgeting - support peer learning and exchange good practices - targeted assistance for developing a Green Budget strategy
- 9. Core analytical and research work • Refinement of definitions and methods • Sharing of existing good practice and country cases • Indicator development Optional work programmes to engage • Designing and applying a “Green Budget Statement” • Designing and applying a “Green Budget Baseline Analysis” • Investigating the tax revenue effects of environmentally-oriented tax policy and of environment-related structural economic change, including decarbonisation Other relevant work (2019-2020) • Developing guidance to identify and assess harmful subsidies to biodiversity at national level 9 Working towards a framework on Green Budgeting
Editor's Notes
- There is a set of national and international commitments to face the threats of climate change and environmental degradation: Goal 6. : Ensure availability and sustainable management of water and sanitation for all Goal 7: Affordable and clean energy Goal13: Climate Action Goal 14: Life below Water Goal 15. : Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss Goal 17. : Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development
- The way governments choose to spend their money will be decisive if these commitments are to be kept. Yet, between 2010 and 2015, fossil fuel subsidies amounted to USD 373-617 billion annually across 76 economies, which collectively contribute 94% of global carbon dioxide emissions (OECD, 2018). In contrast, the amount that governments spend on biodiversity, estimated at about USD 50 billion per year, is approximately one tenth of the spending on fossil fuels and environmental protection averages around 1.3% of public expenditures (OECD, 2017) Equally, using the tax system to internalise negative environmental externalities is another example of greening the budget, while also generating substantial amounts of public revenue. In OECD countries annual environmentally related tax revenue has decreased from 1.83% of GDP in 2000 to 1.56% in 2014. The potential of carbon pricing is also far from being realised. Currently 90% of carbon emissions are not priced at a level reflecting even a conservative estimate of their climate costs. Astonishingly, 60% are not priced at all (OECD, 2016) (Figure 2).
- - Good approaches around - Even the idea of “Green Budgeting” has been around since the 1980ies to make central government agencies directly responsible and accountable for ensuring the environmentally sustainability of their policy pogrammes.
- This includes:- - assessing the trajectory towards meeting national and international commitments - identifying “policy gaps” and areas for particular action - assessing the coherence of policies and resources - taking stock of environmental relative to other priorities - contributing to informed, evidence-based debate and discussion on sustainable and inclusive growth “Investing in Climate, Investing in Growth”: imperative to align policy and all financial flows
- Budgeting for inclusive and sustainable growth: The OECD is already looking at how budget systems can be used to achieve inclusive and sustainable goals. For example, the OECD is currently working with countries such as Austria and Canada to look at how budgeting systems can be better designed to help achieve overarching gender goals. In this work we look at the budget as a year round event with multiple windows to apply a gender lens. For example, in the budget development phase policy proposals can be subject to gender impact assessments. When the draft budget is presented, an accompanying gender budget statement can highlight how the new policies presented will contribute in net towards gender goals, drawing on information from the gender impact assessments. The PCGB is developing a similar “Green Budget Statement” that could accompany the annual budget or spending review, focusing on the environmental dimensions of the main new policies introduced in the budget, and giving a broad assessment of how these policies support the country’s environmental targets. Climate and biodiversity alignment of public spending Ongoing OECD analysis includes the forthcoming edition of the Climate Change Mitigation report as well as recent OECD work on biodiversity-related spending. The French work on the landscape of climate finance charting private and public climate-oriented spending is seen as a good starting point for a diagnostic tool. Similar exercises, focused on the overall composition of public spending, could fit under the PCGB. Environmental cost-benefit assessments: The OECD recognises that it is important to consider the full social costs and benefits of all budget measures. The OECD has a number of activities furthering work in this area, including pioneering work in relation to ex post CBAs of environmentally related taxes and tax provisions being done by the Joint Meetings of Tax and Environment Experts. [Recent publication: Cost-Benefit Analysis and the Environment: Further Developments and Policy Use] Reform of potentially harmful tax expenditures and other budgetary support OECD work on Fossil Fuel Support provides a concrete basis for national and subnational governments to improve budgetary alignment, and the OECD is closely involved with peer reviews on fossil fuel support. Initial discussions during the inception phase revealed that some countries are engaged in concerted efforts to catalogue tax expenditures (e.g., Italy, Finland) and others are tracking tax expenditures (e.g., France) in technical analysis accompanying budget laws. Also, the OECD will be undertaking work to provide guidance to identify and assess harmful subsidies to biodiversity. In combination, these work areas set the stage for comprehensive measurement of environmentally harmful support. Environmental fiscal reform and carbon pricing Taxes are one instrument in the environment policy toolbox. At present, environmentally related taxes are of limited coverage, low and there are volatile rates in most sectors except transport. Denmark scores among the top countries with regards to environmentally related tax revenues. Environmental fiscal reform holds considerable opportunity. This sort of reform could be the cornerstone of cost effective environmental policy, but with few exceptions it does not deliver on that promise yet. With respect to biodiversity, the PCGB can build on OECD work on biodiversity-relevant fiscal and other economic instruments. With respect to climate policy, carbon pricing is a core policy. OECD work on carbon pricing (including Effective Carbon Rates and Taxing Energy Use) is intended to bring transparency and increase momentum. Long-term fiscal sustainability: Environmental taxation not only can improve environmental outcomes but also raises public revenue in the short to medium run, an important consideration in times where tax bases are under pressure. In the longer run, countries need to prepare for eroding energy tax bases, and the PCGB is a good place to explore ways of anticipating on this change. Long term fiscal sustainability analysis is done as a matter of routine, underpinned by economic and demographic projections, often with stark lessons for policy-makers. However, the OECD is looking at how to do a different multi-dimensional LTFS analysis taking into account environmental projections and shining a spotlight on what needs to be done today to achieve national and international commitments.
- France has a comprehensive reporting structure for climate economic analysis accompanying the General Budget to support the French Low Carbon Strategy Ways and Means Report” (an assessment of revenues from energy and environmental taxes;) the “Landscape of Climate Finance” (which tracks public and private climate investment expenditure) “transversal policy document on the fight against climate” (an overview of all tax and budget expenditure measures that are considered to have a significant impact on GHG mitigation across sectors.) The Indonesian 2014 Green Planning and Budgeting Strategy aims to define a more sustainable set of policies and to identify how these can be implemented in line with the Medium Term Expenditure Framework and performance- based budget system. For example, Indonesia requires that all budgetary policy proposals include an assessment of green impacts and calculates the “Green Economy weight” (green economy expenditures as a proportion of total budget expenditures) of the proposal to publicise its contribution towards greening Indonesia’s economy. The EU introduced climate and biodiversity mainstreaming in the 2014-2020 EU multi-annual financial framework. Hence climate and biodiversity expenditures are tracked via tagging methodologies. In addition, a requirement was introduced such that at least 20 % of EU expenditure is climate related. Norway Green book disappeared a long time ago, once during the 90's. What's left is text on the "climate and environmental profile in the state budget". This is chapter 4 of KLD's budget proposition (at least it was in the 2018 proposition. Original idea: categorize budget posts according to the degree of environmental impact genuine desire to say something about the environmental impact of a budget proposal. problematic because most of the grants are "mixed" in the sense that they serve many purposes. (one thing is to report items with (partly) positive environmental impact, something else to report on such grants that have (partially) negative environmental impact. How to evaluate changes in the tax and taxation scheme, and in other regulations, against changes in grants? Norway plans to calculate the climate effects of their state budgets by an independent “calculation committee”. The Norwegian Government has appointed the climate assessment committee to improve the “use of money and regulations and to identify the climate impact of the state budget. work you have been doing in integrating environmental considerations in your budget processes Green Tax Commission Consideration of revenue loss from the electrification of the transport sector (Norwegian he Norwegian Ministry of Climate and environment will be the contact point) Regarding Norway, the Minister of Finance is Ms. Siv Jensen, cf. this webpage. Her email address is siv.jensen@fin.dep.no. The Minister of Climate and Environment is Mr. Ola Elvestuen, cf. this webpage. He can be reached at postmottak@kld.dep.no.
- Indicators: Technical indicators to measure progress towards environmental goals Benchmarks towards the implementation of Green Budgeting (eg. across OECD countries) Evaluating progress on Paris Collaborative overall (eg. a) technical advancement, b) high-level political support c) implementation) 1. Designing and applying a “Green Budget Statement” the environmental impact of new key budget measures the contribution of the annual budget to reaching environmental objectives the level of resources associated with these policy measures and consistency of policies in these areas 2. Designing and Applying a “Green Budget Policy Baseline Analysis” “heat map” assessment environmental impacts of the existing baseline of tax and expenditure policies identify priority areas for progress. 3. Applying environmental cost-benefit assessments in support of green budgeting Building on the latest OECD research range of standardised approaches for application of environmental CBA Particular focus on a proportionate and risk-based approach 4. Investigating the tax revenue effects of environmentally-oriented tax policy and of environment-related structural economic change, including decarbonisation country-specific assessment Effect of multi-year transition to a decarbonised economy is projected on carbon-based revenues policy implications at national level. Working with France and Mexico working towards implementing Green Budget in 2019