Green budgeting would enable countries to account for the environmental costs of things such as pollution-producing factories and vehicles that use fossil fuels.

What is the aim of green budgeting? Traditionally, the budget document is seen, first and foremost, as a tool of economic policy, and secondarily as a social and environmental policy framework. Allocations for environmental protection and social support (welfare, health care, public transit, forests, etc.) are counted as costs, not as investments; natural resources existing in the country are not factored in. In many countries, the budget-making exercise provides a major opportunity for Governments to project the future course of the economy in terms of expected Gross Domestic Product (GDP) growth, trade (surplus/deficit), employment figures and inflation. “Green budgeting” is the process whereby the three dimensions of sustainable development [economic growth, ecological balance and social progress] are fully integrated in this single policy document. A driving principle of green budgets is that you can’t support the economy at the cost of the environment and social integration. The three are interlinked in many ways. These things are not new, of course, and shades of green have existed in national budgets, especially in industrialized countries, for decades. A green budget, however, is one that consistently and comprehensively analyses government expenditures and revenues to bring about true sustainable development. It will give prominence to non-economic targets, such as the ecological footprint or the percentage of carbon emissions that the government expects to reduce in a given year. It will support economic growth, but help shift its internal composition toward more sustainable production and consumption. The ultimate aim of green budgeting is to help change the public’s awareness of all these issues.  Generally, the tools of green budgets consist of fiscal incentives/disincentives and subsidies. But they also include simple reallocation of resources from one budget line to another. Green budgets do not necessarily mean higher taxes in the aggregate. They tend to ensure that the true environmental cost of production is factored into the market mechanism.




1)        Matthiessen, Lisa Fay, and Morris, Peter, “Costing Green: A Comprehensive Cost Database and Budgeting Methodology”, 2003, 27 pp.

2.    Benedict, M. A. & McMahon, E. T. (2006). Green Infrastructure: Linking Landscapes and Communities. Island Press, Washington.   ISBN 1-55963-558-4

3.    R. Gale, S. Barg and A. Gillies (editors). Green Budget Reform. An International Casebook of Leading Practices  (London: Earthscan, 1995; UK  pp. 368, ISBN 1-85383-246-4).


Benchmarking: UNDP