Paris Collaborative: A Global Initiative for Green Budgeting

When governments announce ambitious climate targets, the real test comes much later, quietly hidden in the pages of an annual budget. Does the money actually flow toward clean energy, forest conservation, and low-emission transport, or does it keep funding the very activities that warm the planet? The Paris Collaborative on Green Budgeting was created to answer exactly that question by helping countries align their fiscal muscle with their environmental promises. It is one of the most important, though rarely discussed, reforms in modern public finance.

What is the Paris Collaborative on Green Budgeting? 🔗

The Paris Collaborative on Green Budgeting is a global platform set up to help governments redesign their budget and tax systems so that public money supports climate and environmental goals rather than working against them. It was launched at the One Planet Summit held in Paris on 12 December 2017, and is convened by the Organisation for Economic Co-operation and Development (OECD).

At the launch, the OECD was joined by France and Mexico, which endorsed the initiative as the first of its kind to tackle fiscal policy and environmental commitments together. The Collaborative was described as the first cross-country and cross-sectoral effort to help governments “green” their fiscal policy and integrate climate and biodiversity commitments into national budget frameworks.

Why “Paris”? 🔗

The name is not only geographical. It directly connects the initiative to the Paris Agreement on Climate Change, which requires countries to align financial flows with low-emission, climate-resilient development. If national budgets remain disconnected from these targets, the Paris Agreement risks becoming a set of promises without a funding plan. The Collaborative exists to close that gap.

What exactly is green budgeting? 🔗

Before understanding the Collaborative, it helps to grasp the concept it promotes. Green budgeting uses the tools of ordinary budget-making, such as expenditure reviews, tax policy, impact assessments, and performance indicators, to evaluate whether public finances are helping or harming the environment.

The OECD defines green budgeting as an approach that uses budget policymaking tools to integrate climate and environmental perspectives into budget frameworks and practices, with the aim of producing better-informed decisions. In simple terms, it is about asking one disciplined question for every rupee the government plans to spend or collect: does this decision move us closer to, or further from, our environmental goals?

Green budgeting across the budget cycle 🔗

Green budgeting is not a single document released once a year. It touches every stage of the budget cycle, from planning and formulation to approval, implementation, and oversight. A finance ministry may tag certain schemes as climate-positive, an environment ministry may assess the ecological impact of new spending, and an independent fiscal institution may later review whether the green claims match the actual outcomes.

Origins: the One Planet Summit, 2017 🔗

The backdrop of the Collaborative’s birth matters. The 2015 Paris Agreement had committed nations to keeping global warming well below 2 degrees Celsius. Yet two years later, it was clear that national policy frameworks were not keeping pace. Public spending in many countries was still flowing into fossil fuel subsidies, environmentally harmful infrastructure, and tax breaks that accelerated emissions.

At the One Planet Summit, then OECD Secretary-General Angel Gurría launched the Collaborative as a way to help governments bring climate considerations fully into fiscal and tax policy. The French and Mexican environment ministers of that time endorsed the effort, recognising that fiscal tools, not just climate ministries, would determine whether the Paris goals remained achievable.

Core objectives of the Collaborative 🔗

The Collaborative is designed around a few clear objectives that together form a roadmap for aligning public finance with sustainability.

Aligning budgets with environmental goals 🔗

The central aim is to bring national expenditure and revenue processes in line with climate and environmental commitments. This includes goals under the Paris Agreement, the UN Sustainable Development Goals, the Aichi Biodiversity Targets, and more recently the Kunming-Montreal Global Biodiversity Framework. The Collaborative treats green budgeting as a way to ensure that public budgets reflect these international commitments rather than contradict them.

Designing new tools and methodologies 🔗

One of the Collaborative’s biggest contributions is the development of practical tools. These include green budget tagging, environmental impact assessments of budget measures, reviews of environmentally harmful tax expenditures, carbon assessments, and the integration of climate risks into macro-fiscal projections. Governments can pick and combine tools to suit their administrative capacity.

Sharing data and best practices 🔗

The Collaborative functions as an open research and peer-learning platform. It organises workshops, publishes methodology handbooks, and maintains databases that allow countries to compare practices. Its tasks include developing a voluntary reporting mechanism known as the Green Budgeting Statement, supporting peer learning, and offering targeted assistance for countries building a Green Budget Strategy.

Enhancing accountability and transparency 🔗

By producing cross-country indicators, the Collaborative helps citizens, civil society, and parliaments hold governments accountable. If a country pledges to cut emissions by a certain percentage, a green budgeting framework makes it easier to verify whether the fiscal decisions match that pledge.

Integrating environmental costs into fiscal planning 🔗

Traditional budgeting often ignores the long-term cost of pollution, biodiversity loss, or climate-related disasters. Green budgeting tries to factor these costs in. This includes assessing fiscal risks from climate change, such as higher disaster relief spending, infrastructure damage, and revenue loss from fossil-fuel-dependent industries.

How the Collaborative works in practice 🔗

The Collaborative does not impose one universal template. Instead, it offers a shared framework built around four building blocks. The OECD’s Green Budgeting Framework rests on institutional arrangements, methods and tools, accountability and transparency, and the enabling environment for budgeting. Countries adapt these blocks to their own fiscal structures.

A multi-stakeholder platform 🔗

The Collaborative brings together senior officials from ministries of finance, ministries of environment and climate, independent fiscal institutions, independent climate councils, tax authorities, and sub-national governments. This multi-dimensional approach recognises that greening public finance is not the job of one department alone.

Examples of green budgeting tools 🔗

Several concrete tools have emerged from the Collaborative’s work. Green budget tagging identifies which spending lines support environmental goals. Environmental impact assessments evaluate the ecological consequences of new policy proposals before they are funded. Green expenditure reviews examine whether existing schemes contribute to or undermine climate targets. Environmental fiscal reform involves using taxes and subsidies to influence behaviour, such as carbon pricing or the removal of fossil fuel subsidies. These tools are being explored not only by national governments but also by regional and local governments as decision-making instruments for aligning revenue and expenditure with environmental objectives.

Who has joined the Collaborative? 🔗

The Collaborative has grown quickly since 2017. France and Mexico were early champions, followed by a range of OECD and non-OECD economies. According to the 2022 OECD Green Budgeting Survey, 24 of 36 OECD countries had adopted green budgeting measures, up sharply from 14 countries in 2020. The European Union has made green budgeting a central theme of its economic governance reforms.

Relevance for India 🔗

Although India is not an OECD member, the lessons of the Paris Collaborative are deeply relevant to its fiscal journey. India is one of the largest emerging economies, a signatory to the Paris Agreement, and has committed to ambitious climate targets, including the Panchamrit pledges announced at COP26 and a long-term goal of net-zero emissions by 2070.

Current state of green budgeting 🔗

Green budgeting in India is still at an early stage. Research indicates that the Union government has not yet formally adopted green budgeting, and only a small number of states and union territories have done so using diverse and sometimes inconsistent methodologies. States such as Odisha, Bihar, Assam, Meghalaya, and the union territory of Puducherry have experimented with climate or green budget documents, often drawing on Rio marker-based tagging or departmental allocations for adaptation and mitigation.

Why a national framework matters 🔗

The absence of a uniform national framework means that state-level efforts cannot easily be aggregated or compared. A more robust climate budgeting approach would also help India meet its reporting requirements under the Enhanced Transparency Framework of the UNFCCC and strengthen instruments like sovereign green bonds. Here, the Collaborative’s tools, from green tagging to environmental impact assessments, offer a ready-made menu of international best practice.

Sub-national opportunities 🔗

Given India’s federal structure, a large share of climate-sensitive spending happens at the state level, in sectors like agriculture, water, and urban infrastructure. Subnational green budgeting, an area the Collaborative has increasingly focused on, is therefore particularly important. Aligning state budgets with national climate commitments could significantly strengthen India’s overall climate response.

Benefits and challenges 🔗

The potential benefits are significant. Green budgeting can improve the quality of public spending, attract climate finance, identify harmful subsidies, and give parliaments and citizens a clearer view of environmental priorities. It can also reduce fiscal risks from climate change by flagging vulnerabilities early.

However, the challenges are real. Governments often report insufficient resources, limited technical expertise, and difficulties in measuring the actual impacts of green budgeting. Methodological disagreements, especially on what counts as “green” spending, can undermine comparability. Political resistance to phasing out environmentally harmful subsidies is another persistent hurdle.

The road ahead 🔗

The Paris Collaborative on Green Budgeting is unlikely to remain a niche initiative. As climate targets tighten and extreme weather events become costlier, finance ministries will face growing pressure to demonstrate that public money is working for, not against, environmental goals. The Collaborative’s toolkit, shared frameworks, and peer networks are becoming central to that conversation.

For students of public administration and public finance, the initiative offers a powerful example of how international cooperation, fiscal reform, and environmental policy can converge. It marks a shift from treating climate change as a standalone issue to embedding it in the very DNA of how governments plan, spend, and tax.

What do you think? If India were to design its own national green budgeting framework tomorrow, which single tool, green tagging, environmental impact assessments, or the removal of harmful subsidies, would you prioritise first, and why? And can a government truly claim to be committed to climate action if its budget tells a different story?

References

1. https://www.oecd.org/en/about/programmes/paris-collaborative-on-green-budgeting-.html
2. https://www.oecd.org/environment/one-planet-summit-paris-collaborative-on-green-budgeting-december-2017.htm
3. https://www.oecd.org/en/topics/green-budgeting.html
4. https://oneplanetsummit.fr/en/coalitions-82/paris-collaborative-green-budgeting-103
5. https://www.icaew.com/insights/viewpoints-on-the-news/2025/apr-2025/green-budgeting-driving-sustainable-growth-through-smart-planning
6. https://greenfiscalpolicy.org/blog/paris-collaborative-on-green-budgeting/
7. https://www.oecd.org/en/publications/green-budgeting-in-oecd-countries-2024_9aea61f0-en.html
8. https://www.oecd.org/en/about/projects/subnational-green-budgeting.html
9. https://journalijecc.com/index.php/IJECC/article/view/4967
10. https://www.orfonline.org/expert-speak/climate-budgeting