Q: 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.

Q: Can you give a concrete example of how green budgeting works?

A good example is government procurement. As opposed to traditional budgets, a green budget do more than state how much the Government will purchase in the next fiscal year; it also impose environmental, labor and human rights standards that suppliers must follow if they want to keep selling their goods and services to the government. By greening procurement, which in many developing countries amounts to up to 60% of GDP, Governments could allocate more money to buy goods and services only from those industries that rely on alternative energies and other environmentally and socially sound inputs. The increased demand of those inputs that is generated will help reduce their cost below that of traditional inputs. This will in turn make it possible for the whole industrial sector to shift gear toward green energy and the like.

Other more obvious examples include: cutting subsidies to the fossil fuel industry and diverting the money to support renewable industries, allocating more resources to expand public transit like rail and correspondingly fewer resources to road building, imposing pollution taxes on private companies (instead of having to do the clean-up with taxpayers' money), imposing hefty taxes on gasoline so as to encourage the car and aviation industry to invest in ethanol or other green fuels and allocating more resources to recycling programmes etc.

There is also a large menu of non-financial decisions that Governments can take as part of the budgetary process to green the economy as a whole. A typical example would be the requirement that all public projects be submitted to community-based environmental assessments.

Q: What role could the United Nations play in promoting green budgeting?

At the political level, the United Nations needs to come out more strongly in support of green budgeting and its attendant, green accounting. There is very little mention of green budgets or related aspects in the main commitments of the UN on sustainable development. We know of at least one discussion a few years ago at the working group level within the Commission for Sustainable Development that ended with some recommendations supportive of green budgets. However, those recommendations did not figure in the final decisions of the Commission. The United Nations also needs to set up a technical assistance programme to help Governments build the required technical capacities (especially statistical ones) to develop and apply green accounting principles.

Q: What are the next steps needed to encourage the practice of green budgeting?

A broad awareness-raising programme targeting both Governments and parliaments is needed. The main obstacle here is the misguided belief that green budgets can tamper with economic activity by imposing unnecessary burdens on industry and employers. Green budgets end up saving the economy and taxpayer dollars in terms of better health, more productivity and an improved quality of life.

Q: How might the development of green budgeting be similar to the development of "gender budgeting"?

For one thing, just like the development of gender budgeting required extra pressure from constituencies, green budgeting will not happen spontaneously: political leadership within parliament as well as from the outside will be needed. The IPU's view of gender budgeting is built on the notion of partnership between women and men. We do not support pitting one group against the other, but rather building bridges between the two. Similarly, the development of green budgeting will require building partnerships between employers, workers and consumers.