Governments worldwide adopt green budgeting tools to align public finance with climate goals, boost transparency, and accelerate low-carbon development.
As climate risks intensify and nations ramp up their environmental commitments, governments across the world are increasingly integrating climate metrics into their annual budgets, according to a new briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA). This shift marks a decisive move toward aligning public finance with climate goals, ensuring fiscal policies support low-carbon development and long-term resilience.
The IEEFA report highlights that green budgeting—a framework that embeds climate considerations into public financial planning—has become a critical tool for ensuring coherence between government spending, national climate strategies, and international agreements such as the Paris Agreement and the Sustainable Development Goals (SDGs).
Advanced Economies Show Strong Progress
Countries across the EU and OECD have advanced further in adopting performance-based green budgeting practices, supported by robust institutions and mature climate data systems.
- France increased its climate-positive budget allocation from €38.1 billion in 2021 to €42.6 billion in 2025, directing funds toward clean mobility, renewable energy, and energy efficiency.
- Ireland expanded its environmental spending from €2 billion in 2020 to €7 billion by 2025, after integrating climate budget tagging into its national fiscal processes.
- Mexico witnessed one of the highest jumps, with its climate budget rising sixfold from MXN70 billion in 2021 to MXN466 billion in 2025, underscoring growing momentum in climate-aligned public spending.
These examples, the note states, demonstrate how targeted climate tagging can evolve into comprehensive performance-based frameworks that shift subsidies, guide long-term fiscal planning, and prioritise sustainable sectors.
Emerging Economies Lay Critical Foundations
While many developing nations remain at early stages, significant groundwork is underway. Several Asia-Pacific, African, and Latin American countries are adopting foundational tools such as climate budget tagging, supported by capacity building, transparent reporting, and digital public financial management systems.
“Advanced economies…have progressively embedded climate performance criteria into their core budgetary and fiscal planning processes,” says Gaurav Upadhyay, Energy Finance Specialist at IEEFA and author of the briefing. “Similarly, many emerging economies are adopting foundational green budgeting tools with an emphasis on transparency, capacity building, and empowering subnational actors.”
IEEFA notes that for developing nations, the evolution of green budgeting hinges on improved climate data infrastructure, digital tools, and aligning green budgeting with broader development priorities.
Stronger Transparency and Accountability
The report also examines progress in countries like Norway and the Philippines, where green budgeting has helped improve transparency in public spending, strengthen accountability, and prioritise high-impact climate sectors.
Co-author Soni Tiwari, Energy Finance Analyst, South Asia at IEEFA, highlights that integrating green budgeting with SDGs, green bonds, Just Transition frameworks, and gender-responsive budgeting can help governments synchronise social, economic, and climate priorities—ensuring inclusive and sustainable development.
A Key Pillar for Climate-Aligned Governance
IEEFA concludes that while approaches vary, a common thread unites both advanced and emerging economies: green budgeting is rapidly becoming a foundational pillar for climate-aligned governance. By embedding climate metrics into fiscal planning, countries can move beyond ad-hoc climate actions toward systemic, measurable, and accountable pathways for sustainable growth.