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2.2.2. Main entry points in greening budget support operations

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➡️ Apply the environment & climate risk screening and determine the need for a Strategic Environmental Assessment

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In the context of budget support, the screening:

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In all cases, it is required to:

✅ Verify that the action does not imply the support to any of the activities excluded under Art. 29 of the NDICI-Global Europe regulation (See section 1.1.4).

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When launching a budget support operation, undertaking an SEA is strongly encouraged!

An SEA will help assess the first eligibility criterion for budget support from an environment and climate change perspective, namely ensuring a credible and relevant national/sector policy.

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To learn more about why an SEA is relevant to budget support, click here. An SEA ToR template can be found in Annex 6.

✅ Determine the need for a Strategic Environmental Assessment (SEA) and justify the decision.

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➡️ Analyse the budget support eligibility criteria from a green perspective

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To strengthen the environment and climate-related capacity of partner institutions and systems, complementary support may combine some of the following activities.

Studies

• Promote analytical and participatory approaches that aim to better integrate environmental considerations into policies, plans and programmes, such as a Strategic Environmental Assessment (SEA). Depending on the context also consider the use of tools such as climate vulnerability and risk assessment, or an economic valuation of environmental and climate integration.
• Promote the regular use of PFM diagnostic tools with their dedicated modules addressing climate/environmental aspects (for instance, public expenditure and financial accountability (PEFA Climate), methodology for assessing procurement systems (MAPS) for sustainable procurement, Climate-PIMA on public investment management). See Annex 12 for more details.
• Support institutional self-assessments, including in line ministries, to review their governance set-up and existing practices on green budgeting, and identify areas for improvement. For instance, identify the implications of integrating climate‐related measures in policies, strategies and programmes on the revenue as well as the expenditure sides of a budget. These can then be applied in a medium-term expenditure framework (MTEF), or a medium-term revenue strategy (MTRS).

Capacity development

• Address knowledge gaps and develop guidance allowing decision makers to assess benefits of environmental and climate change proposals, including when engaging with other stakeholders comprising local actors and civil society.
• Support national capacities for the identification of revenue and expenditure relevant for climate or environmental objectives in specific sectors, building on national budgetary classifications, or other applicable methodologies (notably, the EU taxonomy or regional/national taxonomies).
• Develop training and capacity-building of government officials (e.g. accountants, budget analysts and auditors) and/or budget officers and planners in procedures and techniques for preparing green budgets and subsequently monitoring and reporting on fiscal outcomes and fiscal risks.
• Consider complementary capacity development to actors able to channel finance towards a green transition, in the view of accessing additional finance, including from private sources. This could include, for instance, trainings on how to invest in green spaces and natural infrastructure, on the definition and management of green/blue bonds and carbon markets, or on how to improve financial support to policies with green objectives e.g. an inclusive and sustainable blue economy.

Technical assistance

• Deploy short or long-term technical assistance contributing the development of policy and regulation supportive of environmental and climate action.
• Provide technical assistance to PFM institutions covering the development and effective use of guidelines and templates for greening PFM systems, including taxation (e.g. reduce tax benefits with adverse environmental effects, promote tax exemptions and duty waivers that stimulate the consumption of green products and services over polluting ones), procurement (e.g. promoting greener technical specifications and award criteria) or public investment management (e.g. mainstreaming sustainability principles in investment screening, management and monitoring).
• Promote the exchange of good practices between actors in green PFM systems, external audits that address environmental and climate concerns and parliamentary oversight, also with peer/neighbour countries or through peer-to-peer partnerships with EU administrations (e.g. twinning/TAIEX).
• Considering that monitoring and evaluation in budget support can go beyond the use of performance indicators, provide support to data systems to:

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More details on complementary support measures and tools for greening the budget support are available in Annex 14.

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References

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[22] [22]

^[22] The full criteria review includes policy support to the overall objectives of poverty eradication and inequality reduction, and sustainable and inclusive growth and job creation, the consolidation of democracies and peaceful societies, and the promotion of gender equality (Budget Support Guidelines).

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[23] [23]

^[23] In the case of environmental or climate action, results may only be measurable in the medium term, sometimes after the implementation period. Also, the availability of some environmental or climate information (e.g. forest inventory, total national GHG emissions) may not be suitable to budget support timelines, which usually reviews progress on an annual basis. This calls for realism on which information should be required when formulating performance indicators.

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