Green budgeting in Austria—frameworks, implementation, and lessons learned

•  As part of Austria’s Green Public Finance Management framework, the Green Budgeting methodology analyzes the money provided (input) and the impact of the funds (impact). Each budget item is classified under a six-level classification from “intended productivity” for climate measures to “intended counter productivity” for measures designed to counteract climate objectives, to indicate the intention of the respective budget line. In a separate step, the impact of that budget line is estimated—and where possible is expressed in terms of impact indicators that are partly based on bottom-up funding data from the Austrian Transparency Database (such as the amount of CO2 reduced, MWh produced, or assets protected from climate impacts). The system is based on similar practices used by the EU and the OECD to ensure conceptual alignment with best practice and facilitate international comparability.
• An initial baseline review completed in 2022 showed that approximately 11.4% of federal expenditure and 11.5% of revenues were relevant to climate, energy, and environmental objectives. Since then, all budget items have been analyzed with each budget, showing a relevance for 16.7% (by value) of expenditure for the 2024 Federal Budget. This includes about €10.9 billion of green spending.
• To support green budgeting, a ‘Climate Hub’ was created within the MoF across all Directorates General in 2024. The hub coordinates economic, fiscal, tax, and climate policies, and institutionalizes the MoF’s commitment to climate action and integrating climate across all financial decision-making.
• An additional part of the Green Public Finance Management framework involves evaluating the financial and environmental risks associated with budget items. For instance, potential counterproductive expenditure is flagged as a budgetary risk, and its likely emissions impact is evaluated to infer a price to account for future environmental impacts. Such monitoring also helps to avoid greenwashing.

A key lesson from Austria’s experience is the importance of a taking gradual and adaptive approach. Austria’s MoF has implemented tagging progressively, refining the methodology in successive budget cycles to address evolving needs and incorporate lessons learned. More practically, the budget tagging system has proven valuable in aligning fiscal policies with EU climate regulations (which is important also because of the financial consequences of failing to meet emission reduction targets) and long-term climate goals more generally (in line with Paris Agreement Article 2.1c).