Climate labeling of the budget:

Climate labeling of the budget: the experience of countries and opportunities for Kazakhstan 

It is necessary to assess the budget expenditures of the Republic of Kazakhstan to identify sectors of the economy that have a positive or negative impact on the environment, the expert of ERI believes.

Kazakhstan needs to consider the possibility of linking its budgets with the commitments made in relation to the climate targets under the Paris Agreement, says Yerlan Karimov, an expert of Economic Research Institute (ERI) JSC. 

For example, Kazakhstan fully assumes its obligations under the Paris Agreement, which provide guidelines for state policy to achieve the national target for greenhouse gas (GG) emissions.

To fulfill its obligations, Kazakhstan needs to mobilize large funds and introduce work on climate labeling of the budget. This tool can help develop a mechanism for identifying government expenditures that are aimed at greening the economy, and expenditures that have a negative impact on the climate.

Countries and internationa.organizations attract and allocate resources to support the implementation of strategies and programs to combat the effects of climate change and adapt to them.

One of the tools for considering the climate aspect in planning and in the budget process is the climate labeling of the budget.

Climate labeling of the budget is a process carried out on the initiative of the state to identify, measure and monitor public expenditures related to the climate.

Today, 12 countries of the world have already developed methodologies for climate labeling of the budget, considering their own needs, priorities and institutional capabilities.

Figure 1: Countries where climate labeling of the budget has been implemented or is being developed

Source: World Bank

For the first time, climate labeling was introduced in 2012, and in the last five years, the pace of its implementation has accelerated.

The countries that introduced such labeling earlier than others (Nepal, Cambodia, Indonesia and the Philippines) were classified as developing countries and were extremely vulnerable to the effects of climate change. For many developing countries, resource mobilization is an important motivating factor when introducing this tool .

Table 1: Development of climate budgets in the world

Source: Climate Change Budget Tagging: A Review of International Experience

Important advantages of having a country's climate budget labeling are: transparency, accountability and information content of budget expenditures, which can contribute to the development of "green bonds" , as well as be used to link expenditures with the state's strategies and national projects in the field of climate.

According to the expert, to date, Kazakhstan has not conducted a comprehensive assessment of the impact of state budget expenditures on the environment.

In 2019, the country conducted the rapid comprehensive assessment (RCA) for the integration of the Sustainable Development Goals (SDGs) into strategic and program documents of Kazakhstan. According to the results of the assessment, 15 SDGs have a coverage of more than 60%, while 14 SDGs ("Conservation of marine ecosystems") and SDG 15 ("Conservation of terrestrial ecosystems") have very low indicators (coverage of less than 25%), which require strengthening measures to cover them (that is, it is necessary to strengthen the SDGs related to ecology).

"Taking into account Kazakhstan's obligations under the Paris Climate Agreement, the upcoming changes in international trade related to the introduction of the EU "carbon tax" in 2023, as well as the necessary measures to decarbonize the Kazakh economy, there is a need to assess the country's budget expenditures to identify sectors of the economy that have a positive or negative impact on the environment," said Deputy Director of the SDG Secretariat Yerlan Karimov.

The experience of France, which published its first "green budget" in 2021, can be useful for Kazakhstan. France has become the first state to equip itself with a tool for analyzing the impact of its budget on the environment. Budget expenditures amounting to almost 574.2 billion euros were analyzed, of which 10 billion have a negative impact on the environment, the expert added.

See also: ERI experts spoke about global trends and challenges in the field of “green" financing