Aligning green budgeting with nationally determined contributions

Achieving the nationally determined contributions pledged by countries is critical to successfully achieving common climate policy goals. Green budgeting can be more qualitatively aligned with nationally determined contributions through efforts to manage the indirect and unintended impacts of the total budget on national emissions, along with efforts to quantitatively measure the direct and intended impacts of individual budget projects. Policy makers can use a framework based on the Component-Oriented Stochastic Impact by Regression on Population, Affluence, and Technology methodology as a top-down monitoring tool to see the net effect of fiscal spending on national emissions. Also, a framework based on modern portfolio theory can be utilized to construct an optimal industrial portfolio under different policy constraints (economic growth, economic stability, and emissions reduction). This approach makes it possible to adjust fiscal spending in a way that balances emission reduction targets with other policy objectives, thereby facilitating the transition of the industrial structure to a carbon-neutral form and ultimately contributing to achieving the nationally determined contribution. Green budgeting can be more qualitatively aligned with nationally determined contributions through efforts to manage the indirect and unintended impacts of the total budget on national emissions, along with the direct and intended impacts of individual budget projects. Unintentionally induced emissions from fiscal spending can account for a significant portion of a country's emissions, so monitoring the overall impact of fiscal spending on national emissions is necessary to achieve nationally determined contributions. If an industry's direct emissions are not significant, but its indirect emissions may be large due to its correlation with other high-emitting industries, this could be considered when deciding on budgetary expenditures to support that industry.