India must clearly link its climate goals to public spending

• by Vikram Sharma, Guillermo Herrera Nimmagadda and Akshit Saini
• Feb 27, 2026
• 4 min

India’s evolving climate budgeting practices signal strong momentum, but a unified national framework is essential. The op ed proposes a national framework for climate budgeting and argues that it should include a clear tagging protocol, align with major state, national, and international strategies, and report the outputs and outcomes expected from climate spending.

The latest Union Budget has drawn mixed reactions to the government’s climate actions. Some applaud the proposed investments in mitigation, while others argue that climate adaptation measures are insufficient. Such contentions partly stem from limited clarity on how the government is spending on climate change across its myriad schemes and ministries. An annual climate budget statement, based on a common national framework, would bring needed transparency by classifying, tracking, and reporting on the government’s climate-related spending.

A climate budget shows how and where public money is spent towards climate change. It identifies which schemes contribute to climate goals, whether to curb emissions or adapt to heatwaves, and to what extent. This approach, also known as “climate budget tagging” (CBT), is recognized as a global best practice by organizations such as the International Monetary Fund and has been adopted by over 60 countries. The World Bank has shown that CBT increases institutional focus on climate risks while improving fiscal transparency and accountability.

Although the central government has not introduced a climate budget, eighty-eight states and union territories have pioneered the practice. While each of these states follows a slightly different approach to climate budgeting, they provide useful lessons for the country.

Odisha’s Climate Budget outlines its key climate objectives and assesses two aspects: the extent to which a scheme contributes to climate resilience, and its vulnerability to climate risks. For example, the soil conservation and watershed management scheme contributes 70% of its budget toward climate resilience, but 50% of its expected impact is vulnerable to climate risks. Odisha’s climate budget attempts to show how it is responding to and affected by climate change, but does not explain how these judgments are determined.

Bihar’s Green Budget does not measure vulnerability, but it does importantly explain how each scheme contributes to climate goals. It also links scheme contributions to the Sustainable Development Goals (SDGs). This approach, developed by the UN Environment Programme (UNEP), clearly shows how schemes affect climate change and align with international goals.

Finally, Kerala’s Environment Budget, beyond summarizing climate objectives and spending, discusses how the annual budget is linked to key state development plans, such as the Kerala Perspective Plan 2030, and the SDGs. This uniquely shows how Kerala is advancing its long-term climate goals.

Overall, these States show strong initiative to track climate spending. However, the different methods limit comparison between States. There could also be more details, such as on whether a scheme supports mitigation or adaptation, and what this spending aims to achieve.

Leveraging this momentum and lessons from exiting state budgets, the union government must develop a national framework for climate budgeting to guide implementation at the central and state levels. Recognizing each government’s unique policy priorities, this framework should outline the essential components for tagging expenditures while allowing flexibility to add other aspects, like vulnerability. Based on national best practices and global standards like the Public Expenditure and Financial Accountability program, the national framework should emphasize three key aspects.

First, a climate budget should have a clear tagging protocol that identifies overall climate expenditure and its specific areas. To track overall spending, programs should be tagged as “completely” or “partially” relevant to climate (e.g., 50%) to reach a precise figure, as some States already do. To track spending on specific themes, there should be a minimum filter to view spending on climate adaptation and mitigation. This would allow a comprehensive picture of climate spending. The Ministry of Finance (MoF) has already provided a useful starting point through its draft framework on climate finance taxonomy, which offers a common system for the private sector to classify investments as “climate supportive” or “transition supportive”. This could be applied to climate budgets.

Second, the climate budget should align with major state, national, and international strategies, as Kerala does. India has outlined ambitious goals to achieve a sustainable and resilient economy, like the Long-Term Low-Carbon Development Strategy, Nationally Determined Contributions, and the forthcoming National Adaptation Plan. Union and state budgets should clearly link to these strategies to ensure that spending advances longer-term climate goals.

Third, the climate budget should report what outputs and outcomes will result from climate spending. For instance, Kerala spends on forest regeneration but does not specify a goal on restored forests. States like Odisha already produce “outcome budgets” that capture program goals, which could be integrated into climate budgets. The Output-Outcome Monitoring Framework does this for central schemes. A climate budget should set measurable goals to track impact.

Altogether, these principles would ensure climate budgets in India are comprehensive, aligned with broader development strategies, and actionable.

Moving forward, MoF should form a committee with the Ministry of Environment, Forest and Climate Change, States, and the 16th Finance Commission to spearhead the framework development. This national framework would provide clear guidance to governments on embedding climate priorities across planning and budgeting. Amidst serious climate risks, the union and state governments must clearly demonstrate how they are investing in a resilient future through climate budgets.

This was published in “Et Edge Insights” on 26th February 2026.