with environmental and climate goals

identified all the impacts of the government’s budget—both positive and negative—in relation to the country’s environmental goals (climate change adaptation and mitigation, water resource management, waste management and technological risk prevention, pollution control, and biodiversity). The results were published in a report appended to the 2021 draft budget presented to Parliament. They show an increase in expenditure favorable to the environment (43 billion euros) and a drop in expenditure unfavorable to the environment (7.2 billioneuros).

2.2. Area of action 2: Aligning fiscal policy with environmental and climate goals

This second area of action focuses on aligning the two instruments of fiscal policy—public revenue and expenditure—with green objectives. While the first area of action is organizational in nature (exploring how to organize matters in such a way as to bring green issues into the budget), the second is allocational (determining what decisions should be taken in the draft budget to act on these issues). A government that adopts green tax measures and green expenditure steers public funding toward a green and/or low-carbon transition while also encouraging private actors to change their consumption and investment practices. This area of action covers both dimensions.

2.2.1. The definition of tax policy

This area covers the implementation of environmental taxation and, more broadly, the alignment of the tax policy contained in medium-term budget forecasts with the climate strategy.

Sweden:The gradual introduction of a carbon tax

In 1991, Sweden was one of the first countries to introduce a carbon tax. To make this tax acceptable while also giving the private sector time to adapt, the Swedish government teamed up with businesses to work out a timetable for gradually raising the tax. Alongside this, a comprehensive tax reform was included whereby the introduction of the new tax was offset by a reduction in old levies. Specific measures were also adopted to reduce the impact of the carbon tax on fragile businesses and lowincome households. This approach has allowed Sweden to raise its carbon tax from 28US dollarsto 127 US dollars per ton in thirty years, without causing social blockages or loss of competitiveness. Revenue from this tax now comes to 2.9 billion US dollars per year, or 2% of government revenue.

2.2.2. Review of public expenditure

Strengthening the alignment of expenditure with green economy objectives and climate change action primarily involves reviewing subsidies and so-called “brown” tax expenditures—such as those facilitating the use of fossil fuels—that undermine low-carbon development, as well as implementing a public green investment plan.

Indonesia: Reforming fossil fuel subsidies

Over the past two decades, Indonesia has reformed its fossil fuel subsidies. The gradual reduction of these subsidies has encouraged consumers to burn less fuel while also saving the government 15 billion US dollars a year. After the first attempt at reform in 1998, large-scale protests forced the government to back down. However, thanks to a targeted aid policy aimed at mitigating the impact of rising prices on the poorest households, subsequent reforms did not elicit such opposition. Indonesia has thus conducted a large-scale monetary transfer program (2 billion US dollars per year) and reinvested part of the savings accumulated to increase food subsidies for the poorest. To achieve this, an intensive campaign of information and surveys was carried out, monitoring civil society’ s acceptance of the reformmeasuresand adjusting these where necessary.