New report proposes green budgeting framework for Jharkhand

Jharkhand has significant potential to become a frontrunner among Indian states in green public financial management by adopting a green budgeting framework that integrates climate, environmental and Just Transition considerations into government spending and planning, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA), developed in collaboration with the Government of Jharkhand’s Task Force on Sustainable Just Transition.

Jharkhand presents a strong case for adopting and institutionalising green budgeting practices, given its resource-rich economy, dependence on fossil fuel, and increasing exposure to climate, environmental, and transition-related risks.

As the state seeks to balance economic growth and livelihoods with a gradual shift towards a more resilient, low-carbon, and inclusive development pathway, a ‘green budgeting framework’ can help align fiscal policy with environmental priorities, improve transparency in public expenditure, and strengthen long-term economic resilience. 

The report proposes a phased framework tailored to Jharkhand’s institutional and development context and aligned with the draft ‘Framework of India’s Climate Finance Taxonomy’, to improve expenditure tracking, identify environmentally relevant and harmful spending, and strengthen access to green and climate finance.

The framework is built around six thematic objectives: Climate mitigation; climate adaptation and resilience; natural capital protection; resource efficiency and circular economy; sustainable mobility and urban systems; and Just Transition and coal district resilience.

A central feature is a budget-tagging methodology that goes beyond simply classifying spending as ‘green’ or ‘non-green’. It groups public expenditure into five categories based on its environmental relevance: Green positive (G+), transition enabling (T), enabling or systemic (E), neutral (N), and brown or negative (B). This also allows different components of many public schemes to be assigned coefficients based on the strength of their environmental contribution. The framework additionally proposes a ‘Just Transition flag’, which would identify expenditure directly supporting coal districts, fossil fuel-dependent communities, displaced workers and other populations affected by structural economic change.

The report recommends a phased approach for implementation where the initial stage would focus on piloting expenditure tagging in selected departments and preparing an initial green budget statement. Subsequent stages would expand coverage, strengthen institutional arrangements and data systems, and eventually integrate green budgeting into medium-term expenditure planning, public investment decisions and independent evaluation.

“Green budgeting can help Jharkhand move beyond viewing climate and environmental expenditure as a separate category and instead embed these considerations into routine fiscal decision-making,” says Gaurav Upadhyay, Lead Energy Finance Specialist, India Just Transition at IEEFA – South Asia, and a co-author of the report. “A phased approach would allow the state to build institutional capacity, improve data systems and refine its methodology over time.”

The framework also calls for an annual green budget statement published alongside the state budget, and for establishing a green budget portal to improve transparency and public access to methodologies, classifications and data.

The immediate priority, the report urges, is to establish a green budgeting cell and issuing a budget circular enabling pilot tagging across select departments such as energy, agriculture, rural development, and forest. Lessons from the initial exercise could then inform the expansion of green budgeting across the state government. Over time, the framework could also extend the assessment beyond conventional budgetary expenditure to include resources such as District Mineral Foundation funds and other extra-budgetary sources.

“A green budgeting framework could improve the quality, resilience, and long-term sustainability of public spending, and help Jharkhand manage the economic and fiscal implications of environmental change, while advancing inclusive growth and safeguarding people’s livelihoods,” says Ajay Kumar Rastogi, Chairperson, Government of Jharkhand’s Task Force on Sustainable Just Transition.

The report draws on international practices and frameworks developed by the European Union (EU), the Organisation for Economic Co-operation and Development (OECD), and other institutions. Several countries across different income levels and institutional contexts have adopted green budgeting approaches tailored to their national circumstances. These examples demonstrate that green budgeting is not a one-size-fits-all tool, but a flexible framework that can be adapted to different fiscal structures, development priorities and institutional capacities.

“India has made efforts over the past decade to integrate climate and environmental considerations into public finance,” says Vibhuti Garg, Director, IEEFA – South Asia. “While a formal national green budgeting framework is yet to be established, several initiatives have laid the groundwork for such an approach, reflecting the increasing recognition that public expenditure must be better aligned with environmental priorities to meet the country’s climate and sustainable development goals.”