The Under2 Coalition today launched Next Generation Budgets: Transforming State and Regional Budgets for Net Zero. The report provides a blueprint for subnational governments to ensure public spending is aligned with climate goals through green budgeting.

Record heatwaves, floods, and other extreme weather events are highlighting the urgency of the climate crisis. Subnational governments, responsible for over one-third of global public spending, hold powerful levers to accelerate the transition. The report lays out how integrating climate into budgetary processes can turn commitments into real action.  

Drawing on lessons from 11 pioneering states and regions across Europe and the United States, the report provides practical tools such as green budget tagging, a method used to tag environmental expenditure that integrates climate and environmental considerations into government budgetary processes. Key recommendations include creating a cross-department task force, developing a transparent classification system for budget tagging and piloting green budget tagging in key sectors.

Baden-Württemberg, Basque Country, Catalonia, Hawai’i, Lombardy and Maryland among Under2 Coalition governments transforming their public budgets for ground-up climate action

Case studies reveal how climate and finance ministries can work together to reallocate funds, gradually phase out environmentally harmful spending, and prioritise green investments. 

Virginia Bagnoli, Senior Project Manager and co-author of the report, said: 

"There is no 1.5-degree future without local leaders – green budgeting tools enable them to responsibly manage the financial resources they already have in their fight against the climate crisis."

With just five budget cycles left before 2030—when global emissions must fall by 43% to keep 1.5°C within reach—the report calls for urgent action to institutionalise green budgeting practices and sustain them beyond political cycles. 

Key recommendations from the report include: 

• Securing political commitment to embed green budgeting into long-term government priorities and debates. 
• Creating a cross-department task force, co-led by finance and economy, with active participation from environment and climate departments. 
• Developing a transparent classification system for budget tagging, with clear criteria consistent with regional strategies and informed by international frameworks. 
• Piloting green budget tagging in key sectors (e.g. transport) to test feasibility, identify barriers, and build departmental buy-in.  

About the Under2 Coalition

The Under2 Coalition is the world’s largest network of states and regions committed to net zero by 2050 or earlier. With nearly 200 subnational governments representing over 50% of global GDP. Climate Group acts as its secretariat. 

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