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Green Budgeting Can Align Jharkhand’s Fiscal Planning with Climate, Just Transition Goals: IEEFA

An Institute for Energy Economics and Financial Analysis and Jharkhand government task force report has proposed a phased green budgeting framework covering six priority areas to integrate climate, environmental and Just Transition considerations into the state’s public expenditure and investment decisions.

August 26, 2026. By Mrinmoy Dey

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).

The report, titled ‘A Green Budgeting Framework for Jharkhand’, has been developed by IEEFA in collaboration with the Government of Jharkhand’s Task Force on Sustainable Just Transition. It provides a roadmap for incorporating environmental priorities and Just Transition considerations into the state’s fiscal planning and public expenditure decisions.

The proposed framework is structured 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 key feature of the framework is a budget-tagging methodology that moves beyond a simple classification of expenditure as ‘green’ or ‘non-green’. It categorises public expenditure into five groups based on its environmental relevance: Green positive (G+), transition enabling (T), enabling or systemic (E), neutral (N), and brown or negative (B).

The methodology also allows different components of public schemes to be assigned coefficients according to the strength of their environmental contribution. In addition, the framework proposes a ‘Just Transition flag’ to identify expenditure that directly supports coal districts, fossil fuel-dependent communities, displaced workers and other populations affected by structural economic change.

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

Gaurav Upadhyay, Lead Energy Finance Specialist, India Just Transition at IEEFA – South Asia, and a co-author of the report, said, “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. A phased approach would allow the state to build institutional capacity, improve data systems and refine its methodology over time.”

The framework calls for the publication of an annual green budget statement alongside the state budget. It also recommends establishing a green budget portal to improve transparency and public access to budget-tagging methodologies, classifications and data.

As an immediate step, the report recommends establishing a green budgeting cell and issuing a budget circular to enable pilot tagging across selected departments, including energy, agriculture, rural development and forest. The lessons from the initial exercise could subsequently be used to expand green budgeting across the state government.

Over time, the framework could also extend its assessment beyond conventional budgetary expenditure to include resources such as District Mineral Foundation (DMF) funds and other extra-budgetary sources, providing a broader view of public resources contributing to environmental and Just Transition objectives.

“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,” remarked Ajay Kumar Rastogi, Chairperson, Government of Jharkhand’s Task Force on Sustainable Just Transition.

The report draws on international green budgeting practices and frameworks developed by the European Union (EU), Organisation for Economic Co-operation and Development (OECD) and other institutions. It notes that countries across different income levels and institutional contexts have adopted green budgeting approaches tailored to their national circumstances.

According to the report, these international examples demonstrate that green budgeting is not a one-size-fits-all mechanism, but a flexible framework that can be adapted to different fiscal structures, development priorities and institutional capacities.

Vibhuti Garg, Director, IEEFA - South Asia, said, “India has made efforts over the past decade to integrate climate and environmental considerations into public finance. 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.”

The proposed framework positions green budgeting as a tool not only for tracking environmental expenditure but also for improving the alignment of overall public spending with Jharkhand’s climate, sustainability and Just Transition priorities.

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