Budgeting for climate change: obstacles and opportunities at the US state level

Abstract

ABSTRACTState governments in the United States are well placed to identify opportunities for mitigation and the needs for adaptation to climate change. However, the cost of these efforts can have important implications for budgets that already face pressures from diverse areas such as unfunded pensions and growing health care costs. In this work, the current level of spending on climate-related activities at the state level are evaluated and policy recommendations are developed to improve financial management practices as they relate to climate risk. An examination of state budgets reveals that climate mitigation and adaptation activities represent less than 1% of spending in most states. The data collection highlights the obstacles to collecting accurate spending data and the lack of budgetary and accounting procedures in place. More importantly, the difficulty in benchmarking these activities poses challenges for the analysis of state-level policies as well as planning and modelling future climate-related spending. Other policy contexts, including public pensions and infrastructure, can provide guidance on budgetary and accounting tools that may help states prepare for and more efficiently manage climate-related expenditures.Key policy insightsClimate change mitigation and adaptation will require substantial investments across many levels of government on a wide range of activities.Currently, US states are not clearly demarcating climate expenditures, hindering the identification of climate-related budgetary risks.In the absence of guidelines, these longer term fiscal outlays may remain chronically underfunded in favour of more near-term spending priorities.Establishing appropriate financial management and data collection practices is important for more sophisticated cost-effectiveness and policy analyses.