Implementing budgetary reforms in Greece

3. Green budgeting in Greece

3.1. Introducing green budgeting in Greece

Since 2020, Greece has progressively advanced green budgeting as part of its wider PFM reform agenda. Led by the Ministry of Economy and Finance (previously the Ministry of Finance), the reform seeks to embed environmental considerations into budgetary processes by aligning climate and environmental goals with budget planning, execution, and reporting. The aim is to enable more informed decision-making across the budget cycle through a framework that analyses and classifies expenditures according to their environmental impact. This approach is intended to enhance the government’s capacity to track, evaluate, and improve the alignment of public spending with national and international environmental commitments.

Following Greece’s participation in the OECD Paris Collaborative on Green Budgeting in early 2020, a joint working group was established between GAO and the Ministry of Environment and Energy to develop the methodology, key principles, and classification criteria for green budgeting. With OECD support, GAO also prepared a roadmap for implementation. On this basis, green budget tagging was introduced as the first step towards a comprehensive green budgeting framework.

As shown in Figure 3, a pilot green budget tagging exercise was conducted in 2022, focusing on budgetary programmes of the Ministry of Environment and Energy and the Ministry of Rural Development and Food. The exercise involved assessing the extent to which budgetary programmes contribute positively, negatively, or neutrally to the six environmental objectives set out in the EU taxonomy. The results of this exercise were integrated into the 2023 Performance Budget.

Building on this experience, the institutional scope of green budgeting was broadened in the 2024 budget cycle to cover all line ministries, Parliament, the Presidency of the Republic, and the Presidency of the Government. For the 2025 budget, Greece completed green budget tagging across all central government entities. Beyond ministries and national institutions already included, the exercise was also extended to decentralised administrations. This expanded coverage demonstrates Greece’s commitment to embedding green budgeting practices across all budgetary entities.

Figure 3. Timeline for introducing budget tagging

3.2. Tagging methodology in Greece

The Greek green budget tagging methodology is closely aligned with the EU Taxonomy for sustainable activities and corresponding guidance material, ensuring consistency with European-level classification standards and facilitating comparability at the international level.

The environmental impact of each budgetary programme in Greece is assessed by analysing the underlying activities. Each programme is evaluated against the six environmental objectives defined in the EU Taxonomy for sustainable activities:

• mitigation of climate change

• adaptation to climate change

• sustainable use and protection of water and marine resources

• transition to a circular economy

• pollution prevention and control

• protection and restoration of biodiversity and ecosystems.

A positive, negative, neutral, or mixed tag is assigned to each of the six objectives, reflecting how the programme’ s activities contribute to that objective. These six objective-level tags are then consolidated into a single overall tag for the programme, using the following rules:

• Positive (Green/Θ): The programme is classified as positive with respect to all six EU Taxonomy environmental objectives, or positive for at least one objective and neutral for the others.

• Negative (Red/A): The programme is classified as negative with respect to all six EU Taxonomy environmental objectives, or negative for at least one objective and neutral for the others.

• Neutral (Blue/Ο): The programme is classified as neutral with respect to all six EU Taxonomy environmental objectives.

• Mixed (Orange/M): The programme is classified as having at least two different ratings with respect to the EU Taxonomy environmental objectives, which may vary between negative, positive, or neutral, but is not classified as Unclassifiable/Undetermined for any objective.

• Unclassifiable/Undetermined (Grey/ΜΠ): The programme is classified as undetermined for at least one objective. This classification may be applied, for example, when there is insufficient information to determine the environmental impact.

The green budget tagging results are reviewed annually by GAO, in co-operation with the Ministry of Environment and Energy. Updates are informed by more detailed assessments of the environmental impacts of underlying programme activities, as well as by methodological improvements.

3.2.1. Presentation of the green budget tagging results

In Greece, a dedicated green budgeting chapter is included in the introductory report to the budget. A more detailed justification of the green budget tagging classification is provided in the Performance Budget, published as an annex to the main budget documentation.

The presentation of green budget tagging results in the Performance Budget is clear and structured allowing stakeholders to quickly grasp both the financial information and environmental impacts of the public spending. Results are presented at the programme level (Figure 4). They are displayed in a matrix format in a summary table, where each column represents one EU taxonomy objective and contains a symbol indicating the programme’s classification for that objective (e.g., positive, neutral). An overall environmental tag for each programme is provided in the last column. The inclusion of financial information alongside budget tags is particularly useful, as it enables stakeholders to assess the financial size of programmes with positive, neutral, or mixed environmental impacts.

A notable good practice is the use of colour coding. For example, positive contributions are marked in green, negative in red while neutral ratings appear in blue. This visual aid improves readability and allows users to scan the table quickly to identify key patterns.

Figure 4. Presenting the budget tagging exercise results

Source: The Ministry of Economy and Finance (2024[4]), 2025 Performance Budget.

In addition, the Performance Budget provides a breakdown of the green budget tagging results per line ministry/ Central Administration Agency, including a brief description of the justifications for the environmental tags assigned to each programme (Figure 5). While this level of detail enhances transparency, the accompanying narrative explanations can be lengthy and, in some cases, occupy a substantial share of the Performance Budget. This can make the document more cumbersome to navigate and may reduce its accessibility for decision-makers who require concise and targeted information. Once supportive IT systems are in place, these tables could be digitalised, allowing users to access detailed justifications on demand while keeping the core budget documentation streamlined.

Figure 5. Detailed breakdown of green budget tagging results

Source: The Ministry of Economy and Finance (2024[4]), 2025 Performance Budget.

3.3. Strengthening the impact of the green budgeting in Greece

The implementation of Greece’s green budget tagging framework represents a significant step towards integrating environmental considerations into the national budgeting process, in line with the key pillars of the OECD Green Budgeting Framework (OECD, 2021[5]). Since its introduction, the green tagging exercise has expanded in institutional coverage, strengthened its methodological foundation, and increased institutional engagement. Nevertheless, further improvements are needed to reduce administrative burdens and enhance the framework’s effectiveness as a strategic tool for aligning public spending with national priorities and international environmental commitments.

3.3.1. Key strengths of the green budgeting

Leadership of the Ministry of Economy and Finance and collaboration with the Ministry of Environment and Energy

The initiative has been led by the Ministry of Economy and Finance, which has shown strong institutional leadership in steering the reform and embedding it within the broader public financial management framework. This leadership has ensured continuity, visibility, and alignment with other budgeting reforms, including performance budgeting and spending reviews. A key institutional strength lies in the active involvement of the Ministry of Environment and Energy, which collaborates closely with the General Accounting Office to support methodological development and review. This inter-ministerial co-operation has contributed to the technical credibility of the tagging process.

Broad institutional coverage

The broad scope of the exercise, covering all line ministries, constitutional bodies, and decentralised administrations, ensures a comprehensive overview of the environmental impacts of the state budget. This broad coverage improves the robustness of the analysis by capturing a wide range of policy areas and expenditure types. The methodology is expected to be expanded to tax expenditures and the revenue side of the budget in the coming years, and co-operation with the relevant directorate has already begun in this regard.

Credibility of results

The exercise is implemented in an iterative manner, with annual improvements informed by lessons learned, evolving EU guidance, and feedback from participating institutions. Regular reviews incorporate more detailed assessments of the environmental impacts of underlying programme activities, improving the accuracy and consistency of green budget tagging results. The combination of broad coverage, methodological improvements, and systematic quality assurance by GAO and the Ministry of Environment and Energy reinforces the credibility of green budget tagging results. However, to this date, the results of the tagging exercise are not subject to auditing.

3.3.2. Areas for improvement in the Greek green budgeting practices

Limited impacts on budgetary decision-making

To date, the impact of green budget tagging results on budgetary decisions remains limited. While the methodology allows for the identification of programmes with environmental relevance, this information is not yet systematically used to inform funding allocations or prioritisation decisions. At present, green tagging results are presented in the Performance Budget submitted to Parliament in mid-November. Once formal reporting mechanisms are established, GAO and other stakeholders will be better placed to assess environmental tags during budget negotiations and to weigh the associated trade-offs.

Capacity-intensive exercise

The implementation of the tagging process requires significant administrative capacity across both central government and decentralised administrations. This includes dedicated staff time for data collection, classification, and validation; specialised training to ensure consistent application of the methodology and technical expertise to interpret environmental impacts. For some entities, particularly at subnational level, these requirements can pose a challenge to timely and accurate implementation, potentially affecting the quality of the tagging results.

Lacking IT systems

The absence of fully integrated IT tools to support the tagging process increases the administrative burden on all stakeholders involved and increases the risk of errors and inconsistencies. Currently, much of the process relies on manual data entry, validation, and consolidation, which can slow down workflows and complicate quality assurance. Integrating tagging into IT systems is being prepared and expected to be in place for 2027 budget to support data collection, improve accuracy, and facilitate the development of more timely and accessible reports.

Lacking linkages to broader performance framework

Although tagging results are presented in the budget documentation, the link between these results and programme objectives or performance indicators is not yet systematically established. This limits the framework’s capacity to monitor whether programmes tagged as environmentally relevant are delivering their intended environmental or climate outcomes. Strengthening these linkages by, for example, requiring programmes with positive or negative tags to include environmental references in their performance information would enhance the strategic use of tagging results and reinforce accountability for outcomes.

3.3.3. OECD Recommendations to strengthen the impact of the green budgeting

• Strengthen the link between tagging results and budget decision-making by incorporating a dedicated green budget statement into the introductory section of the annual budget. This statement should summarise key findings from the tagging exercise and outline their implications for resource allocation and policy prioritisation.

• Leverage tagging results to inform future spending reviews, with particular focus on programmes that show both high fiscal savings potential and significant environmental impact. This would enable more targeted and strategic reallocation of resources in support of sustainability objectives.

• Integrate green budgeting more systematically into the performance budgeting framework by requiring line ministries to include at least one environmental objective and indicator in the Annual Programme Plans for programmes identified as environmentally relevant through the tagging exercise.

• Use business intelligence (BI) tools to visualise tagging results, enabling stakeholders to interact with the data and access detailed information on the rationale behind tagging classifications.

• Broaden the scope of green budgeting to the revenue side by designing and piloting a methodology to classify environmentally relevant revenues and tax expenditures, including environmentally harmful subsidies and green taxes.