GREEN BUDGET TAGGING IN THE KYRGYZ REPUBLIC Conceptual Approach September 2024 i Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Green Budget Tagging in the Kyrgyz Republic Conceptual Approach September 2024 © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of the World Bank Group with external contribu- tions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Because The World Bank encour- ages the dissemination of its knowledge, this work may be reproduced, in whole or in part, for non-commercial purposes as long as full attribution to this work is given. Please cite the work as follows: “Ministry of Finance of the Kyrgyz Republic and the World Bank. 2024. Green Budget Tagging in the Kyrgyz Republic. Conceptual Ap- proach. Washington, DC: World Bank.” All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; email: pubrights@worldbank.org. Cover design: Vladimir Mirzoyev. Photo: @nastyaaf, freepik.com iii Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Contents Foreword by the Ministry of Finance of the Kyrgyz Republic vi Foreword by the World Bank vii Acknowledgments viii Abbreviations ix Executive summary x 1. Introduction 1 2. Objectives of green budget expenditure tagging 3 3. Green budget expenditure tagging: Overview of international experience 5 3.1. Green budget expenditure tagging and its objectives 5 3.2. Definitions and classification of green budget expenditures 7 3.3. Estimation of green budget expenditures 11 3.4. Quality assurance 13 3.5. Integration with the budget process 13 3.6. Roles and responsibilities 15 3.7. Phased implementation 15 4. Definitions and classification of green budget expenditure tagging in the Kyrgyz Republic 17 5. Green budget expenditure tagging in the Kyrgyz Republic: The process and roles of ministries and agencies 22 5.1. Description of the overall budget expenditure tagging process 22 5.2. Identification, classification, and assigning of relevance weights 25 5.3. Analysis and reporting 28 5.4. Quality assurance 30 5.5. Roles and responsibilities for green BET 30 5.6. Integration with the budget process 32 5.7. Technical support and guidance to relevant sector ministries and budget user agencies 36 6. Phased implementation of green budget expenditure tracking in the Kyrgyz Republic 37 ANNEXES Annex 1. Detailed description of roles and responsibilities of different actors in the process of green budget tagging 39 Annex 2. Assessment of needed additional inputs for incorporating climate and environmental commitments in public financial management procedures and practices 44 Annex 3. Cross-reference between the green tags and specific SDG targets 45 Annex 4. Government documents related to climate and environment 46 iv Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Contents FIGURES Figure 1: How can the results of green BET be used? 4 Figure 2: Green BET initiatives across the globe 5 Figure 3: ‘Green’ and ‘Climate’ system 8 Figure 4: Green BET during different stages of the budget cycle 14 Figure 5: Main stages in green BET 23 Figure 6: Stepwise process of green BET in the Kyrgyz Republic 25 Figure 7: The decision tree for classification and assigning green tags for measures included in the programs of program-based budgets 26 Figure 8: Conceptual summary of the assessment of relevance weight 28 Figure 9: Integration of green BET into the budget preparation process 33 Figure 10. Integration of green budget expenditure reporting in the budget reporting process 33 BOXES Box 1: Monitoring SDGs in the Kyrgyz Republic 4 Box 2: Why implement green budget tagging? Best practice example from Indonesia and Ireland 6 Box 3: Best practice examples: green expenditure definitions 8 Box 4: Expenditure in Ireland’s budget with probable positive and negative impact 10 Box 5: Green budget expenditure definition and coverage – best practice example from Uzbekistan 10 Box 6: International experience in definition of relevance weights for green expenditures 12 Box 7: Integration into the existing budgeting processes – best practice examples from Indonesia and Morocco 13 Box 8: Roles in green budget tagging - best practice examples of Nepal, Nicaragua, and Philippines 15 Box 9: Phased implementation of green budget tagging in the region - example from Uzbekistan 16 Box 10: When does expenditure touch upon more than one green objective? 20 Box 11: Example of the process from the perspective of tagging 1 of codes of program (552) Providing the population with thermal energy) by one ministry (Ministry of Energy - ME) 34 TABLES Table 1: Examples of thematic coverage of green budget expenditure definition 7 Table 2: Examples of green budget expenditure classification 9 Table 3: Illustration of measures from program budget 2023 that can be classified as measures with expenditure contributing to achieving green objectives (climate adaptation - CCA, climate mitigation - CCM and environment - ENV) 20 Table 4: An example for calculating a program’s climate expenditure 29 Table 5: Roles various ministries and agencies play in the process of tagging green budget expenditures 31 Table 6: Budget preparation timeline 32 Table 7: Linking the SDG implementation with the implementation of the green objectives by selected ministries 45 v Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Foreword by the Ministry of Finance of the Kyrgyz Republic Dear Colleagues, I am delighted to present this report on the conceptual approach underpinning the establishment of a Green Budget Tagging system in the Kyrgyz Republic. This significant milestone marks our commitment to integrating climate and environmental considerations into our budget process and aligning our actions with our Nationally Determined Contributions (NDCs) and other environmental commitments. The Green Budget Tagging system provides a framework for identifying, tracking, and classifying green finance flows in the public sector. By tagging budget expenditures related to climate change mitigation, adaptation, and environmental protection, we can ensure that these priorities receive adequate consideration during budget preparation and negotiation. This system will also enhance the effectiveness of our climate and environmental measures by incentivizing ministries to integrate them into their plans and budgets. One of the key benefits of the Green Budget Tagging system is its ability to improve the monitoring and reporting of our climate and environmental actions. By accurately tracking green expenditures, we can better report on the implementation of our national and international climate and environmental obliga-tions. This includes producing the data and visualizations required for biannual reporting on domestic climate finance, as mandated by the United Nations Framework Convention on Climate Change (UNFCCC). Furthermore, the Green Budget Tagging system will enable us to identify funding gaps and justify reprioritization of fiscal resources for relevant measures from national, international, and bilateral donors. It will also enhance our ability to design and implement green fiscal incentives and other green financial instruments, including debt swaps or sovereign green bond issuance leveraging financing for climate adaptation, climate mitigation, and environmental protection efforts. I would like to express my sincere gratitude to the interministerial working group, sector ministries, and core and World Bank teams for their invaluable contributions in developing the Green Budget Tagging guidelines. I would also like to thank the Ministry of Finance team, the Ministry of Natural Resources and Technical Supervision, and all the ministries and agencies involved in the consultations and piloting process. Your dedication and expertise have been instrumental in shaping this system. I am confident that the implementation of the Green Budget Tagging system will strengthen our capacity to mobilize financing for the implementation of our NDCs and other environmental commitments. It will also enhance our ability to monitor and report on the progress of our Sustainable Development Goals (SDGs), particularly SDG 13 on Climate Action. I encourage all ministries, agencies, and budget users to welcome the Green Budget Tagging system and integrate it into their budget planning and execution processes. Together, we can ensure that our financial resources are effectively allocated to support our climate and environmental objectives. Thank you for your continued commitment to sustainable development and for your contributions to build strong technical foundations to establish the Green Budget Tagging system in the Kyrgyz Republic. Zhibek Duisheeva Deputy Minister of Finance of the Kyrgyz Republic vi Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Foreword by the World Bank We are delighted to present this Green Budget Tagging Guidelines report, which marks a significant milestone in our efforts to promote sustainable development and combat climate change in the Kyrgyz Republic. This report is the result of the dedicated work and collaboration of an interdisciplinary World Bank team, led by Leela Raina and Bakyt Dubashov, along with a team of experts and consultants. At the World Bank, we are committed to supporting countries in their journey toward a greener and more sustainable future. This report is a testament to our renewed mission of reducing poverty on a livable planet. By providing technical assistance and capacity building, we aim to empower countries to integrate climate and environmental considerations into their budget processes. We would like to express our sincere appreciation to the Ministry of Finance and their team, led by Deputy Minister Zhibek Duisheeva, for their collaboration, leadership in convening an interministerial working group across sector ministries, and support throughout the development of this report. Their commitment to green budgeting and their valuable inputs have been instrumental in shaping the guidelines and ensuring their relevance to the Kyrgyz Republic’s context, at an important stage when the Kyrgyz Republic transitions from functional budgeting to performance-based budgeting. We would also like to extend our gratitude to the peer reviewers from the World Bank, Nicholas Menzies, Saša Eichberger, and Viviane Wei Chen Clement, for their insightful comments and guidance. Their expertise has greatly enriched the quality and rigor of this report. Furthermore, we would like to acknowledge the efforts of the interministerial working group as well as the participants of the consultations held across 2023 and 2024. Their valuable inputs and feedback have contributed to the development of a robust and comprehensive green budget tagging methodology. This report not only provides guidelines for green budget expenditure tagging but also highlights the importance of aligning budget processes with climate and environmental objectives. By tagging and tracking green expenditures, the Kyrgyz Republic will be able to identify gaps in the implementation of climate and environmental strategies, improve budget planning, and mobilize additional resources to meet its goals. We are confident that the implementation of green budget tagging will not only support the Kyrgyz Republic in fulfilling its international commitments, such as the Nationally Determined Contributions and the Sustainable Development Goals, but also contribute to the country’s overall sustainable development agenda. We would like to commend the World Bank team, the Ministry of Finance, and all stakeholders involved for their dedication and hard work in making this report a reality. Together, we can create a greener and more prosperous future for the Kyrgyz Republic. We are proud to celebrate this achievement and look forward to witnessing the positive impact of green budgeting in the Kyrgyz Republic. Sanjay Srivastava Hugh Riddell Practice Manager Country Manager Environment Natural Resources and Blue Economy in the Europe for the Kyrgyz Republic, and Central Asia Sustainable Development Department World Bank vii Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Acknowledgments This Green Budget Tagging Guidelines report was produced by a core World Bank team led by Leela Raina (Environmental Economist) and Bakyt Dubashov (Senior Economist). The team included Aidai Bayalieva (Senior Environmental Specialist), Oleksii Balabushko (Lead Economist), Baiba Gaile (Senior Specialist, consultant), Davina Jacobs (Senior specialist, consultant), and Gulira Borubaeva (Senior National Expert, consultant). This assessment was produced under the overall guidance of Naveed Hassan Naqvi (outgoing Country Manager for the Kyrgyz Republic), Hugh Riddle (incoming Country Manager for the Kyrgyz Republic), Urvashi Narain (Program Leader, Sustainable Development, Europe and Central Asia), David Knight (Program Leader, Equitable Growth, Finance and Institutions, Central Asia), Sanjay Srivastava (Practice Manager for Environment, Natural Resources, and Blue Economy in the Europe and Central Asia Sustainable Development Department), Antonio Nucifora , Practice Manager, Macroeconomics, Trade and Investment Global Practice for Central Asia, Caucasus, Russia and Türkiye, Sameh Wahba (Regional Director, Sustainable Development, Europe and Central Asia Region), and Asad Alam (Regional Director for Europe and Central Asia, Equitable Growth, Finance and Institutions). The team also thanks the peer reviewers from the World Bank: Nicholas Menzies (Senior Governance Specialist), Saša Eichberger (Senior Environmental Specialist), and Viviane Wei Chen Clement (Senior Climate Change Specialist) for their detailed comments and invaluable guidance. The team is grateful to Kanykei Temirbekova (Administrative Assistant), Kunduz Adylbekova (Administrative Assistant), Linh Van Nguyen (Senior Program Assistant), and Grace O. Aguilar (Program Assistant) for their project management support. Nigara Abate (Senior Communications and Knowledge Management Specialist) prepared the report for publication. The report was produced in collaboration with the Ministry of Finance of the Kyrgyz Republic (MF) and its team of specialists led by Deputy Minister of Finance. This work has benefited greatly from several interministerial consultations held in 2023 and 2024 under the leadership of the MF as well as from thorough feedback from the MF during the finalization of the tagging methodology. The team would like to extend its deep gratitude to the participants of the consultations for their valuable inputs on numerous technical aspects of green budget expenditure tagging, including the green expenditure budget expenditure definitions and classification, on options for estimation of green budget expenditures, on alignment of tagging with the budget process, on roles and responsibilities of different institutions, on the reporting and on phased implementation of green budget tagging. The interministerial working group for green budget tagging has been instrumental in shaping the guidelines and the conceptual approach. We are grateful for the engagement and active participation of the specialists representing sector ministries and agencies. We also extend our gratitude to the NDC partnership country team for the Kyrgyz Republic for their valuable support and engagement. This publication was funded by the World Bank’s Climate Support Facility (CSF). The CSF is an umbrella multi-donor trust fund administered by the World Bank’s Climate Change Group. Launched in December 2020, its mission is to support developing countries in their efforts to accelerate the transition to low- emission and climate-resilient economies and communities to meet the goals of the Paris Agreement.   viii Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Abbreviations BET Budget Expenditure Tagging CBT Climate Budget Tagging CCA Climate Change Adaptation CCCCESD Coordinating Council of Climate Change, Environment and Sustainable Development CCM Climate Change Mitigation CM Cabinet of Ministers ENV Environment EU European Union GEAP Green Economy Action Plan GEDP Green Economy Development Program GHG Greenhouse Gas ICMA International Capital Markets Association ISGBs Irish Sovereign Green Bonds MDB Multilateral Development Bank MEC Ministry of Economics and Commerce MF Ministry of Finance MNRETS Ministry of Natural Resources, Environment and Technical Supervision MTBF Medium-Term Budget Framework NBSAP National Biodiversity Strategy and Action Plan NDC Nationally Determined Contribution NDP National Development Plan NDS National Development Strategy OECD Organisation for Economic Co-operation and Development SDGs Sustainable Development Goals SOE State-Owned Enterprise TBP Triannual Budget Planning UNDP United Nations Development Programme UNDRR United Nations Office for Disaster Risk Reduction UNEP United Nations Environment Programme (now UN Environment) UNFCCC United Nations Framework Convention on Climate Change ix Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Executive summary The Green Budget Tagging Guidelines Conceptual highlights the advantages of green budget expend- Approach establishes a comprehensive framework iture tagging (‘green BET’), including improved for implementing green budget expenditure transparency, promotion of environmentally re- tagging in the Kyrgyz Republic, aligning with the sponsive policy making, and enhanced readiness country’s fiscal policy directions for 2024–2028. 1 to access international financing and policy-based This initiative underscores the critical role of financing for climate action. green budget tagging as a fundamental aspect of Overall, the report and Concept Package are budget policy. valuable resources for the Kyrgyz Republic, This report delineates the objectives, processes, aimed at enhancing public financial management and roles of ministries and agencies in green practices and contributing to the Sustainable budget expenditure tagging. It underscores the Development Goals. This initiative represents a necessity of quality assurance, integration with the significant step toward integrating climate and budget process, and provision of technical support environmental considerations into budgetary to sector ministries and budget user agencies. processes, thereby enhancing the effectiveness of Furthermore, it includes a phased implementation measures addressing climate and environmental plan and detailed descriptions of the roles and challenges. responsibilities of different actors involved in the Key Learnings from Building Interim Guidelines for tagging process. Green Budget Expenditure Tagging in the Kyrgyz This concept document supplements ‘Interim Republic Guidelines for Tagging Green Budget Expenditures’ ■ Prioritization of simplicity and ease of use. and presents a proposed methodology for The guidelines are designed for simplicity classifying, tagging, and reporting public and practical use by ministries and agencies expenditures based on their contributions to responsible for mainstreaming climate and climate and environmental goals. It incorporates environmental considerations in sectoral international best practices and details key planning and budgeting. This approach ensures concepts and foundational elements of green accessibility and practicality for users. budget expenditure tagging contextualized for the Kyrgyz Republic (approved by the Ministry of ■ Integration with existing budget processes. Finance [MF] on June 13, 2024. 2 The guidelines emphasize integrating green budget expenditure tagging into the existing Green budget expenditure tagging is empha- national public financial management sized as a government-led process for identifying, framework. This alignment ensures that the measuring, and monitoring climate- and environ- tagging process leverages the strengths and ment-relevant public expenditures. The document addresses the limitations of the current budget 1 Page 10 of document approved at the meeting of the Cabinet of Ministers of the Kyrgyz Republic and Head of the Presidential Administration of the Kyrgyz Republic dated 12.09. 2023 № 18/17-18. https://www.minfin.kg/storage/files/shares/Post/Post- 1043/documents/1752a40cd0e44b03897028a43ffbc450.pdf. 2 Order of the Ministry of Finance Nr 90 “On Approval of the Interim Guidelines for Green Budget Expenditure Tagging of the Kyrgyz Republic and conducting a piloting of green budget expenditure tagging” (orig: “Об утверждении Временного руководства по маркировке «зеленых» расходов бюджета Кыргызской Республики и проведении пилотного проекта по внедрению маркировки «зеленых» расходов”), dated of June 13, 2024. x Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach process. This is particularly important and an environmental objectives, and use of tagging opportune time to pilot the guidelines given to support green financing instruments and that the Kyrgyz Republic is transitioning to international reporting. performance-based systems. ■ Consultative process and the importance ■ Quality assurance mechanisms. To ensure the of engagement through an interministerial accuracy and reliability of tagged expenditures, working group. A key learning from the devel- the guidelines recommend quality assurance opment process is the importance of engag- mechanisms. These involve reviewing and ing an interministerial working group. Through validating tagged expenditures to confirm their workshops and consultations, this group dis- climate or environmental relevance, reducing cussed various aspects of green budget ex- the risk of ‘greenwashing.’ penditure tagging, including definitions, clas- sifications, alignment with the budget process, ■ Phased implementation. The guidelines institutional roles, and phased implementation. propose a phased approach to implementation. Representatives from sector ministries and This involves piloting in selected ministries agencies, including the Ministry of Finance, or agencies to test practical implementation, Ministry of Natural Resources and Technical quality control, analysis, and reporting before Supervision, Ministry of Emergency Situations, scaling up. Continuous capacity building for all Ministry of Transport and others, played a cru- stakeholders is also emphasized to ensure the cial role. Their input was instrumental in shap- reform’s success. ing the guidelines and concept document. ■ Links to international best practices. Drawing Overall, the consultative process involving on international best practices, the guidelines the interministerial working group and sector benefit from the experiences and lessons ministries ensured a comprehensive and inclusive learned in other countries. This helps ensure approach to developing the green budget that the tagging process in the Kyrgyz Republic expenditure tagging system in the Kyrgyz Republic. aligns with global standards and effectively The key learnings underscore the importance of achieves its objectives. Countries such as simplicity, integration, quality assurance, phased Indonesia, Ireland, France, and Uzbekistan implementation, and international best practices have influenced the guidelines through their in building effective guidelines for green budget successful implementation of green budget expenditure tagging. tagging systems, focus on climate and xi Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 1. Introduction The Green Budget Tagging in the Kyrgyz Republic: Republic; and outlines the next steps for phased Conceptual Approach (hereafter referred to as implementation of Green Budget Tagging in the the ‘Concept Document’) presents the conceptual Kyrgyz Republic. framework for green budget tagging in the Kyrgyz The objective of the Concept Document is to: Republic. The need for green budget tagging has been prioritized in the Main Directions of Fiscal ■ Provide the reader with a general understanding Policy of the Kyrgyz Republic for 2024–2028, 3 of international experience on green which foresees establishment of a system for green expenditure tagging; budget tagging as one of the tasks of budget policy ■ Explain the key concepts and building blocks for 2024–2028. for green budget expenditure tagging (BET) The Concept Document supplements ‘Interim system in the Kyrgyz Republic; and Guidelines for Tagging Green Budget Expenditures ■ Explain why and how to track and report green in the Kyrgyz Republic’ (approved by the Ministry of budget expenditures in the Kyrgyz Republic, Finance (MF) on 13/06/2024;4 hereafter referred how to ensure the quality of the data produced to as the ‘Guidelines’) and its further updates as throughout this process, and what are the part of phased implementation of Green Budget roles of the different public institutions in this Tagging in the Kyrgyz Republic. process. In particular, the Concept Document details Together with the Guidelines, the Concept green budget tagging concepts and international Document builds the foundations of a green budget best practice examples; describes the proposed tagging system which can explore prioritizing methodology for classifying, tagging, and reporting and repurposing government budget toward public expenditures based on their contribution environment and climate outcomes through, for to climate and environmental goals in the Kyrgyz example, fiscal policy reform. Preparation of the Concept Document The Guidelines and this Concept Document have in leveraging its own resources to meet financing been developed as part of technical assistance needs and signal a serious commitment to from the World Bank requested by the Ministry of international development partners who have the Finance (MF) in 2021 to explore green financing ability to crowd in financing. This will also allow the options to scale up financing for the Kyrgyz government to reallocate scarce public resources Republic’s Nationally Determined Contribution and build confidence and credibility to secure (NDC) implementation. One of these options is additional international and domestic financing. identifying, tracking, and classifying green finance The first step in developing and implementing flows in the public sector, which can assist the MF a system for identification, tracking, and 3 Page 10 of document approved at the meeting of the Cabinet of Ministers of the Kyrgyz Republic and Head of the Presidential Administration of the Kyrgyz Republic from 12.09. 2023 № 18/17-18. https://www.minfin.kg/storage/files/shares/Post/Post-1043/documents/1752a40cd0e44b03897028a43ffbc450.pdf. 4 Order of the Ministry of Finance of 13/06/2024 Nr 90 “On approval of the Interim Guidelines for Green Budget Expenditure Tagging of the Kyrgyz Republic and conducting a piloting of green budget expenditure tagging” (orig: “Об утверждении Временного руководства по маркировке «зеленых» расходов бюджета Кыргызской Республики и проведении пилотного проекта по внедрению маркировки «зеленых» расходов”). 1 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach classification of green finance flows in the public the environment, biodiversity, and green economy sector is to prepare budget tagging guidelines. into the budget process, was utilized for further consultations. Two consultation workshops To initiate the process of developing the Guidelines were held with the Working Group. One was held and the Concept Document, a workshop was held in May 2023 to discuss the definitions of the in February 2023 under the leadership of the MF, proposed green expenditure budget expenditure together with other ministries, to provide training and classification and estimation options. During on green budget tagging and reach consensus the second consultation workshop, the Working on the overall scope of green BET. Thereafter, Group discussed the alignment of tagging with a series of consultations were held on several the budget process, the roles and responsibilities technical issues related to green BET. The existing of different institutions, and the reporting and interdepartmental working group (Order of the phased implementation of green budget tagging. Ministry of Finance No. 132-P of 12/22/2010; This was followed by individual consultations with hereafter referred to as the ‘Working Group’), several ministries throughout 2023. which was established to develop and implement measures aimed at integrating the components of The Guidelines and this Concept Document are the sustainable development, aspects of poverty and result of consultations with this Working Group. Target groups The main target group of the Concept Document institutions responsible for the preparation of includes all ministries and agencies, who tag Medium-Term Budget Framework (MTBF) and the their budget following the requirements included annual budget. This Concept Document is also in the Guidelines. This includes the staff of the intended mainly for decision-makers on public departments and other functional sub-divisions funds allocations at the level of ministries and that are responsible for implementation of agencies as well as at the level of the Cabinet of climate and environmental policy, including also Ministers (CM) and Jogorku Kenesh. for integration of climate and environmental The secondary target group of the Concept priorities in sector planning and implementation. Document are other interested individuals and It also includes the staff responsible for budget practitioners. This includes experts in the Kyrgyz preparation and the staff responsible for Republic involved in Sustainable Development preparation, updating, implementation, and Goal (SDG) monitoring and reporting, members monitoring of budget programs and for preparation of the public participating in the public councils and updating of the program passports, as well as established at the level of ministries and agencies, the members of the working groups established at budget tagging and tracking practitioners, and the level of ministries, departments, and budgetary experts working in other countries. 2 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 2. Objectives of green budget expenditure tagging The Kyrgyz Republic is facing several environmental recovered in 2021, resulting in a slight decline in challenges, including water pollution, air pollution public debt from 57.9 percent of GDP in 2020 to (mostly in the big cities), land degradation, and 50.6 percent in 2021. glacial degradation, among others. Even though Relevant ministries, including the MF, will need the Kyrgyz Republic has the third lowest level of to mobilize substantial additional resources to greenhouse gas (GHG) emissions per capita in fulfill the national and international environmental Europe and Central Asia, it has significant carbon and climate obligations. Green BET will allow intensity, well above the world and Europe and the Kyrgyz Republic to gain insight into trends Central Asia averages, mainly on account of the and patterns around climate and environmental inefficient use of fossil fuel for energy, heating, expenditures. This can help determine where the industry, and transport. largest implementation gaps exist in relation to The Kyrgyz Republic has made considerable national strategies for implementing climate and progress to address its climate and environmental environmental objectives and improve budget challenges. Significant progress has been made planning and execution for the coming years. It also through issuance of policies and strategies like can help identify the country’s needs for raising ‘Green Economy Development Program’ (GEDP) additional funds to meet its goals. The data can and ‘Green Economy Action Plan’ (GEAP) adopted additionally be used to develop and implement by CM in 2019. The country has committed to green financial instruments which can leverage significant GHG emission reductions as evidenced in financing for climate adaptation, climate mitigation, its latest Nationally Determined Contribution (NDC) and environmental protection efforts. and its climate and environmental commitments The goal of the green BET system for the Kyrgyz are among the main cornerstones of the National Republic is to enable budget and accounting Development Strategy. The full list of government reports to include trends and patterns of documents related to addressing climate and climate and environmental expenditures. This environmental challenges is provided in Annex 4. contributes to the overarching goal of mobilizing Yet implementing these ambitious climate and financing for the implementation of NDCs and environmental commitments will require significant other environmental commitments in the Kyrgyz resources. According to the updated NDC (2021), Republic. If implemented, the Kyrgyz Republic may “The overall estimated cost of the implementation use green BET as a development policy trigger for of mitigation and adaptation actions will total at development partners’ support for development around US$10 billion, including 37 percent coming policy loans, debt repurposing or swap or issuance from public resources (funding by the private of sovereign green bonds in line with international sector, international donors through climate experience. Green BET will also support the finance mechanisms, and the national budget) and country’s ongoing efforts to monitor and report 63 percent sought in the form of investments of on implementation of SDGs, particularly SDG 13. international financial assistance.” In the meantime, Green BET will enable the MF and the Ministry of the public debt remains high. After a sharp increase Natural Resources, Environment and Technical in public debt in 2020 due to the COVID-19 Supervision (MNRETS) to ensure that environment pandemic, the Kyrgyz Republic’s economy slowly and climate policies receive adequate consideration 3 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach during budget preparation and negotiation. BET finance, as required by United Nations Framework is also likely to increase the awareness of climate Convention on Climate Change (UNFCCC) reporting and environmental issues among decision-makers under monitoring, reporting, and verifications. The and to incentivize ministries to integrate climate MF and MNRETS can use information on green and environmental measures into their plans and expenditures to design and implement other budgets, thereby enhancing the effectiveness of green financial instruments. By showing the actual Выявление пробелов such measures. This will also improve the monitoring expenditures в финансировании >>> and comparing them to the estimated and reporting of the government’s climate and costs for achieving the green objectives outlined in Увеличение Информация для отчетности Маркировка actions and increase environmental РКИКvisibility. в рамкахtheir ООН и по ЦУРthe >>> 13 national strategies, ministries andдля финансирования agencies will «зеленых» расходов the government’s ability to выполнения обязательств Thus, it will enhance be better able to justify their budget proposals and бюджета Внедрение других «зеленых» по ОНУВ и других report on the implementation >>> will экологических of its national and the government финансовых инструментов be able to identify funding gaps. international climate and environmental obligations, This will increase the ability to justify increased обязательств Повышение качества including the production of data and visualizations support >>> for relevant measures with national, бюджетных решений required for biannual reporting on domestic climate international, and bilateral donors (see Figure 1). Figure 1: How can the results of green BET be used? Identification of funding gaps >>> Information for the reporting Upscaled financing under the UNFCC and on SDG 13 >>> Green budget for implementation of NDC expenditure tagging Implementation of other green and other environmental financial instruments >>> commitments Better budget decisions >>> Source: Original elaboration for this publication. In addition, the green BET, in conjunction with other tools (such as Environmental Box 1: Monitoring SDGs in the Kyrgyz Republic Impact Assessments that incorporate the climate perspective), will help strengthen the environment and climate The Kyrgyz Republic is committed to and monitors change perspective in the management its efforts in the implementation of SDGs and moni- of public investment projects. The tor its efforts in SDG implementation. With this aim, ability to monitor green expenditures the country has made significant progress in adapt- will aid in determining the extent ing the global SDG indicators and targets to nation- to which adaptation and mitigation al circumstances and is continuously improving the monitoring system by using high-quality, accurate, are incorporated into the project comparable, and disaggregated data to ensure implementation. alignment with public administration performance Finally, the green BET will facilitate indicators. monitoring expenditures for the imple- The responsible ministries are working on integrat- mentation of SDG 13 (Climate Action) and ing SDGs into medium-term budgets, budget docu- other SDGs. However, to monitor SDG- ments, and processes. On September 12, 2023, the related expenditures under other SDGs, CM of the Kyrgyz Republic approved the document an additional SDG expenditure tracking ‘Main Directions of the Fiscal Policy of the Kyrgyz mechanism would be required. The Republic for 2024–2028’. In the section ‘Fiscal Pol- proposed system for green BET can be icy’, it is noted that one of the tasks of the budget policy for 2024–2028 is the introduction of tagging used for developing tracking systems for of expenditures for implementing the national stra- other cross-cutting issues, such as SDGs, tegic priorities and SDGs. gender, and disaster risk reduction. See Annex 3 for details on links with the SDGs. 4 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 3. Green budget expenditure tagging: Overview of international experience This section presents international experience and best practice examples from select countries on green BET. It details green BET objectives provides a definition and classification of green budget expenditures in different national contexts The section also introduces different methods for estimating green budget expenditures and describes how countries ensure the quality of these estimates. It presents several topics related to the institutionalization of green budget tagging, including the integration with the budgetary processes and roles and responsibilities of different actors in the tagging processes that are applied in different countries. Finally, the Section shares international experience in phased introduction and expansion of green BET. It also provides a background for the green budget methodology choices for the Kyrgyz Republic presented in Sections 4, 5, and 6. 3.1. Green budget expenditure tagging and its objectives Green BET can be defined as a Figure 2: Green BET initiatives across the globe 6 government-led process of identification, measurement, and monitoring of climate- and/or environment-relevant public expenditures. It is a public financial management tool to identify, classify, weigh, and mark (tag) expenditures of governments, by attaching tags (sometimes referred to as markers or codes) to budget lines. It analyzes individual budget measures in terms of their contribution or impact on (expected) climate and/or environmental outcomes. Climate mitigation Climate adaptation Climate mitigation and adaptation Thus, it aims to highlight the budgetary One-time Recurring measures related to climate and/or environmental action. Green BET started Source: I4CE (Institute for Climate Economics). 2021. “The Good, the Bad and in 2012 with the focus on climate in the Unclear.” Environmental Budget Tagging - From communicating national effort to improving budgetary performance. several Southeast Asian countries (Nepal, Bangladesh, Cambodia, Thailand). 5 Since The reasons why countries decide to perform green BET then, it has evolved into various systems vary, but typically the main reasons are the following: that often have broader scope covering other environmental dimensions. It ■ To reveal the extent of links between budget measures has also rapidly expanded to other and their climate and environmental impacts, which regions across the globe. See Figure 2. improves the transparency and rises awareness Смягчение последствий изменения климата Адаптация к изменению климата World Bank. 2021a. Climate Change Budget 5 6 Note that since 2021, green BET is being implemented in more Смягчение последствий изменения климата и адаптация к изменению климата Tagging: A Review of International Experience. countries, for example, Armenia, Uzbekistan. Разовые Регулярные 5 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach ■ To ensure consistency of the budget with financing instruments. environmental and climate and environmental There are three essential design elements to plans and strategies and thus promote CBT methodologies: definition of climate and environmentally responsive policy making environment-relevant expenditure, definition of ■ To report on implementation of national climate appropriate coverage, and estimation of climate- and environmental commitments and environment-relevant spending. Additional important elements to consider are the validation ■ To facilitate access to international financing by or quality control mechanisms and integration identifying funding gaps and by demonstrating of green BET with the budget cycle. Roles of all government commitment involved institutions should be clear and they ■ To facilitate implementation of other green should have the capacity to implement their roles. Box 2: Why implement green budget tagging? Best practice example from Indonesia and Ireland Indonesia is among the pioneers of climate budget tagging. It implemented its tagging system since 2014 to identify expenditures on projects that deliver specified climate change benefits in accordance with the Republic of Indonesia’s climate objectives. Indonesia used the Climate Budget Tagging (CBT) exercise to issue a green sukuk (Islamic green bond). Indonesia needs $81 billion to finance climate change mitigation and adaptation actions in 2015-2020 Source: TNC,2017 The Government of Indonesia has developed and implemented Climate Budget Tagging (CBT) since 2016 to track how much the government spending on climate change actions out of the national budget. WHY СВТ? Supporting green budgeting development in order to prioritize climate change-related investments. Obtaining data on climate change-related investments will make the public be able to access information on the government›s spending, as well as improving accountability. Supporting policymakers in mainstreaming climate change actions in the national development programs. Source: Rulliadi D. (Ministry of Finance, Republic of Indonesia). 2019. «Climate Budget Tagging and Green Sukuk / Islamic Bond. An Indonesian Experience.» Presentation at Sherpa’s Meeting, Finance Minister Coalition for Climate Action, Helsinki, February 21–22, 2019. Ireland introduced CBT as part of wider green budgeting reforms. CBT facilitates reporting to investors on Irish Sovereign Green Bonds (ISGBs). Under the terms of this bond, any proceeds raised can only be devoted to eligible green expenditure and the government must report to investors through an annual allocation report on the disbursement of these sums. Amounts raised through the sale of ISGBs are allocated against eligible green projects, which generate a positive environmental benefit. For example, according to the ISGB reporting for 2021, €2,501.4 million was allocated to eligible green projects. The eligible categories of such projects included built environment/energy efficiency, clean transport, climate change adaptation, Environmentally Sustainable Management of Living Natural Resources and Land Use, renewable energy, and sustainable water and waste water management. Source: Cremins, A., and L. Kevany. 2018. “An Introduction to the Implementation of Green Budgeting in Ireland.” Staff Paper 2018, Department of Public Expenditure and Reform, Climate Change Unit; Government of Ireland. 2021. Irish Sovereign Green Bond Eligible Green Projects Impact Report 2021. 6 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 3.2. Definitions and classification of green budget expenditures There are two distinct approaches to the definition Policy-based definitions limit climate- and of climate- and environment-relevant activities environment-relevant activities to those that are and expenditures. Objective-based definitions specifically referenced in national climate change distinguish climate and environment-relevant and environment policy documents, exhaustive list activities on the basis of their intended impact. enlisted in Annex 4. What is ‘green’ expenditure? It is not easy to define ‘green’ budget items given covers only climate, while some include other that there is no internationally accepted definition environmental topics. Some countries have and different countries define them differently. expanded it even further. For example, Mexico Many countries have adopted a definition that assesses the contribution of its budget to all SDGs. Table 1: Examples of thematic coverage of green budget expenditure definition Country Green expenditures Considers the multidimensional aspect of the environment by identifying the impact of France expenditures on six environmental objectives: Climate Change Mitigation (CCM), Climate Change Adaptation (CCA), Water, Waste, Pollution, and Biodiversity Georgia CCA, CCM Italy Environment Originally Climate. Since 2024, Climate and Environment: a total of six assessment criteria used for determining green budget expenditure: CCM, CCA, Protection of Water and Marine Resources, Ireland Transition to a Circular Economy and Waste Management, Pollution Prevention and Control, Protection and Restoration of Biodiversity and Ecosystems. Philippines CCA, CCM Uganda CCA, CCM Mexico SDGs Source: Adapted from OECD. 2021. Green Budget Tagging: Introductory Guidance & Principles. OECD Publishing, Paris; Government of France. 2021. Report on the Environmental Impact of the Central Government Budget – September 2021; Department of Public Expenditure. 2023. Green Budgeting in REV 2024. Climate and Environmental Expenditure in the Revised Estimates for Public Services. The Organisation for Economic Co-operation prevention, and so on. This concept is explained and Development (OECD) defines ‘green’ budget in the United Nations Environment Programme items as those that contribute positively to broad (UNEP) inquiry paper (2016) along the three pillars environmental objectives, such as mitigating and/ of sustainable development, where climate and or adapting to climate change, or those related ‘other environment’ are both sub-elements of the to other environmental dimensions, such as environmental pillar and thus represent the notion ecosystems, biodiversity, water management, air of ‘green’, see also Figure 3 below. quality, protection of marine resources, pollution 7 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach «Устойчивые» >>> Figure 3: ‘Green’ and ‘Climate’ system Sustainable Development Environmental Social Sustainability Economic Sustainability Mitigation Adaptation Other Environmental “Low-Carbon” >>> Climate >>> “Green” >>> Socioenvironmental >>> “Sustainable” >>> Source: Adapted from UNEP (2016). “Definitions and Concepts: Background Note.” Inquiry Working Paper 16/13, UNEP Inquiry, 2016. https://www.unep.org/resources/report/definitions-and-concepts-background-note-inquiry-working-paper-1613. Box 3: Best practice examples: green expenditure definitions European Union (EU) Taxonomy for Sustainable Finance. The EU taxonomy defines investments in economic activities which make a substantial contribution to one of six environmental objectives: (1) climate change mitigation; (2) climate change adaptation; (3) sustainable use and protection of fresh water and marine resources; (4) transition to a circular economy; (5) pollution prevention and control; and (6) protection and restoration of biodiversity and ecosystems, without harming any of the other activities. Joint multilateral development bank (MDB) definition of climate finance. Refers to the financial resources (own-account and managed by MDBs) committed by MDBs to development operations and components which enable activities that mitigate climate and support adaptation to climate change in developing and emerging economies. International Capital Markets Association (ICMA) green bonds. The green bond principles ex- plicitly recognize several broad categories of eligibility for investments in green projects, which contribute to the following environmental objectives: CCM, CCA, natural resource conservation, biodiversity conservation, and pollution prevention and control. Several states have issued sover- eign green bonds and green bond frameworks to define the scope of their green investment with the bonds’ proceeds (Belgium, Fiji, France, the Netherlands, and so on). OECD-DAC Rio markers. Four Rio markers—biodiversity, CCM, CCA, and desertification—are used to monitor aid targeting environmental sustainability in general and the objectives of the Rio Conventions in particular. Source: OECD. 2021. Green Budget Tagging: Introductory Guidance & Principles. OECD Publishing, Paris. https://doi.org/10.1787/fe7bfcc4-en. The thematic coverage of green expenditure is and environmental protection). Different countries interlinked with its classification. Green public use different classification systems, as illustrated expenditure is classified so that it is linked with by some examples in Table 2. specific policy priority (for example, CCM, CCA, 8 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Table 2: Examples of green budget expenditure classification Climate expenditures are classified as contributing to one of the six thematic areas (food security/ social protection/health, comprehensive disaster management, infrastructure, research and Bangladesh knowledge management, mitigation and low-carbon development, capacity building, and institutional strengthening) or one of the 44 programs under the national climate change policy. Expenditures are classified along 12 sectors considered the most directly linked to mitigation and Colombia adaptation efforts. Expenditures are classified across seven areas: food security, water sufficiency, ecosystem and Philippines environmental and ecological stability, human security, climate-smart industries and services, sustainable energy, and knowledge and capacity development. Environmental expenditure is classified in accordance with the classification of the European System Italy for the Collecting of Economic Information on the Environment Source: Proposed Green Budget Expenditure Classification Options for Kyrgyz Republic. Draft for the consultation with the Working Group (2023), prepared using OECD (2021). Most of the methodologies cover central gov- amount of green expenditure. 8 Expenditure for sal- ern-ment recurrent and investment budgets, aries of civil servants for development of policies, though some countries tag expenditures in a lim- legislation, and norms for monitoring and enforce- ited number of key institutions. In such cases, it ment and similar activities can be a vital part of na- is advisable that the tagging should cover at least tional efforts to attain green objectives. those government institutions that have budgets In terms of the type of budget items to include, in sectors that have the strongest influence on countries should aim for green budget tagging to implementing climate adaptation, climate mitiga- cover both positive and negative measures. 9 This tion, and environmental objectives, including ag- is because addressing environmental and climate riculture, energy, transport, industry, and nature change challenges requires a shift in the overall conservation / biodiversity. Some countries have composition of public expenditure, including the extended their tags to local governments. Includ- reduction in ‘harmful’ expenditure. 10 For example, ing subnational budget is particularly important France and, recently also, Ireland identify expendi- in countries with high levels of fiscal decentrali- ture that has an unfavorable impact on climate and zation and where spending in areas relevant to environmental objectives. Identifying negative ex- climate and environmental policy are devolved. penditure and taxation can be a good approach for Some include transfers to state-owned enterpris- setting the basis for influencing outcomes and in- es (SOEs).7 creasing pressure on decision-makers to deal with Most countries choose to cover both recurrent and harmful expenditure, for example, subsidies that investment expenditure because excluding cur- have negative impact on climate and environmen- rent expenditures may lead to underestimating the tal goals. 7 World Bank 2021a. 8 OECD 2021. 9 OECD 2021. UNDP (United Nations Development Programme). 2015. “Making Sense of Climate Finance: Linking Public Finance and National 10 Climate Change Policy in the Asia-Pacific Region.” https://www.asia-pacific.undp.org/content/rbap/en/home/library/democratic_governance/making-sense-of-climate-finance.html. 9 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Box 4: Expenditure in Ireland’s budget with probable positive and negative impact Ireland’s Department of Public Expenditure estimates that around €5,418 million of expenditure allocated in 2024 has a probable favorable impact on the climate and environmental objectives. This includes programs targeting emissions reductions through residential, public, and community retrofitting and public transport investment, flood risk management programs, funding for State agencies implementing national climate and environmental policies, programs aimed at protection of the environment and enhancement of biodiversity and ecosystems through habitat restoration and protection and agri-environmental schemes, and the range of programs in relation to waste management and water quality. The department also estimates that around €1,539 million of expenditure allocated in 2024 has a probable unfavorable impact. This includes expenditure items which would be considered fossil fuel subsidies and other potentially harmful support; involve emissions-intensive activities in transport, agriculture, and industry; or involve the provision of funding which enables those activities and involves infrastructure and construction projects likely resulting in net unfavorable impacts on the environment. According to the department, the identification of expenditure as potentially unfavorable is not in any way a suggestion that a policy or program is flawed or should not proceed. Rather it acknowledges the likely practical consequences of the program from a climate and environmental perspective so that consideration can be given to how any impact can be mitigated or minimized, and where this is not possible, it highlights the need for the government to consider other measures to offset the potentially unfavorable consequences of necessary expenditures Source: Department of Public Expenditure. 2023. Green Budgeting in REV 2024. Climate and Environmental Expenditure in the Revised Estimates for Public Services. In practice, however, most countries tend to subsidies are often excluded because they are only identify positive expenditure while negative politically more sensitive. 11 expenditure, revenues, tax expenditures, and Box 5: Green budget expenditure definition and coverage – best practice example from Uzbekistan Uzbekistan recently prepared a methodology and implementation roadmap for CBT. In Uzbekistan, the definition and classification of expenditures will need to be ‘objectives based’ rather than ‘pol- icy based’. This is because, although the climate change and green growth policy context is be- coming increasingly sophisticated, Uzbekistan does not have a detailed climate change strategy or policy document. In addition, budgetary information does not indicate the links between line items in the budget and any possible associated policies. CBT will identify four main types of activities: ■ Positive mitigation ■ Negative mitigation ■ Positive adaptation ■ Negative adaptation. Based on several considerations, the methodology proposes a phased implementation approach. In the short term, coverage is limited to republican budget. CBT at the level of local budgets will be considered in the long term, alongside the transition to a decentralized CBT process. Both investment and operating expenditures will be tagged. Source: UNDP & AFD (2022). “Climate Budget Tagging in Uzbekistan. Methodology and Implementation Roadmap.” 11 World Bank 2021a. 10 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 3.3. Estimation of green budget expenditures Countries follow different approaches to the es- mate or environmental objectives. Consequently, timation of climate- and environment-relevant according to the definitions of green expenditure, expenditures: limiting tagging to programs that only a portion of the expenditures associated with have climate change or environment as a prima- a number of measures can be considered green. To ry objective, estimating the expenditures asso- reduce the risk of overestimation or underestima- ciated with the climate- or environment-relevant tion of the climate and environmental impact of a elements, and applying relevance weights to es- budget, the relevance weights should be assigned timate the fraction of program or project expend- to the lowest disaggregated level possible. iture that is relevant to climate or environmental Weighting based on a review of program and pro- objectives. 12 ject objectives can generate a rough estimate of Colombia and Ireland tag expenditures under climate-relevant expenditures by program, insti- programs that identify climate change as a main tution, and sector. This may be sufficient to as- objective. This narrows the range of activities sess the alignment of resource allocations with considered climate relevant by excluding climate climate and environmental policy objectives, co-benefits of programs. monitor changes in allocations over time, and link climate finance to climate-relevant activities. 13 Estimating the expenditures associated with the climate- or environment- relevant elements by ap- The United Nations Office for Disaster Risk Re- plying relevance weights is commonly used when duction (UNDRR) methodology for tagging cli- the level of granularity of the budget does not al- mate adaptation and disaster risk expenditure low estimating the exact amount of expenditure also foresees a ‘potential’ degree of relevance. that is spent for climate or environmental tasks. This is foreseen for budget lines that make no ex- plicit contribution or for which the contribution is Relevance weights are assigned to the measures unclear but the outcomes of which are expected that receive a green tag, and they determine the to be significantly affected by disasters/climate proportion of green expenditures within each change. This may include programs that are ex- measure that has a green tag. Put simply, rele- pected to relate to climate and disaster objectives vance weights determine the expenditure actually but where the scope and balance of activities is allocated to climate (and/or other environmental not yet clear. 14 dimensions). Relevance weights are necessary because green expenditures are often found in Use of relevance weights in budget tagging sys- measures that are not specifically focused on cli- tems of different countries is illustrated in Box 6. World Bank 2021a. 12 13 World Bank 2021a. 14 UNDRR. 2023. “Budget Tagging for Disaster Risk Reduction and Climate Change Adaptation.” United Nations Office for Disaster Risk Reduction (UNDRR). 11 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Box 6: International experience in definition of relevance weights for green expenditures Different countries address the need for relevance weights differently: Country Weights Ghana High relevance (100%), medium relevance (50%), and low relevance (20%) Moldova Main (100%), high relevance (70%), medium relevance (50%), neutral relevance (25%) Completely relevant (90–100%), very relevant (60–80%), quite relevant (30–50%), Honduras and relevant (10–20%) Cambodia High relevance (80%), medium relevance (50%), and low relevance (25%) Pakistan High relevance (75% or more), moderate (50–75%), low (25–50%), and marginal (less than 25%) Highly relevant (above 60% of expenditures allocated to climate activities), relevant (20– Nepal 60%), neutral (below 20%) Bangla- The weight is the percentage of total expenditure for each climate intervention minus the desh share of the expenditure that would take place under a business-as-usual scenario. Expenditure classified as expenditure with favourable – neutral – negative impact on green France objectives, not weighted. Expenditure classified as expenditure with favourable – neutral – negative impact on green objectives, not weighted. Tagging only distinguishes whether the budget line is climate rel- Uzbekistan evant or not, whether that relevance is positive or negative, and whether it relates to miti- gation or adaptation or affects both mitigation and adaptation. Use of relevance weights in CBT in Nepal A relevance score is assigned at the program level based on the sum of climate-change–relevant activity budgets and expenditures. More specifically, planners in the sector ministries prepare budget sheets for each program and its activities. Two climate-change-specific columns have been added to the budget sheet format: the first indicates the climate relevance of each activity (yes/no) and the second the budget amount allocated to the respective activity. The share of cli- mate-relevant activities in the overall program budget determines the climate relevance of the overall program. Programs are then classified into three groups: highly relevant (more than 60 percent of program budget allocated to climate activities), relevant (20–60 percent), and neutral (less than 20 percent). To estimate the total cost of climate activities, the methodology counts the entire cost of highly relevant programs, half the cost of relevant programs, and none of the cost of neutral programs. Use of relevance weights in climate change budget tagging in Honduras Expenditures on climate-relevant operations and activities are grouped in three categories (high, medium, and low relevance). Operations and activities with a clear focus on CCA or CCM were classified as highly relevant and weighted at 100 percent; those with links to climate change ob- jectives are considered of medium relevance and weighted at 50 percent; and those related to the medium relevant expenditures but not directly linked to climate change are considered low relevance and weighted at 20 percent. Estimations distinguish programs related to adaptation and mitigation and allow the expenditures to be split (at 50 percent each) when they support both objectives. Sources: World Bank, June 2023 Workshop in Morocco; OECD 2021; Postic C. 2021. “The Good, the Bad and the Unclear.” En- vironmental Budget Tagging – From communicating national effort to improving budgetary performance.” Pris, I4CE; World Bank. 2021b. Technical Annex: Overviews of Climate Expenditure Tagging Frameworks; UNDP & AFD. 2022. “Climate Budget Tagging in Uzbekistan. Methodology and Implementation Roadmap.” 12 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 3.4. Quality assurance Some countries use quality assurance mecha- proval. In the Philippines, agencies are required nisms to review tagged expenditures, confirm to document the climate objective, outcome, and their climate or environmental relevance, and re- relevance of the tagged expenditure. The forms duce the risk of ‘greenwashing’—that is, the exag- are reviewed by the Climate Change Commis- geration of the climate or environmental relevance sion in terms of tagging consistency over time of programs and projects. 15 (previous, current, and future fiscal year) and the climate responsiveness of the tagged programs. Indonesia, the Philippines, and Uganda provide Programs that do not meet the criteria can be ex- for a quality assurance or validation mechanism cluded after consultation with the government in their methodologies. In Indonesia, tagging is agency. In Uganda, budget entities fill in a Quality verified in reconciliation meetings between line Assurance and Review form together with their agencies and the Climate Change Secretariat of budget proposals. The form provides supporting the Ministry of National Development Planning. information for the tagging, including information Tagging is then validated by the Ministry of En- on climate-relevant objectives and outputs. The vironment and Forestry for consistency with the Climate Change Department reviews tagging and NDC and endorsed by the Ministry of Finance suggests adjustments based on the forms. 16 before the budget is submitted for legislative ap- 3.5. Integration with the budget process International experience indicates that any budget framework, be integrated into the existing expenditure tagging approach should build on the budgeting process, and consider the existing existing national public financial management strengths (and limitations) of the budget process. Box 7: Integration into the existing budgeting processes – best practice examples from Indonesia and Morocco Indonesia’s CBT, implemented since 2014, is fully integrated in the budget process by the following actions: 1. Legal basis: CBT is regulated under the Minister of Finance, Regulation No. 142/2018. 2. IT systems: CBT is integrated into the National Planning and Budgeting systems like KRISNA – Indonesia’s Integrated Financial Management Information System (IFMIS). 3. Guidelines: Guidelines on CBT has been developed to support the sector ministries. The green BET process is part of program-based budgeting and the preparation of the MTBF. Morocco aims to integrate the objectives of the NDCs into the three-year budget planning (Triannual Budget Planning – TBP). This involves labeling specific resources for the implementation of measures and investments corresponding to the Kingdom’s commitments on identified climate actions, ensuring that they are reflected in various budgetary programs and projects. Incorporating the NDC objectives into the TBP will certainly ensure coherence and strategic alignment between climate priorities and available financial resources. It is crucial for the relevant sector ministries to closely collaborate with the budget department to ensure effective coordination and consistent integration of the NDC objectives into the three-year budget programming. 15 World Bank 2021a. World Bank 2021a, 2021b. 16 13 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Box 7: Integration into the existing budgeting processes – best practice examples from Indonesia and Morocco CBT process to link TBP and the NDC: ■ Creation of an interdepartmental task force, comprising representatives from relevant ministries. ■ Compatibility assessment of Morocco’s NDC targets with the expenditures foreseen in the TBP. Identification of priority sectors requiring climate-compatible investments to accomplish emission reduction and CCA objectives. ■ Development of climate labeling criteria: Formulation of specific criteria and indicators for CBT, which may include contribution to GHG emission reduction, water policy (CCA), promotion of renewable energy, energy efficiency, and waste recycling. These criteria must be lucid, quantifiable, and integrated into the guidelines of the three-year budget plan. ■ Labeling of green/climate expenditures: Identifying and labeling specific expenses in accordance with the established climate criteria will facilitate tracking and reporting of climate-related expenditures within the state budget. Creating a separate category for climate expenditures in the three-year budget plan, may be considered. ■ Monitoring and evaluation: Implementation of a monitoring system to gauge progress in achieving climate-related expenditures and set objectives. This will enable the identification of necessary adjustments and ensure the effectiveness of the measures undertaken. Sources : Rulliadi D. (Ministry of Finance, Republic of Indonesia). 2019. “Climate Budget Tagging and Green Sukuk / Islamic Bond. An Indonesian Experience.” Presentation at Sherpa’s Meeting, Finance Minister Coalition for Climate Action, Helsinki, February 21–22, 2019. World Bank, June 2023 Workshop in Morocco on methodology of climate budget tagging. Expenditures are generally tagged during budget budget. This allows the tagging information to be preparation and thus provide information on allo- considered in budget preparation and ensures that cations. This can provide useful evidence to help any changes to the budget emanating from budget frame budget and policy decisions as they are be- hearings or legislative review are reflected. 17 ing formulated. The impact of tagging on resource Tagging actual expenditure is done rarely and ex- allocation is the greatest where tags are applied penditure reports are rarely presented to higher before measures have been planned and budget- authorities (planning ministries, presidential ad- ed. Information may also be presented in reports ministrations and so on), analyzed or published18 . accompanying the draft budget and supporting Nevertheless, evaluations at or after the end of parliamentary oversight. For example, in the Phil- budget year can be particularly useful when the ippines, the tagging is applied during the budget implemented budget is significantly different from preparation; updated after budget hearings, once the approved budget. Such evaluations can also be the proposed budget is developed to the Con- useful for preparation of the next year’s budget. gress; and finally, once Congress has approved the Figure 4: Green BET during different stages of the budget cycle Timing Before the beginning Start and end After the end of the relevant budget year of the budget year of the budget year Budget stage Planning Approval Implementation Audit Potential role for Inform budget Instil greater Inform in-year Inform scrutiny of budget evidence from green planning and allocation transparency and adjustments execution and follow-up budgeting tools decisions accoundability decisions Source: Postic et al, I4CE (2021) based on OECD (2021). OECD 2021. 17 Сроки До начала соответствующего В начале и в конце По окончании 18 World Bank 2021a. бюджетного года бюджетного года бюджетного года Этап Планирование Утверждение 14 Исполнение Аудит бюджетного цикла Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Потенциальное Информация для Повышение Информация для Информация для значение сведений, принятия прозрачности и корректировки рассмотрения 3.6. Roles and responsibilities Typically, the tagging process is led by ministries include developing methodologies, guidelines, pro- of finance / development or an inter-ministerial in- cedures, and regulations governing the tagging stitutional setup. In most countries, designing the process. Assigning of tags is typically done either conceptual approach for green expenditure tag- centrally or by the sector ministries and agencies. ging was done jointly by the ministries of finance In case of the latter, a separate validation by either and ministries of environment. This typically would climate or environmental authority is advised. 19 Box 8: Roles in green budget tagging - best practice examples of Nepal, Nicaragua, and Philippines In Nepal , the National Planning Commission, the Ministry of Finance, and sector ministries/ institutions are engaged in the tagging process. The National Planning Commission provides capacity building and elaborates policy and budgeting guidelines, which has strengthened collaboration between the commission and sector ministries. Sector ministries tag development programs and projects in their budget proposal, usually in consultation with officials working on those activities. The National Planning Commission reviews and validates tagging in coordination with the Ministry of Finance. In Nicaragua , the budget circular requires budget entities to tag climate-, disaster-, and environment-related expenditures. Budget entities tag activities in the IFMIS during the budget formulation process. The General Budget Directorate under the Ministry of Finance and Public Credit reviews and approves the tagging. In the Philippines , the Department of Budget and Management issues the Budget Call that contains general information on the budget process as well as the budget preparation forms and instructions. The climate change expenditure form is part of the package. All national government agencies and local governments tag their respective budgets. The Climate Change Commission provides yearly orientation on climate expenditure tagging for ministry budget and planning officers, climate change focal points, and SOEs. A module on climate expenditure tagging is integrated into the wider capacity-building program for national government agencies. The Climate Change Commission reviews the climate change expenditure forms prepared by budget entities to ensure the consistency of tagging over time (previous/current/future fiscal year) and the climate responsiveness of the tagged programs. Источник: World Bank 2021b. 3.7. Phased implementation Green budget tagging is one of the steps in tagging is implemented in phases, with gradual greening national public finances. It requires increase in the scope of tagging over time. For introducing new methodologies and procedures example, Indonesia’s CBT was started in 2025 with within the national budgetary process and having six ministries (Ministries of Agriculture, Energy novel expertise within the public institutions. and Mineral Resources, Transport, Industry, Devising and implementing green budgeting in Environment and Forestry, and Public Works and general and green budget tagging in particular is Housing) tagging only mitigation expenditure. In therefore expected to take time and resources. 2018, the system was expanded to a total of 17 International experience shows that in most cases ministries and by adding adaptation. 19 World Bank 2021a. 15 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Budget tagging design is often implemented by capacity building for all involved is vital to the piloting in selected ministries or agencies. This success of the reform. 20 allows for an adaptive approach, as the lessons The speed of implementation is determined by learned from piloting can facilitate the smooth factors such as the strength of political will and rollout of regulatory reform to institutionalize administrative leadership as well as the capacity the green budget tagging system. Continuous of government to implement a new reform. Box 9: Phased implementation of green budget tagging in the region - example from Uzbekistan Uzbekistan is currently setting up a system for the implementation of CBT. The roadmap for the implementation of CBT proposes phased implementation, summarized as follows: Aspect of CBT Near-term approach Long-term approach Consolidated budget: (1) State budget (republican and local budgets), (2) Budget budgets of State targeted funds, and Republican budget coverage (3) extrabudgetary funds of budget institutions (including international public finance) Expenditure All budget expenditures All budget expenditures (operating and coverage (operating and investment) investment) Object of The second level of functional The lowest level of program classification tagging classification - subcategory - measure/activity The authority Decentralized. Implemented by ministries/ Centralized. Implemented by implementing agencies that are responsible for budget the Ministry of Finance16 the CBT programs (first-level budget allocators) Quality Experts specialized in State authority responsible for CCM and assurance CCM and CCA policy CCA policy Conducted by the Ministry of Finance CBT is conducted by sector ministries / after sector ministries / agencies agencies while developing their budget CBT in the submit their budget applications to programs and the CBT results are budget the ministry, as part of drafting budget submitted to the Ministry of Finance process allocations to first-level budget within the framework of their budget agencies. applications. CBT is conducted manually, outside Automation of Financial Management Information CBT and climate budget classifier are of CBT System (FMIS). A climate budget integrated into the FMIS. classifier is applied. Information on climate spending is included in the budget message and the annual budget execution report Information on climate expenditures Publicizing the and is available to the Parliament is focused equally on financial and CBT results and civil society. The information on nonfinancial aspects. climate expenditures is mainly focused on financial aspects. Sources: UNDP & AFD. 2022. “Climate Budget Tagging in Uzbekistan. Methodology and Implementation Roadmap”; OECD 2021. 20 UNDP (United Nations Development Programme). 2022. Global Climate Public Finance Review. UNDP Global Climate Public Finance Review. 16 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 4. Definitions and classification of green budget expenditure tagging in the Kyrgyz Republic This section, together with Sections 5 and 6, presents the green budget tagging methodology for the Kyrgyz Republic. Section 4 defines and explains green budget expenditures in the context of the Kyrgyz Republic and how these expenditures are classified. Section 5 explains the tagging process at different stages of the budget cycle and the roles of the different ministries in tagging, quality assurance, and analysis and reporting. Finally, Section 6 describes a phased approach for the introduction and expan- sion of green BET. The development of the methodology benefitted from the rich international experience on green budget tagging, that has been described in Section 3. Green public expenditure definition To define ‘green budget expenditure’ for green Based on the above considerations, the following BET in the Kyrgyz Republic, the key questions definition of green expenditures is used for the asked were as follows: what should be the thematic purpose of green BET in the Kyrgyz Republic: coverage, whether it covers both recurrent and investment expenditure, and whether it also Green expenditures are defined as money in includes subnational expenditure. the republican budget for implementation of Based on the outcomes of the consultation with the climate mitigation, climate adaptation, and oth- er environmental objectives (further referred Working Group, it was agreed that for the purposes to as ‘environment objectives’) that are defined of tagging green budget expenditure should cover in the Kyrgyz Republic’s national strategies and the following: policies. A key characteristic of green public ■ Only expenditure in the republican budget expenditure is that it promotes the transition with a positive contribution to climate and toward a low-carbon, climate-resilient, and environmental objectives should be included. In green economy. the medium to long term, the Kyrgyz Republic should also consider including local government Note that due to the specific target group of the budgets and tagging expenditure with a Guidelines (ministries and agencies at the central negative impact on climate and environmental level), this definition has a substantially narrower objectives. At this stage, including local scope. It does not include the budgets of local government budgets and tagging expenditures governments. Neither does it reflect that green with negative impact were not recommended expenditure can also be found in the private sector. due to capacity constraints. The definition will be revised as necessary as part of the phased implementation of green BET and ■ Both recurrent and investment expenditure further implementation of green financing in the should be included. Kyrgyz Republic. ■ Off-budget expenditure should not be included It includes both investment and recurrent because it is technically complicated and not expenditure. Funds provided as official always feasible to identify these off-budget development assistance are usually included in items. 17 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach the republican budget (comprising the Public following classification is used: Investment Program). ■ Climate mitigation Green budget expenditure classification ■ Climate adaptation ■ Environment. Together with the Working Group, it was decided that the choice of the classification system should More detailed classification can be considered at prioritize simplicity and ease of use by the target later stages of the implementation of green BET. group (specialists responsible for mainstreaming This could be potentially relevant especially in climate and environment in sectoral planning and case of the ‘environment’ group of expenditures. implementation and budget planners in different Definitions and examples for Climate mitigation, ministries), while at the same time enabling the Climate adaptation, and Environment: results to be used in decision-making. The three classification groups are defined and Therefore, for green budget expenditure of the explained here. republican budget of the Kyrgyz Republic the Mitigation of climate change and climate change mitigation expenditure Climate change mitigation (CCM) expenditure is green expenditure for activities that aim to reduce or avoid GHG emissions. The objective of mitigation is to limit the extent of future global warming. CCM activities contribute to: ■ Limiting anthropogenic emissions of GHGs; or ■ Protecting and/or enhancing GHG sinks and reservoirs; or ■ Integrating climate change concerns with national, subnational, and/or sectoral objectives through institution building, capacity development, strengthening the regulatory and policy framework, or research; or ■ Supporting the Kyrgyz Republic’s efforts in meeting its obligations under the UNFCCC Compared to the business-as-usual scenario, the ■ Forestry and other land use sectors: through Kyrgyz Republic’s overall mitigation objective is to maintaining and expanding the area of forests reduce GHG emissions by 16.63 percent by 2025 and perennial plantations to increase carbon and by 15.97 percent by 2030. If international ‘sinks’. support is provided, GHG emissions will be reduced Some examples of CCM expenditures are as by 36.61 percent by 2025 and 43.62 percent by follows: 2030, assuming business as usual. Approximately 60 percent of all GHG emissions in the country are ■ Housing sector - expenditures for measures concentrated in the energy sector. to increase energy efficiency of buildings (building regulations and norms to increase According to the NDC (2021), the mitigation energy efficiency and upgrading of heating efforts in the Kyrgyz Republic focus primarily on systems). the following: ■ Energy sector - expenditures for switching ■ Energy sector: through the reduction of from coal to gas in heating. consumption of fossil fuels, an increase in the ■ Transport sector - measures to develop generation of energy from renewable energy electric transport and to improve infrastructure sources, and the modernization of energy for bicycling. supply systems to reduce greenhouse gas emissions. 18 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Adaptation to climate change and CCA expenditure Climate change adaptation (CCA) expenditure is green expenditure for a measure designed to imple- ment any of the three global adaptation goals of the Paris Agreement (Article 7): 1. Strengthening adaptive capacity 2. Strengthening resilience to the negative impacts of climate change 3. Reducing the vulnerability of human and natural systems to the impacts of these influences. CCA encompasses a range of activities from information and knowledge generation to capacity develop- ment, planning, and the implementation of CCA actions. Climate adaptation refers to the process of measures. The updated NDC contains a list of responding to current or anticipated climate priority adaptation measures and covers all the most change impacts . Adaptation aims to help vulnerable sectors: water resources, agriculture, vulnerable people and local economies respond to energy, emergencies, public health, forests the loss and damage caused by climate change as and biodiversity, as well as new cross-sectoral well as explore opportunities to build resilience to sections on ‘Climate Resilient Areas and Green future damage. Cities’ and ‘Improving Early Warning Systems’. The Kyrgyz Republic is one of the most vulnerable Some examples of CCA expenditures are as nations in Eastern Europe and Central Asia follows: to climate change. The Kyrgyz Republic is ■ Agriculture sector - expenditures for experiencing an increase in the frequency and introduction of new heat-, drought-, or salt- severity of climate induced hazards such as floods, resistant varieties of agricultural crops. drought, unpredictability of seasonal weather, and the occurrence of natural disasters such as ■ Energy sector - expenditures for measures landslides, mudflows, and avalanches. To deal with to increase the stability of the energy this reality, the Kyrgyz population and economy infrastructure to overloads at critically low must adapt to these changing circumstances. This temperatures. includes, for instance, managing water resources ■ Health sector - expenditure to study impacts more efficiently, introducing new crop varieties on population health from climate change; that are more resistant to droughts or increased expenditure for measures to increase soil salinity, and ensuring that all infrastructure resistance of health infrastructure to extreme can withstand floods or landslides, among other climate events. Environmental expenditure (referred to OE – Other Environment Tag) Environmental protection expenditure is green expenditure for ‘environmental protection’, that is, a measure to implement other environment-related measures that protect and manage environmental domains and resources (air, water, soil, glaciers, other environmental resources, nature, and biodiversi- ty), protect human health and natural systems from the adverse impacts of pollution (including ionizing and non-ionizing radiation), and ensure efficient use of environmental and natural resources. Green budget expenditure belonging to several classes of green expenditure These definitions and classification of green and to have a more comprehensive analysis of expenditure as CCA, CCM, and environment expenditure under these three policy objectives. expenditure allow to classify budget expenditure as Some examples demonstrating the impact of one belonging to more than one of these policy priorities. budget measure on several policy objectives are This allows the user to compare the impact of the provided in Table 3. budget measures on these three policy objectives, 19 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Table 3: Illustration of measures from program budget 2023 that can be classified as measures with expenditure contributing to achieving green objectives (climate adaptation - CCA, climate mitigation - CCM and environment - ENV) Ministry / Agency CCA CCM ENV Ministry of Natural Resources, Ecology and Technical Supervision (MNRETS) Coordination of the activities of protected areas and promotion of issues on the conservation of ecosystems, measures to preserve biodiversity in the territory of ? ? X protected areas, as well as conducting scientific activities, conservation, and reproduction of biodiversity objects Ministry of Emergency Situations Forecasts and provision of specialized hydrometeorological information and information X X on environmental pollution State Agency of Architecture, Construction, Housing and Municipal Services Create conditions for sustainable drinking water supply and sanitation in settlements ? ? X ? ? ? Implementation of public investment projects The symbol ‘?’ is used when the question “whether program passports. Nevertheless, it should be the measure contributes to the specific green stressed that the quality of information to be objective” depends on the nature of the measures obtained from the budget tagging is intrinsically considered. Further information about the measure related to the quality and the level of detail of the is required to determine the classification. 21 Such budget, including how well the program budget is information could be sourced from, for example, linked with strategic planning. Box 10: When does expenditure touch upon more than one green objective? Mitigation and adaptation activities often complement each other. Similarly, environment activities can contribute to mitigation and adaptation objectives. Mitigation can be beneficial for CCA by reducing disaster risks and increasing community resilience. For example, changing farming practices that increase the resilience of crops to the changing climate (climate adaptation objective) can also reduce GHG emissions (climate mitigation objective). The use of more efficient heating and cooling systems will reduce GHG emissions (mitigation objective) and reduce air pollution (environment objective), but it will also increase the resilience of the population to the effects of the changing climate (adaptation objective). Switching to green transport will not only reduce GHG emissions (mitigation objective), but will also reduce air pollution (environment objective). Afforestation and reforestation activities will increase the amount of carbon that is stored in trees (mitigation objective), but they can also reduce the risks of landslides (adaptation objective) and contribute to the protection of biodiversity and ecosystems (environment objective). Such measures can help the Kyrgyz Republic to reduce the impact of future climate shocks, enjoy greater productivity and growth, and reap social and environmental benefits. The information in the table is based on the information in the program budget for 2023. No additional information was used (for 21 example, program passports). 20 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Box 10: When does expenditure touch upon more than one green objective? This can be illustrated further by looking at the concrete examples of measures from program budget 2023 in Table 3. Let us look at the budget measure, “Coordination of the activities of protected areas and promotion of issues on the conservation of ecosystems, measures to preserve biodiversity in the territory of protected areas, as well as conducting scientific activities, conservation, and reproduction of biodiversity objects.” Its main objective is environmental protection. This clearly follows from the name of the measure in the budget. But this measure could be contributing to adaptation by reducing vulnerability to negative impacts of climate change on forest ecosystems and biodiversity. This could be the case if this measure includes activities related to, for example, protection of forests and biodiversity from climate-induced pests and diseases and control of forest fires or if forests and other vegetation types reduce the risk of landslides. Furthermore, the same measure could also be contributing to mitigation objectives by increasing GHG removals. This could be the case if it includes creating forest plantations that act as carbon sinks. The budget measure “Forecasts and provision of specialized hydrometeorological information and information on environmental pollution” is an example of expenditure that improves resilience through investments in early warning systems (climate adaptation), but such expenditure also contributes to environment objectives by providing information to protect air and water resources. The budget measure “Create conditions for sustainable drinking water supply and sanitation in settlements” contributes to the environmental objective. It helps protect water ecosystems and human health from pollution and it is likely to ensure more efficient use of water. But this measure could be contributing to mitigation by reducing GHG emissions if wastewater treatment plants are expanded with biogas plants or other solutions that reduce GHG emissions in wastewater treatment. Furthermore, the same measure could also be contributing to adaptation objectives by reducing water losses in the drinking water supply networks, thereby reducing water withdrawal and this way responding to the decline in water availability due to the changing climate. It may also include additional incremental investments to ensure that water supply and drainage systems are more resilient to the impacts of changing climate such as floods. To be able to classify these measures correctly, more information about the specific activities would be required. If this additional information confirms that the budget measures contribute to all three green objectives, the budget measures will be classified as contributing to all three objectives. The ministries in the sectors that have impacts on As the ministries gain experience and the im- climate adaptation, mitigation and environment are plementation of green BET progresses, further likely to have expenditure in all these three catego- sub-divisions of these categories could be con- ries. This is further illustrated by the ministry-spe- sidered. This is likely to be particularly relevant for cific checklists and examples in Annex 4. the category ‘environment’. Green Budget Expenditure Tagging Based on the definitions presented above, green implementation of climate adaptation, climate BET in the Kyrgyz Republic can be defined as a mitigation, and environmental objectives. These process led by the CM of the Kyrgyz Republic of measures are then assigned one (or more) of three defining and applying green tags for identification, specific green tags—climate change adaptation measurement, and monitoring of green public ex- (CCA), climate change mitigation (CCM), and/or penditures. Green BET identifies those meas- environment (ENV)—with relevance weights used ures in the budget programs of the ministries and to calculate the green expenditure within each agencies that fully or partially contribute to the identified measure. 21 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 5. Green budget expenditure tagging in the Kyrgyz Republic: The process and roles of ministries and agencies This section explains the overall budget tagging process and roles of the various ministries and agencies. It starts by explaining the overall budget process and the actions performed at different stages of the budget cycle. It then clarifies the methodology for identification and classification of green expenditures, as well as assigning of relevance weights for the calculation of the green expenditure. It explains how green expenditure is calculated, analyzed, and reported. This is followed by the description of the process for quality control. The next section summarizes the roles and responsibilities of different ministries in this process as well as how it is linked with the budget process. Finally, it specifies the technical support that the sector ministries and agencies can receive from the MNRETS and MF in this process. 5.1. Description of the overall budget expenditure tagging process The green BET process in the Kyrgyz Republic degree of contribution to the green objectives is part of the program-based budgeting and the to calculate their expenditure for CCA, CCM, preparation of the MTBF. Ministries and agencies and / or environmental protection. This is annually tag their draft MTBF and draft program- carried out during the development of the based budgets and submit the information on MTBF, and thereafter the tags and weights green expenditures to the MF, together with the are applied to the draft annual budget that the draft MTBF and draft program-based budgets. ministries and agencies prepare. The tagging process in the Kyrgyz Republic covers 2. Quality assurance: Discussing classifications the following main stages: assigning of the tags, and weights during public hearings and working quality assurance, and analysis and reporting. group meetings at the level of each ministry and These stages are implemented as follows (see also agency, discussing climate and environment Figure 5): classification and weights with MNRETS, and including information justifying the tags in the 1. Assigning the tags: Identifying green program passports, 22 all of which increases expenditures in the program-based budget the credibility of the tagging. This is carried at the level of activities and budget measures out during the development of the MTBF and of the program-based budget; classifying thereafter as necessary during the draft annual these as measures for CCA, CCM, and/ budget preparation. or environmental protection; determining relevance weights that reflect the measures’ 22 The ‘Budget Program Passport Form’ as defined in Attachment 5 ‘Budget Program Passport Form’ of ‘Instruction on formation, review and execution of budgets on a program basis’ (Annex 2 of Decree of the Cabinet of Ministers of the Kyrgyz Republic of 24 December 2021, № 349, On program-based budgeting, (“Форма паспорта бюджетной программы”: Приложение 5 к Инструкции по формированию, рассмотрению и исполнению бюджетов на программной основе, Приложение 2, Утверждена постановлением Кабинета Министров КР от 24 декабря 2021 года № 349). 22 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 3. Analysis and reporting: Supplementing the MF, which presents this information in the program budget proposal submitted by the MF explanatory notes that are attached to the to the CM, and thereafter to Jogorku Kenesh, report on the implementation of the republican with the information on green expenditures budget. This information is also included in the tagged and calculated by the ministries Citizens’ budget. In addition, this information is and consolidated by the MF during budget sent to MNRETS; the Ministry of Economy and preparations. The standard reporting formats Commerce; and the Coordinating Council of prepared by ministries and agencies and Climate Change, Environment, and Sustainable defined in the Order on Monitoring of Budget Development (CCCCESD) for analysis and Programs23 , are supplemented with information recommendations. The ministries and agencies on the implementation of green expenditures use the information on green expenditure during reporting on budget implementation. implementation by each ministry and agency This information is then consolidated by the for their internal analysis and decision-making. Figure 5: Main stages in green BET 2 Classification .... Program Z Program Y 4 Program X Budget Adaptation Mitigation Environment protection Measure 1 $$$ High relevance Not relevant Potentially relevance Quality Assurance 1 Measure 2 $$$ Not relevant Not relevant Medium relevance Identification Measure 3 $$$ Low relevance Marginal Not relevant 3 .... $$$ .... .... .... Weighting Program Z Green Public Expenditure in Kyrgyz Republic Program Y 5 Green expenditure program X Analyze and Report Source: Original elaboration for this publication. The following paragraphs explain this process in more detail, see also Figure 6. 2 Process during MTBF preparation Классификация For those ministries and agencies which .... prepare the measures level. Measures that contain green the MTBF, the tagging process starts Программа Z with the expenditure are then classified as an adaptation, Программа Y initial assignment of tags while preparing the mitigation, and/or environment measure. 4 It is Программа X Бюджет АИК СПИК ООС MTBF. First, the ministries and agencies identify Высокая important Отсутствие to note Потенциальная that one measure can belong Контроль Мера 1 $$$ значимость значимости значимость green expenditure in their budget programs Отсутствие at to Отсутствие more than Средняя one of these categories. качества After the 1 $$$ Мера 2 значимости значимости значимость Низкая Несущественная Отсутствие Идентификация Мера 3 $$$ значимость значимость значимости 3 .... $$$ .... .... .... Взвешивание 23 Decree of the Cabinet of Ministers of the Kyrgyz Republic , dated August 1, 2022, No. 436 ‘On Monitoring and Evaluation of the Effectiveness of Budget Programs’. 23 Программа Z «Зеленые» бюджетные расходы в КР Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Программа Y 5 «Зеленые» расходы Програма X Анализ classification of the budget measures, relevance program passports. weights are estimated for the calculation of The MF consolidates information on mitigation, each measure’s adaptation, mitigation, and/or adaptation, and environmental expenditures from environment expenditure. all ministries and agencies and includes it in the As part of quality assurance, the ministries and explanatory notes to the draft budget that it sends agencies discuss their proposed classification, it to the CM and Jogorku Kenesh. This is sent as a weights, and expenditures during internal public background information and to help improve deci- consultations and working group meetings. sion-making on further implementation of national MNRETS can be invited to these consultations and international climate mitigation, climate adap- for advice or it can also be approached directly tation, and environmental commit-ments. for advice on relevant topics (for example, the Information on mitigation, adaptation, and identification, classification, and/or assigning of environmental expenditures is also included in the relevance weights). Citizens’ budget, which the MF prepares for both As part of quality assurance, the ministries and the draft budget and the approved budget. agencies prepare the information explaining the proposed classification, weights. Process for annual budget implementation reporting Process for annual budget preparation Once the budget has been implemented, the sec- The tags prepared during the MTBF are applied to tor ministries and agencies calculate the imple- the measures in the program-based budget during mented green expenditures by applying the rele- the formation and discussions of annual program- vance weights to the implemented expenditures based budgets. For those ministries and agencies of the measures in the program budget. The sector which do not prepare the MTBF, the tagging ministries and agencies submit this information process starts at this stage by performing the together with other information on the implemen- same tasks as described for the MTBF stage above. tation of their budgets to the MF. The MF consol- During the annual budget preparation, the tags are idates the information on miti-gation, adaptation, applied to actual budget measures in the program- and environmental expenditure in the implement- based budget, and the green budget expenditures ed budget, and includes it in the explanatory notes are calculated by the sector ministries and to the annual budget implementation report which agencies. The classification and relevance weights the MF submits to the CM and Jogorku Kenesh. can be reviewed at this stage, if necessary, but The sector ministries and agencies use the infor- normally the same tags are applied as those mation on mitigation, adaptation, and environmen- prepared for the MTBF. tal expenditure in their implemented budget to im- As part of quality assurance during the annual prove their budget planning in the coming years. budget preparation, the ministries and agencies The MF shares the consolidated information on discuss the classification, relevance weights, and mitigation, adaptation and environment with calculation of green expenditures during internal the MNRETS, the Ministry of Economics and public hearings and working group meetings. Commerce (MEC), and the CCCCESD. This is done MNRETS can be also invited to these meetings to determine where the largest implementation to advise. After that the ministries and agencies gaps are in the national strategies; improve budget update the information on green tags and on planning and execution in the coming years; and their justification, approve it, and then submit it report on domestic, climate, and environmental to the MF along with the proposed draft annual expenditures to raise funds for the Kyrgyz budget and the calculated green expenditures for Republic’s implementation of green objectives. reconciliation. The MF reviews this information In addition, this data can be used to develop and, if necessary, requests changes or updates. and implement green financial instruments to The ministries and agencies include the infor- increase financing for climate adaptation, climate mation on the justification of the tags in their mitigation, and environment. 24 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach отчетности отраслевых министерств и ведомств бюджета, направляемая в КМ, а затем в Жогорку Кенеш вместе с Ежегодным отчетом об Процесс исполнении бюджета. Та же информация маркировки в ходе направляется в МПРЭТН, МЭК и КСИКЭУР формирования Проведение анализа: пробелы в финансировании, отчетности «зеленые» ответные меры по реализации национальных Гражданский бюджет – раздел об исполнении приоритетов в области климата, окружающей среды и Гражданского бюджета, бюджета устойчивого развития. Выработка рекомендаций по посвященный исполнению бюджета совершенствованию процесса маркировки Information on mitigation, adaptation, and prepares. The MF requests all participants for environmental protection expenditures Анализ процесса is also рекомендаций, маркировки, рассмотрение their feedback on the касающихся tagging улучшения process и обновления and results Руководства included in the Citizens’ budget, which the MF and revises the Guidelines as relevant. по маркировке «зеленых» расходов бюджета Figure 6: Stepwise process of green BET in the Kyrgyz Republic Assign tags for climate- and Discuss the green tags at the meetings Process during environment-related measures held as part of MTBF preparation MTBF preparation in the MTBF of the organization Apply the tags to the draft budget proposal; calculate Discuss the green tags as part adaptation, mitigation, and environmental expenditures; of annual budget preparation prepare and submit to the MF the information on green expenditure Process during the preparation Including the information on green expenditure in of annual budget Justification and the explanatory notes to the draft republican budget quality control Citizens’ budget - a section on green budget allocations in the Citizens’ budget (for both the draft submitted to Jogorku Kenesh and the approved budget) Prepare and submit to the MF the Report to the CM and Jogorku Kenesh - information on actual green expenditure consolidated information on green budget as part of annual reporting by the sector implementation submitted to the CM, and thereafter ministries and agencies to Jogorku Kenesh, together with the annual budget implementation report. Same information also sent to the MNRETS, MEC, and CCCCESD Process during implementation Analysis: financing gaps, green Citizens’ budget - a section on reporting responses in relation to national climate, green budget implementation in environmental, and sustainable development the Citizens’ budget priorities. Recommendations for improved green BET process Reflections on tagging process, analysis of the recommendations for improvements and updating of the tagging and tracking Guidelines Source: Original elaboration for this publication. 5.2. Identification, classification, and assigning of relevance weights How to identify and classify green budget measures? To identify the measures in program budgets that sectors. These priorities also include climate- have a positive contribution to climate adaptation, and environment-related aspirations. mitigation, and/or environmental objectives, the ■ The Green Economy Development Program staff responsible for tagging need to be familiar in the Kyrgyz Republic for 2019–2023 which with the relevant national and sectoral strategies to sets priority directions necessary for greening understand the role of the sector in implementing its economy. green priorities. This is because the green ■ The Decree of the President of the Kyrgyz expenditures are identified and classified based on the Republic, March 19, 2021, No 77, “On priorities specified in the main national and sectoral measures to ensure environmental safety strategies and plans. These include the following: and climate sustainability,” which outlines ■ The National Development Strategy of the the priority environment- and climate-related Kyrgyz Republic for 2018–2040 which sets interventions. broadly formulated strategic priorities in all ■ The NDCs of the Kyrgyz Republic which is 25 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach a comprehensive document listing priority strategically important documents which after measures in climate adaptation and mitigation. their adoption will further help identifying green Each signatory of the Paris Agreement priorities. (including the Kyrgyz Republic) is requested to Second, the staff need to be familiar with the nature prepare their NDC every five years. The updated of each budget program using easily available NDC of the Kyrgyz Republic prepared in 2021 information. This includes the program passports, defines the priority measures for reaching the (draft) budget, and implementation reports the climate targets and indicative financing from previous years. If necessary, the staff can needs. Sectoral plans for the implementation also discuss the nature of the program and its of NDC and the strategy for achieving carbon measures with the relevant technical staff. Using neutrality by 2050 are under preparation. this information and the checklists and examples in The full list of the current government documents Annex 1, the staff use the decision tree (Figure 7) to related to addressing climate and environmental determine if the given measure should be tagged as challenges is provided in Annex 4. These were used an adaptation measure and/or mitigation measure to prepare more specific checklists and examples and/or environmental measure. After the staff have that have been included in the Guidelines to assist identified and classified the measures as containing the staff to identify and classify measures in the expenditure that relates to adaptation, mitigation, program budgets that contribute to climate and and/or environmental objectives, they proceed environmental objectives. The Kyrgyz Republic with estimating the green expenditure in budget is currently in the process of preparing other measures by assigning relevance weights. Figure 7: The decision tree for classification and assigning green tags for measures included in the programs of program-based budgets Identify the measure Does the measure Does the measure Does the measure Review Review Review contribute to contribute to contribute to for climate for climate for other climate mitigation climate adaptation “other environment” mitigation YES adaptation YES environmen objective? objectives? objectives? YES NO NO NO Apply the Apply the Apply the CMM tag and CMA tag and OE tag and the relevance the relevance the relevance weight weight weight First, the measure is reviewed for the tagged as a mitigation measure and and natural systems to the impacts of climate mitigation objective: “Does the assigned a relevance weight. The these influences?” The staff use the measure contribute to the stabiliza- staff use assessment questions in the same process as described above for tion of GHG emissions by avoiding or Guidelines to determine the relevance CCM. reducing them or by enhancing GHG weight. If in doubt, the staff consult the Thereafter, the staff review the same removals?” The staff use easily avail- MNRETS. If still in doubt, staff should measure for environmental objectives: able information (the program budget, apply the most conservative option. “Does the measure contribute to pro- the program passport, implementation If the measure does not include CCM re- tecting and managing environmental reports from previous years) to deter- sults, indicators, or activities, it should domains and resources, protecting hu- mine the expected results, indicators, not be tagged as a CCM measure. man health and natural systems from and / or activities of the measure to an- adverse impacts of pollution, and en- Then the staff proceed with reviewing swer this question and specific check- suring efficient use of environmental the same measure for climate adap- lists in the Guidelines to determine resources?” The staff use the same tation: “Does the measure contribute whether these are CCM-related results, process as described above for CCM. to strengthening adaptive capacity, indicators, and / or activities. strengthening resilience to the nega- Thereafter the next measure in the pro- If the measure includes CCM results, tive impacts of climate change, and/ gram-based budget is analyzed using indicators, or activities, it should be or reducing the vulnerability of human the same process. Source: Original elaboration for this publication. 26 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Relevance weights In the Kyrgyz Republic, green expenditures are relevance weight assigned for each of the three found across a wide range of ministries and classes (climate mitigation, climate adaptation, agencies as part of non-climate or environment- and environment). focused measures that contain some green In addition to these four quantitative relevance components. Consequently, only a portion of categories that receive a quantitative relevance the expenditures associated with a number of weight that allows calculating climate adaptation, measures can be considered green according to climate mitigation, and environmental expenditure the definitions provided in Section 4. To address of the measures in budget programs, potential this, each measure marked with green tags is relevance is also used. This relevance is used also assigned a ‘relevance weight’ for each tag. It for measures that are obviously contributing to quantifies the degree of contribution to the green green objective(s), but sufficient information is objective (climate mitigation, climate adaptation, not available to select the appropriate relevance and/or environment). weight. This is done to mark the measures that If detailed information about the costs of could potentially contain green expenditures. measures’ actions is available, the relevance Presence of such measures in the program weight of the measures can be calculated by first budgets should be seen as a strong signal to analyzing the level of green expenditure at the the budget users to improve the quality of their action level. This is currently not possible since program budget. the program budgeting is still being developed In the future, the weighting system could be revised. and this information is not yet widely accessible. Ideally, as program budgeting becomes more Given the current level of granularity of the granulated weights will no longer be needed as tags republican budget, the Working Group agreed could be assigned to specific expenditure items that that a weighting system of having four degrees are fully green. Alternatively, as the ministries and of relevance should be applied. Less detailed agencies gain more experience with budget tagging weighting system could result in the exclusion of and with information on costs at the activity level, many measures with a relatively lower proportion additional weighting can be introduced within each of green expenditures. A more detailed weighting of the above listed weight categories to give a more system would add complexity which should be precise final weight. avoided at least during the initial stages of green BET in the Kyrgyz Republic. The conceptual summary of the assessment or relevance weight is presented in Figure 8. The relevance weights are therefore assigned to the entire measure distinguishing the following As a result, each measure can be tagged with one degrees of contribution to the green objective: or two or three tags with a specific quantitative relevance weight, not tagged at all, or tagged ■ High relevance with a qualitative tag as ‘potentially relevant’. This ■ Medium relevance last option should be used if the information in ■ Low relevance the program passport and the program budget ■ Marginal relevance. is not sufficient to quantify the relevance. This is done to mark the measures that potentially could Each of these categories are assigned a specific contain green expenditures. Presence of such percentage. Climate adaptation, climate measures in the program budgets should be seen mitigation, and environment expenditure of the as a strong signal to the budget users to improve measures are then calculated by multiplying the quality of their program budget for the next the total expenditure of the measure with the budget year. 27 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Figure 8: Conceptual summary of the assessment of relevance weight Assessment of the relevance of the contribution to the CCM objective Does the measure directly and explicitly contribute to the CCM objective? Is the whole measure YES High implemented because of CCM concerns? relevance, 100% NO Do more than half of the activities of the measure promote the CCM objective? Or is there a clear YES Medium reference to CCM in the description of the measure? Do half of the indicators measure a theme relevance, 50% related to CCM and, when applicable, they show a significant contribution to the CCM objective? NO Do some of activities of the measure promote the CCM objective? Or is there a clear reference to YES Low the CCM in the description of the measure? Or are at least one-quarter of the indicators of the relevance, 25% measure are related to measuring a theme related to CCM? NO Is there su cient evidence that the measure includes at least some elements related to YES Marginal CCM and promotes the CCM objective to a degree that is not negligible? relevance, 5% NO Does the available information suggest that there could potentially be some CCM-related elements YES Potentially relevant implemented with this measure, but the information is not su cient to give a satisfactory answer to No relevance weight the questions for assigning a quantitative relevance weight? assigned NO The measure does not include any elements that promote CCM objectives or the measure includes so few elements that promote the CCM objectives that its contribution to the CCM objective is Tag removed assessed as negligible. Repeat the above process for climate change adaptation Repeat the above process for environment Repeat the above process for the next measure tagged with a green tag Repeat the above process for the next program Source: Original elaboration for this publication. 5.3. Analysis and reporting mainstreaming in sectoral plans and budgets. This process will help strengthen the implemen- Green BET for the Kyrgyz Republic will enable the tation of climate and environmental objectives generation of information on green expenditures outlined in government strategies and plans. for implementing climate- and environment-re- lated commitments, assess trends, track budget This will also allow generating information execution, monitor financial and physical perfor- necessary for reporting on domestic climate mance, and report on these. This information will finance under UNFCCC reporting requirements. be submitted to the CM and Jogorku Kenesh to- The sector ministries and agencies perform gether with the annual budget proposal and annual calculations of green budget allocations for each budget implementation reports. It will also be used green priority: by the CCCCESD, the Ministry of Economy and Commerce, and MNRETS. ■ Climate adaptation ■ Climate mitigation The Green BET report can help identify and highlight current gaps in climate and environmental ■ Environmental management 28 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach The information on climate adaptation and climate measure, while environmental expenditure of mitigation is also used for calculating climate ex- each measure is calculated by multiplying the penditure; see below. The sector ministries also expenditure of the measure with the relevance perform the calculation of potentially green ex- weight assigned with the tag for environment. penditures. Environmental expenditures of the programs are added to obtain the environmental expenditure After that, the MF consolidates information on at the level of each ministry and agency and total green budget allocations and prepares summarized in the republican budget. The same process is information on green expenditures (per program, carried out for calculating total adaptation and per organization, and in total in the republican total mitigation expenditure. budget), which is included in the explanatory notes to the draft budget submitted to the CM and Jogorku Kenesh. Calculation of climate expenditures The MF also consolidates information on potential There are measures that contribute to both climate green expenditures for climate adaptation, climate mitigation and climate adaptation objectives. mitigation, climate, and environment. Note that This means that one single measure can be the measures that receive the qualitative tag tagged both as a climate mitigation measure and ‘potential’ are not included in the calculation as a climate adaptation measure. As the result of climate adaptation, climate mitigation, and there can be situations when the activities (and environment expenditure. therefore the expenditures) that contribute to the implementation of mitigation objectives Calculation of total adaptation, total mitigation, are the same as the ones that contribute to and total environmental expenditures the implementation of adaptation objectives. The total adaptation, total mitigation, and Therefore, to avoid double counting, the mitigation total environmental expenditure of a program and adaptation expenditure are not added. Instead, are calculated separately. For example, total the following method is used. See also Table 4 for environmental expenditures are calculated an illustrative example. by adding environmental expenditure of each Table 4: An example for calculating a program’s climate expenditure Budget (in CCA tag CCM tag ENV tag Climate Program X: CCA exp. CCM exp. ENV exp. 1000’ som) weight weight weight expenditure 1 2 3 4 5 6 7 8 9 Measure 1 100 000 100% 25% 50% 100 000 25 000 50 000 100 000 Measure 2 150 000 5% 7 500 0 Measure 3 180 000 25% 25% 45 000 45 000 45 000 Total CCA, CCM, ENV expenditure of the program 100 000 70 000 102 000 Climate expenditure of the program 145 000 Note: Key: CCA - climate change adaptation; CCM - climate change mitigation; ENV - environment. Column and calculation notes: The values in Column 9, lines for Measures 1–3, are equal to whichever is the highest value in Columns 6 and 7. For example, for Measure 1, the highest value appears in Column 6. Therefore, the climate expenditure of Measure 1 is 100,000. The value in Column 9, ‘Climate expenditure’ is calculated by adding the subtotals for Measures 1–3 in Column 9. First, the climate expenditure of each program adaptation expenditure for Measure 1 is higher is determined. This is done by calculating the than mitigation expenditure (100,000 > 25,000); climate expenditure of each measure. The climate therefore, the climate expenditure for Measure 1 expenditure of the measure is counted as equal equals 100,000. After the climate expenditure has to whichever is the highest—climate adaptation been determined for each program measure using or climate mitigation. For example, in Table 4, the this method, the program’s climate expenditure 29 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach is calculated by adding each of the measure’s ample, climate mitigation, the expenditures of the climate expenditure. measures that could potentially contain climate After the program’s climate expenditure has mitigation expenditures (and which have received been calculated using this method, the climate the tag ‘potential’) are added to obtain totals of expenditure of the programs can be simply added such measures per program, ministry or agency, to obtain the climate expenditure at the level of and in the republican budget. The same method is each ministry and agency and in the republican used for the other two tags. It is expected that at budget. least during the initial years of tagging, the total expenditures marked as potentially relevant will In future, a more advanced system could be de- be observably high. This will not be indicative of veloped for the calculation of climate expenditure high climate mitigation / adaptation / environmen- that accounts for the degree of overlap between tal expenditure in the republican budget, but it will mitigation and adaptation when calculating climate indicate the areas where the planning and budg- expenditure. Due to the additional level of com- plexity, this is currently not recommended. eting specialists should pay greater attention to better integrate climate change and environment Measures marked as ‘potential relevance’ in the implementation planning and budgeting. Measures that have been tagged with ‘potential This could be done by, for example, identifying the relevance’ do not receive any quantitative rele- actions that are necessary for implementing the vance weight because the share of green expend- green objectives, clearly highlighting the contri- iture cannot be estimated. Therefore, it does not bution to the green objectives in the description make any sense to calculate green expenditures of the measures and activities and by developing of such measures. Instead in the case of, for ex- relevant indicators and targets. 5.4. Quality assurance Quality assurance of the identification, classi- ■ Each ministry and agency can approach the fication, and allocation of relevance weights is an MNRETS for specific questions regarding the integral part of the green BET process. It is done identification, classification, and allocation during the assignment of tags while preparing the of relevance weights to the measures in their draft MTBF and thereafter while preparing the program budgets. draft annual budget. ■ Each ministry and agency must prepare informa- ■ Each ministry and agency must include the tion that justifies the assigned tags and weights discussions of the proposed tagging during and submit this information using a specific the working group meetings that take place form to the MF with their draft annual budget during MTBF and annual budget preparation. and the calculations of green expenditures. Civil society members can participate in these ■ The MF verifies if all the information has been meetings. Ministries and agencies can also filled correctly following the instructions invite the MNRETS to participate in these provided in the Guidelines and requests meetings to provide specific advice or opinion. revisions if relevant. 5.5. Roles and responsibilities for green BET Green BET requires the involvement of several and the NDCs. These are deepened with the national ministries and agencies. Each of these application of the green budget tagging system. already has certain responsibilities related to While the overall leadership is provided by the MF, the planning and budgeting for climate change the tagging itself is performed by the ministries and environment in line with the NDS, National and agencies, who organize the work internally Development Plan (NDP), GEDP, GEAP, National using the working groups that are established Biodiversity Strategy and Action Plan (NBSAP), for the preparation of the MTBF and the annual 30 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach budget. The MF and MNRETS provide support detailed description for each. The implementation requested by the ministries and agencies of the overall responsibilities of the different throughout this process. Subsequently, the MF ministries and agencies in the green BET process leads the reporting and analysis by preparing will be done within the limits of the approved consolidated reports. This information is used for staffing rates and the resources of the republican analyzing funding gaps and for improved alignment budget that are foreseen for these ministries and with the national climate and environmental agencies for the relevant years. Therefore, the priorities. Table 5 describes the overall roles ministries and agencies will need to gradually of the different ministries and agencies in the assign the necessary staff and resources for the green BET process and Annex 1 provides a more implementation of the necessary tasks. Table 5: Roles various ministries and agencies play in the process of tagging green budget expenditures Overall process MF: Leadership; integration with budget process, the Treasury IT system, and the regulatory framework; regular updating of the reference manuals for respective sector ministries and guidelines All: Contributing to the improvement of the Guidelines Assigning the tags All ministries and agencies: Tagging their own program budgets during the preparation of MTBF and of the draft budget and calculation of the green expenditure. MF: Advise and consult with the ministries and agencies on links to the budget process. MNRETS: Practical advice to other ministries and agencies on how to ensure consistent tagging of programs and measures (assigning of the tags and relevance weights). Quality assurance All ministries and agencies: ■ Include information on the proposed green expenditure and tags when presenting the MTBF and the annual budget at working group meetings, participate with civil society representatives or public council (if available) for the internal public consultation. ■ Prepare the required information to justify the assigned tags and weights. ■ Submit to the MF information on green expenditure and revise/update it as requested by the MF MNRETS: Fosters tag credibility by providing technical opinions to the ministries and agencies on the tags in their budget programs (for example, opinions on whether the tagged measures contribute to green objectives, and whether assigned weights correctly reflect the degree of contribution to the green objective). MF: Review of the documents on green tagging submitted by the sector ministries and agencies; verification of the completeness of the submitted information and compliance with the requirements defined in the Guidelines. Analysis and reporting MF: ■ Prepares consolidated reports on green expenditure in the draft budget for budget discussions at the level of the CM and Jogorku Kenesh. ■ Prepares consolidated reports on green expenditure in the implemented budget and submits to the CM and Jogorku Kenesh as well as to MNRETS, MEC, and CCCCESD. ■ Includes information on green expenditure in Citizens’ budgets. All ministries and agencies: Prepare information on green expenditure and submit to the MF for consolidation. Internal analysis of the report on green expenditure in the implemented budget for improved budget preparation. MNRETS, MEC, CCCCESD, CM, Jogorku Kenesh: Analyze the consolidated reports on green expenditure in the implemented budget for improved alignment with the national climate and environmental priorities. MNRETS: Reports on domestic climate expenditure within the framework of UNFCCC. 31 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 5.6. Integration with the budget process The green budget tagging follows the budget include measurable targets and performance in- calendar and is integrated in the budget cycle of dicators to track the progress toward these tar- the Kyrgyz Republic. The summary below focus- gets and promote the coordination of actions of es on the main stages in the budget cycle of the the relevant ministries and agencies. Also, the Kyrgyz Republic that are relevant for the green level of detail on the nature of the programs and BET process. However, it should be stressed that measures needs to be increased, IT systems for for meaningful and sustainable implementation budget preparation and implementation need to of green BET, tracking the improvements in the be improved, and the awareness of all the main current planning and budgeting system will be decision-makers (including the members of the required. Among others, the link between strate- Parliament) on program-based planning and gic planning and budgeting needs to be improved budgeting and also on green planning and budg- and environment and climate strategies need to eting needs to be increased. Table 6: Budget preparation timeline The calendar for the preparation of the following year’s Calendar JANUARY budget is issued by the Chairman of the CM in January each year. Preliminary expenditure ceilings FEBRUARY Preliminary expenditure ceilings are issued by the MF, and on the basis of these ceilings the ministries and MTBF preparation by ministries and agencies, agencies prepare and update their draft MTBFs. The including working group meetings, with preparation of the MTBF by the budget users includes, participation of civil society representatives or APRIL public council (if available) for the internal public among others, discussing the proposed MTBF at work- consultation ing group meetings, with participation of civil society representatives or public council (if available) for internal public consultation. Draft budget proposals by the budget users JULY After that the ministries and agencies prepare their draft budget and submit it to the MF for reconciliation. Reconciliation between MF and budget users AUGUST The MF prepares the consolidated draft budget and submits it to the CM, who submits it to Jogorku Kenesh Consolidated draft budget to the CM SEPTEMBER (the Parliament). The budget is discussed in the budget committees and finally Jogorku Kenesh reviews and ap- proves the project and sends it for signing by the Presi- Consolidated draft budget to Jogorku Kenesh OCTOBER dent. The budget submission is accompanied by several Citizens’ budget annexes containing explanatory notes (‘Пояснительные Draft budget discussions in budget committees записки’)—the program-based budget is presented as and approval by Jogorku Kenesh DECEMBER one of the annexes. The budget is signed and approved by the President. Submission to the President DECEMBER The MF also prepares the Citizens’ budget for the budget proposal submitted to Jogorku Kenesh and for the ap- Citizens’ budget proved budget. Approval by the President Budget implementation Reporting on the implementation of program budget by budget users is done per semester. 1st semester implementation report SEPTEMBER The annual report on the execution of the republican budget is prepared and submitted by the MF to the CM, 2nd semester implementation report APRIL based on reports from budget users. It is approved by the decision of the CM and submitted to Annual report on budget execution to the CM MAY Jogorku Kenesh for approval. Citizens’ budget The MF also prepares the Citizens’ budget for the budget Annual report on budget execution OCTOBER implementation report using the information that is in to Jogorku Kenesh the report submitted to Jogorku Kenesh. Source: Original elaboration. 32 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Обсуждение «зеленых» маркеров в рамках подготовки ССБР Внутриведомственное Апрель Исполнители: все министерства и ведомства обсуждение ССБР Применение маркеров к проекту бюджета Июнь Подготовка проектов бюджета Исполнители: все бюджетополучатели Июль бюджетополучателями BET take place? When does greenОбсуждение маркеров в рамках подготовки проекта Паспорта бюджета. Исполнители: все бюджетополучатели, программ Июль МПРЭТН. Обоснование, контроль Green BET is integrated along the main stepsкачества information on green expenditures. consolidated Исполнители: все бюджетополучатели, МФ, МПРЭТН of the budget process; see also Figures 9 and Similarly, the annualНаправление budget implementation report сводного бюджета в Пояснительная записка о «зеленых» расходах КМ и Жогорку Кенеш вместе с 10. Tagging is performed during the preparation is also supplemented with this information. The пояснительной запиской Сентябрь в проекте бюджета of the MTBF and the tags are then applied Исполнитель: МФ to Citizens’ reports prepared by the MF for the draft Гражданские бюджеты the draft budget prepared by the ministries and budget, approved budget, and for the budget (на основе проекта бюджета, Декабрь Формирование Гражданского бюджета с информацией agencies. The draft budget submitted to the CM о «зеленых» расходах implementation report are also в Жогорку with supplemented направленного Исполнитель: МФ Кенеш, утвержденного бюджета) and later to Jogorku Kenesh is supplemented with the information on green expenditure. Figure 9: Integration of green BET into the budget preparation process Additional elements related to green Stages in the budget expenditure tagging preparation process Дополнительные элементы, связанные с маркировкой Процесс April Assign the tags расходов «зеленых» подготовки MTBF by бюджета Who: All ministries and agencies budget users Апрель Подготовка и направление в МФ информации о фактически следующего произведенных «зеленых» расходах года Исполнители: Discuss отраслевые the green tags министерства as part of MTBF и ведомства preparation Internal April discussion of the MTBF Who: All ministries and agencies Отчет для КМ и Жогорку Кенеш - сводная информация об Май исполнении «зеленого» бюджета; тот же отчет направляется в Ежегодный следующего June Apply tags to the draft МПРЭТН, МЭК budget И КСИКЭУР. отчет об Draft budgets года July Who: All budget users Исполнитель: МФ исполнении by budget users бюджета Анализ: Discussпробелы в финансировании, the tags as part of draft budget«зеленые» preparationответные меры по Program Май Who: национальных реализации All budget users, приоритетов MNRETS в области климата, passports July следующего окружающей среды и устойчивого Justification, развития. Рекомендации по quality control года совершенствованию Who: All процесса МЗРБ budget users, MF, MNRETS Исполнители: все министерства и ведомства Consolidated budget to the CM An explanatory note on green expenditure in draft budget and Jogorku Kenesh with September Май Гражданский бюджет - раздел, посвященный исполнению Who: MF explanatory notes следующего «зеленого» бюджета Исполнитель: МФ Гражданский бюджет года Citizens' budgets на основе December Citizens' budget with the information on green expenditures (for the draft submitted to Jogorku Ежегодного отчета Июнь Анализ процесса маркировки, Who: MF рассмотрение рекомендации, Kenesh and for the approved budget) касающихся улучшения и обновления об исполнении следующего бюджета года Руководства по маркировке «зеленых» расходов бюджета Исполнитель: Source: Original elaboration for МФ при участии всех министерств и ведомств this publication. Figure 10. Integration of green budget expenditure reporting in the budget reporting process Additional elements related to green The budget expenditure tagging preparation process April Prepare and submit to the MF the information on actual green expenditure next year Who: Sector ministries and agencies May Reportto the CM and Jogorku Kenesh - consolidated information on green budget next year implementation; The same is also sent to the MNRETS, MEC, and CCCCESD Annual report Who: MF on budget implementation Analysis: Financing gaps, green responses in relation to national climate, environmental, and sustainable development priorities. Recommendations May for improved green BET process next year Who: All Citizens' budget - a section on green budget implementation May in the Citizens' budget next year Who: MF Citizens' budget for the annual Reflections on the tagging process, analysis of the recommendations for report on budget June improvements and updating of the tagging and tracking Guidelines implementation next year Who: MF with inputs from all Source: Original elaboration for this publication. This process is described in Box 11 is from the perspective of sector ministries. 33 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Integration with the IT system of the Treasury Legal basis During the piloting, the tagging is carried out using To strengthen the integration with the budget a parallel system (spreadsheets). After the piloting, process, the green BET methodology has been it will be necessary to update the IT system of the defined in separate Guidelines for Tagging Green Treasury so that the tags can be entered there di- Budget Expenditures in the Kyrgyz Republic rectly. This will allow the preparation of automat- approved by the MF on June 13, 2024. Additional ically generated reports on green expenditure in changes to the existing regulations should be the proposed and implemented budgets. It is ex- considered after the initial piloting; see Annex 1. pected that support from development partners will be necessary to introduce these changes. Box 11: Example of the process from the perspective of tagging 1 of codes of program (552) Providing the population with thermal energy) by one ministry (Ministry of Energy - ME) Important note. This is a fictional example created for the purpose of illustrating some possible examples of the type of interaction between the ME and MF and MNRETS during this process. None of the conversations between the ministries and none of the decisions described below have actually taken place. The Working Group tasked to prepare the MTBF proposal for the ME is informed that the MTBF proposal preparation will also include tagging measures in the program budget that contribute to climate change mitigation, adaptation, and environment objectives. The ME nominates the staff member who will be responsible for this task. Assign tags in MTBF. The staff responsible for tagging at the ME analyzes the measures of the program using the program passport. The program consists of three measures: ■ Generating and selling heat energy to the population ■ Satisfying the needs of Min-Kush villagers regarding quality heat and water supply and drainage services at the lowest possible cost ■ Ensuring environmental safety of the population. First the measure ‘Generating and selling heat energy to the population’ is analyzed in terms of its contribution to the green objectives (climate adaptation, climate mitigation, environment). The ME is not sure whether this measure contributes to climate adaptation, mitigation, and environmental objectives and what weights to assign if it does. Therefore, it approaches the MNRETS for clarification. The MNRETS discusses the content of the measure with the ME staff and makes the following observations: ■ The measure foresees a reduction of the losses of thermal energy. The MNRETS therefore concludes that this measure contributes to the mitigation objectives. However, the MNRETS also observes that the main reason why the measure has been designed is not reduction of GHG emissions. The MNRETS concludes that it should not receive high relevance weight. At the same time, all the indicators for this measure clearly refer to a theme directly linked with GHG emission reductions (reduction of energy losses and energy efficiency). But the proposed indicator values show very limited expected reduction of losses and increase in efficiency. Therefore, based on the criteria in Table 4 of the Guidelines, the MNRETS concludes that the measure should be assigned low relevance weight for the tag ‘climate change mitigation’ and advises the ME accordingly. ■ It is not clear whether the measure contributes to adaptation objectives. If this measure includes elements that would ensure the safety of energy infrastructure from climatic 34 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Box 11: Example of the process from the perspective of tagging 1 of codes of program (552) Providing the population with thermal energy) by one ministry emergencies, then it could be tagged as an adaptation measure. If it increases the resilience of the population to the changing climate, then too it could be tagged as adaptation measure. Due to the lack of information, the MNRETS advises either not to tag this measure as an adaptation measure or to tag it with ‘Potential’ significance weight. Based on this feedback, the ME decides not to tag this measure. ■ The measure contributes to efficient use of environmental resources and it is likely to contribute to reduction of air pollution. Therefore, the MNRETS concludes that it should be tagged as an environmental measure. The MNRETS further observes that the main reason why this measure was developed is not in response to air pollution or increased resource efficiency. Therefore, the MNRETS concludes that it should not receive high relevance weight. However, all indicators of this measure clearly refer to a theme directly linked with resource efficiency (efficient use of fuels for energy production). This is likely to have a further positive impact on air quality due to reduced air pollution. At the same time the proposed indicator values show very limited expected increase in efficiency. Therefore, based on the criteria in Table 4 of the Guidelines the MNRETS advises the ME to assign low relevance weight for the tag ‘environment’. With help from MNRETS, the ME proceeds with the same process for the measure ‘Satisfying the needs of Min-Kush villagers regarding quality heat and water supply and drainage services at the lowest possible cost’ and for the measure ‘Ensuring environmental safety of the population’. Result: Increased awareness of ME staff on green actions and green items in their budget. Discuss the green tags at the meetings held as part of MTBF preparation. When preparing the MTBF, the ME holds several working group meetings for the preparation of MTBF. The green tags and weights are presented and discussed during one of the meetings. During this meeting, the participants agree with the proposed tags and weights. But they also observe that the ME needs to consider how in future it should address the safety of the energy infrastructure from climatic emergencies in the energy sector adaptation program. Result: Increased transparency of the green expenditure, increased awareness of ME staff on green actions and green items in their budget. Apply the tags to the draft budget proposal. ME staff enter the tags that were applied to the budget programs in the MTBF to the same budget programs in their draft annual budgets. They do so by filling the ‘green budget’ fields in the budget information management system once the IT system of the Treasury has been updated. Until then the ME uses Excel sheets that it will submit to the MF for filling this information. The ME staff request the help from the MF because they are not sure how they should enter the information about the tags correctly. After receiving the clarification from the MF, the ME staff fill the tags with corresponding weights. After that they calculate the climate adaptation, climate mitigation, climate and environmental expenditure for each program and for the ministry in total. They also calculate the total costs of the measures that have been tagged as measures potentially containing climate adaptation, climate mitigation, and environmental expenditure (per program and total for the ministry). Result: Increased transparency of the green expenditure Discuss the green tags at the meetings held as part of annual budget preparation. Process similar to the preparation of the MTBF. Result: Increased transparency of the green expenditure, increased awareness of ME staff on green actions and green items in their budget. Justification and quality control The ME staff fill the required information on the green tags and on their justification using the format provided in the Guidelines and request help from the MF if they have any doubts about how to enter the required information correctly. After preparing this information, it is submitted for approval within the ME and after that to the MF. 35 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Box 11: Example of the process from the perspective of tagging 1 of codes of program (552) Providing the population with thermal energy) by one ministry The information on the green tags that has been approved by the head of the ME is inserted in the program passport. Result: Higher reliability of the information on green expenditure Prepare and submit to the MF the information on actual green expenditure The responsible staff of the ME use the same tags and weights that were assigned to the program budget to calculate the green expenditure in the implemented program budget. They calculate the climate adaptation, climate mitigation, climate and environmental expenditure for each program and for the ministry in total. They also calculate the total implementation costs of the measures that have been tagged as measures potentially containing climate adaptation, climate mitigation, and environmental expenditure (per program and total for the ministry). Result: Increased transparency of the green expenditure Analysis The ME analyzes the information on actual expenditure that it has produced: how well the planned budget was implemented, were the measures tagged correctly, if there were measures tagged as potentially green, and how the planning of the program can be improved to ensure that more precise weight can be assigned. In case of the program ‘Providing the population with thermal energy’, the ME decides that for planning future investments in energy infrastructure they need to revise their technical standards to ensure that the infrastructure is resilient to the impacts of the changing climate and they include this activity in their planning. The ME analyzes if some measures to achieve the program objectives or to better mainstream environment and climate change in the program implementation are missing. The ME checks if the measures contain relevant climate- and environment-related results indicators and discusses what can be improved in the program budget for the next year. Result: Improved and tailored budget proposals for the subsequent years. Reflections on tagging and tracking process and updating of the Guidelines The ME provides feedback to the MF on any special problems encountered. On the basis of this and the opinions of other ministries and the statement of the MNRETS, MEC, and CCCCESD, the MF updates the Guidelines as relevant. Result: Improved overall process for tracking green expenditure in republican budget. 5.7. Technical support and guidance to relevant sector ministries and budget user agencies In case questions arise during the green BET, the For planning and budgeting questions , for MF and MNRETS provide advice. For technical example, on the use of the Guidelines, assigning questions on climate change and on environmen- the green expenditure tags in the Excel sheets, tal topics , for example, on how to identify, classify the preparation of program passports, obtaining and weigh climate change mitigation, adaptation the green expenditure reports, and so on, advice is or environment expenditure of a measure, advice provided by the MF. The advice is provided by the is provided by the MNRETS. The MNRETS nom- supervisors (curators) of the sector ministries and inates the contact persons and informs the MF agencies within the MF. and subsequently the MF informs the ministries and agencies about whom they can contact in case such advice is needed. 36 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach 6. Phased implementation of green budget expenditure tracking in the Kyrgyz Republic A phased approach is recommended to implement green BET in the Kyrgyz Republic. ■ Piloting. During the initial year(s), the tagging generated reports on green expenditure in the will be done for a few selected ministries at the proposed and implemented budgets. central level to test the practical implemen- The scope of the application of green BET will tation of green expenditure tagging, quality include a higher number of central level minis- control, analysis, and reporting. The selection tries/avvgencies. For that it will be necessary criteria include the potential significance of to develop and implement training programs green expenditure, likelihood of complexity for the relevant specialists of the central-level of tagging expenditure of the given measure, ministries/agencies. and quality of the ministry’s program-based budget. It is expected that the progress under Piloting and Phase 1 will be closely interlinked with the Such testing is needed to reveal gaps in data, pace of improving the program-based budget- processes, and understanding of users to ad- ing as the basis for green budget tagging. dress gaps by boosting capacity for full-scale implementation. The testing would also bring ■ Phase 2. Green budget tagging will be con- clarity regarding classification and weighting tinuously applied. The scope of the applica- methodology. For example, different classifi- tion will continue to expand to cover all cen- cation and weighting approach could be devel- tral-level ministries and agencies as well as oped for climate (mitigation and adaptation) local self-governments. Green BET will also be and for environment. It would also allow up- expanded to tag expenditure with negative im- dating the Guidelines with a full taxonomy for pact on green objectives. Tracking will be ex- climate/green public investments in the main panded to cover not only budget expenditure sectors by adding activities from real-life budg- but also green budget revenues. ets of the ministries and agencies. Considering the pace of improving pro- ■ Phase 1. Based on the pilot results, the Guide- gram-based budgeting, the weighting system lines will be updated and the MF will decide on will be adjusted as appropriate. For example, if the necessary updates in the norms and regu- tags can be assigned at the level of activities lations guiding the budget preparation and re- or even sub-activities, the need for weights can porting procedures in the Kyrgyz Republic and be eliminated as the tags could be assigned to implement the required changes to formalize specific expenditure items that are fully green. the application of the green budget expend- Alternatively, as the ministries and agencies iture tracking across budgeting cycle—plan- gain more experience with budget tagging and ning, execution, reporting. It will be necessary with information on costs at the activity lev- also to update the IT system of the Treasury el, more detailed weighting can be introduced so that the tags can be entered there directly. reflecting the contribution to the green objec- This will allow the preparation of automatically tives more precisely. 37 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach The Guidelines will be updated on a regular ba- take place during the preparation of the MTBFs and sis to incorporate lessons learned and the ex- annual draft budgets of the budget users. Regular- pansion of the scope of green budget tracking ly updated Guidelines, adopted by a decree of the as well as to reflect any relevant policy updates. MF with the updated norms and regulations guiding the budget preparation and reporting procedures Linked to the increased capacities, green ex- will provide overall guidance for each specific year penditure audits will be introduced in the longer on the green budget tagging process. In addition, term. 24 the program budget classification will be capturing Such a phased implementation will allow to create the ‘green tags’. a system where the application of green budget To implement the above-described system, further tagging will be performed by the relevant sector development of the green budget tagging will be ministries and other government institutions, by required, including the support for increasing the entering the information in the IT system of the capacities of all ministries and agencies that will be Treasury. Quality assurance will be part of the im- engaged in the implementation of green BET. plementation with the MF and MNRETS, and it will 24 OECD provides the following definition: “Environmental audit or validation of the budget: An independent, objective ex-post analysis conducted within the budgetary process by a competent authority different from the central budgetary authority, of the extent to which environmental objectives are effectively promoted by the proposed policies set out in the annual budget and/ or multiannual documents. This is typically conducted by the Supreme Audit Institution or possibly by Climate/Environmental watchdogs.” Source: OECD https://www.oecd.org/gov/budgeting/2020-green-budgeting-survey-glossary.pdf. 38 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Annex 1. Detailed description of roles and responsibilities of different actors in the process of green budget tagging Ministry of Finance (MF) Due to the budget implications of the implementation of the national and international climate and environmental commitments the MF plays a key role in green budget tagging. This includes ensuring the mainstreaming of climate change and environment in budgeting procedures, thereby mobilizing domestic resources for climate and environment action. It also monitors reports from the ministries and agencies to ensure policy implementation. Its roles in expenditure tagging are to: Overall process ■ During the piloting* of the Guidelines: guide selected ministries and agencies to carry out the actions needed under this Guideline; ■ Integrate the requirements related to the Green Budget Expenditure Tagging in the relevant regulations governing the process of program-based budgeting; ■ Ensure the integrity of the methodology applied in the Guideline; ■ Raise the awareness of sector ministries and agencies on green budgeting, including in the context of Program Based Budgeting, prepare and implement regular training courses on green budget expenditure tagging by the Learning Centre of the MF; ■ Integration of the green tags in the IS-Treasury; ■ Continuously improve the methodology over time, based on the feedback from MNRETS and sector ministries and agencies; Assigning the tags ■ Advise other ministries, departments, and agencies on how to ensure consistent tagging of programs and measures;** ■ Correctly apply the budget tagging methodology as part of the planning process of MF programs;** Quality assurance ■ Document the supporting information on climate change and environmental relevance of tagged expenditure items for quality assurances purposes ***; ■ Check that the ministries and agencies have tagged their budget programs and that the information on the green tags and their justification has been correctly provided by ministries and agencies with the submission of their draft MTBF and draft annual budgets; ■ Continuously improve quality assurance procedure and update the quality assurance information requirements as necessary based on the experience and on feedback from MNRETS and sector ministries. 39 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Analysis and reporting ■ Prepare consolidated information on proposed and on implemented green budget expenditures and attach to the draft budget and the budget implementation report to inform budget hearings and to evaluate performance. Share the same information with the CCCCESD, MNRETS and MEC. ■ Prepare consolidated reports on green expenditure (planned and implemented) at the level of budget users. ■ Integrate information on green budget in Citizens’ budget ■ Perform internal analysis of green expenditure for internal budget expenditure planning purposes on basis of automatically generated extracts of expenditure under the relevant programs of the ministry** Note: * See section 6 regarding the need for piloting. ** At more advanced stage of Green BET the expenditure tagging will be implemented also for local municipalities and state-owned enter- prises. At that stage, the MF will also provide the necessary guidance to them, including the reporting formats; as well as will incorporate information about their expenditure into overall reports on green budget expenditure in Kyrgyz Republic and in Citizens’ Budget. *** It is expected that tagging of MF budget programs will take place at later stages of Green BET, after the initial piloting, see section 6. To be clarified with the MF about tagging of the investment projects. Ministry of Natural Resources, Ecology and Technical Supervision (MNRETS) The MNRETS is the national coordinator on environment and climate change issues. Most notably it: “coordinates the activities of government bodies, local governments and organizations on matters of jurisdiction related to the Ministry’ (i.e. on “protection of the environment, ecology and climate, geology and subsoil use, use and protection of natural resources, including bioresources, subsoil and water resources, with the exception of irrigation and reclamation infrastructure”. 25 The role of MNRETS in Green BET is to: Overall process ■ Ensure the integrity of the methodology applied in the Guideline as far as it relates to the correct choice of the tags and weights; ■ Advise on the improvement of the methodology over time, considering climate and environmental policy developments as well as findings from quality control of budget reviews; Assigning the tags ■ Correctly apply the budget tagging methodology in the planning of MNRETS programs; ■ Advise other ministries, departments, and agencies on how to ensure consistent tagging of programs and measures as far as it relates to the correct choice of the tags and weights; Quality assurance ■ Document the supporting information on climate change and environmental relevance of tagged expenditure items for quality assurances purposes; ■ Foster the credibility of the tags by providing technical opinions to the budget users on the tags in their budget programs (for example, opinions on whether the tagged measures contribute to the green objectives and whether the assigned weights correctly reflect the degree of contribution to the green objective); ■ Advise on the improvements of quality assurance procedure and the quality assurance information requirements; Analysis and reporting ■ Prepare calculations on green expenditure in the draft budget and green implemented expenditure for its own budget programs ■ Review the consolidated reports shared by the MF on green budget expenditure with the focus on adequacy or gaps in the green responses of the ministries/agencies in relation to the national climate and environment policies; suggest improvements as relevant as part of the process of coordinating with the CCCCESD and MEC; ■ Prepare the reporting on domestic climate finance under UNFCCC reporting requirements; ■ Perform internal analysis of green expenditures for internal budget expenditure planning purposes on basis of the consolidated information on expenditure under the relevant programs of the ministry. 25 Regulations on the Ministry of Natural Resources, Ecology and technical supervision of the Kyrgyz Republic – Annex 1of the Resolution No. 263 of the Cabinet of Ministers of the Kyrgyz Republic of November 15, 2021. 40 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach At a more advanced stage of Green BET, the expenditure tagging will be implemented also by local self- government authorities. At that stage, the MNRETS will also provide the necessary technical guidance to them. Ministry of Economy and Commerce (MEC) One of the functions of the MEC is to ‘elaborate and implement the state policy in the area of green economy development and climate mitigation and adaptation’ and it ‘coordinates the activities of state executive authorities in the field of sustainable development, including the development of a green economy and climate mitigation and adaptation26 . Based on this, its roles in green expenditure tagging are: Overall process ■ Advise the MF and MNRETS on the continuous improvement of the methodology over time, considering policy developments and the practical application aspects. Assigning the tags ■ Correctly apply the budget tagging methodology in planning of MEC programs*; Quality assurance ■ Document the supporting information on climate change and environmental relevance of tagged expenditure items for quality assurances purposes*; Analysis and reporting ■ Prepare calculations on green expenditure in the draft budget and green implemented expenditure for its own budget programs* ■ Perform internal analysis of green expenditures for internal budget expenditure planning purposes on basis of the consolidated information on expenditure under the relevant programs of the ministry*; ■ Review the consolidated reports shared by the MF on green budget expenditure with the focus on adequacy of / gaps in the green responses of the ministries / agencies in relation to the national sustainable development priorities, including the development of a green economy and climate mitigation and adaptation; suggest improvements as relevant as part of the process of coordinating with the CCCCESD and MNRETS. Note: * It is expected that tagging of MF budget programs will take at later stages of Green BET, after the initial piloting, see Section 6 . Ministries and agencies For a wide variety of sector ministries and agencies, climate change and environment are directly relevant. This encompasses implementation of specific adaptation measures, ensuring investment programs are climate resilient, implementing greenhouse gas mitigation programs, implementing specific environment related measures (for example, building and rehabilitation of sewerage systems and municipal waste landfills by the State Agency of Architecture, Construction, Housing and Municipal Services) or natural resource management measures (for example, forest and water management by the Ministry of Agriculture). The Ministries and agencies implement climate change and environment related actions, guided by the NDS, NDP, NDC, GEAP and the Decree on measures to ensure environmental safety and climate sustainability. Their roles in expenditure tagging are to: Overall process ■ Advise the MF and MNRETS on the continuous improvement of the methodology over time, considering policy developments and the practical application aspects. Assigning the tags ■ Correctly apply the budget tagging methodology in their planning of programs. Annex 1of the Resolution No. 263 of the Cabinet of Ministers of the Kyrgyz Republic of November 15, 2021. Regulation on the 26 Ministry of Economy and Commerce of Kyrgyz Republic as amended by the regulation Nr. 702 from 16 December 2022 cbd.minjust.gov.kg/act/view/ru-ru/99775. 41 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Quality assurance ■ Document the supporting information on climate change and environmental relevance of tagged expenditure items for quality assurances purposes; ■ Provide the information on proposed green expenditure and the tags and weights during the public hearings of the draft MTBF and the draft budget; ■ Engage MNRETS for technical advice regarding the proposed tags and weights before formally submitting the draft MTBF and the draft annual budget to the MF for the annual budget reconciliation between the MF and sector ministries. Analysis and reporting ■ Prepare calculations on green expenditure in the draft budget and green implemented expenditure for its own budget programs; ■ Perform internal analysis of green expenditures for internal budget expenditure planning purposes on basis of the consolidated information on expenditure under the relevant programs of the ministry. Coordinating Council for Climate Change, Environment and Sustainable Development Overall process ■ Advise the MF and MNRETS on the continuous improvement of the methodology over time, considering policy developments and lessons learned from earlier analysis and reporting. Assigning the tags ■ Not applicable. Quality assurance ■ None. Analysis and reporting ■ Review the consolidated reports shared by the MF on green budget expenditure with the focus on the adequacy or gaps in the green responses of the ministries/agencies in relation to the national sustainable development priorities; suggest improvements and / or issue opinions as relevant as part of the process of coordinating with the MEC and MNRETS. Local self-governments (LSG) LSGs are responsible, among others for a wide range of climate and environment related measures in their territories. This encompasses implementation of specific adaptation measures and ensuring that their investments are climate resilient, implementing greenhouse gas mitigation programs at local level (for example, related to energy efficiency of buildings and local public transport), implementing specific environment related measures (for example, building, rehabilitation and operation of sewerage systems and municipal waste management). The local municipalities implement climate change and environment related actions, guided by the NDS, NDP, NDC, GEAP and the Decree on Measures to ensure environmental safety and climate sustainability. The role of local municipalities in green budget tagging will be elaborated in more detail in later phases of Green BT application in KR. In general terms, their tasks are expected to be: ■ Correctly apply the budget tagging methodology in their planning of programs and projects. ■ Document the supporting information on climate change and environmental relevance of tagged expenditure items for quality assurances purposes. ■ Perform internal analysis of green expenditure for internal budget expenditure planning purposes on basis of automatically generated extracts of expenditure under the relevant programs of the ministry. ■ Advise on the continuous improvement of the methodology over time, considering policy developments and the practical application aspects. 42 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach State-owned Enterprises (SOEs) SOEs are responsible, among others for a wide range of climate and environment related measures in their operations. This encompasses implementation of specific adaptation measures and ensuring that their infrastructure is climate resilient, implementing greenhouse gas mitigation programs (for example, related to energy efficiency and use of renewable energy), implementing specific environment related measures (for example, building, rehabilitation and operation of wastewater and air treatment systems, technology improvements to reduce waste of resources). The SOEs implement climate change and environment related actions guided by the NDS, NDP, NDC, GEAP and by the national environmental legislation and regulations. Their expenditure is not part of the state budget therefore tagging their expenses is not carried out as part of green budget expenditure tagging. However, given the important role of SOEs, the government may decide that the budgets of SOEs should also be tracked in order to understand how they contribute (or don’t) to the implementation of mitigation, adaptation and environmental objectives. If and when such a decision will be made, a separate, but complementary, process would need to be established for tagging green expenditure in the budgets of SOEs. Development Partners Significant support for the achievement of national climate change and environment related objectives is provided by international multi- and bilateral development partners through a variety of financing instruments, including, for example, investment projects, development policy support and technical assistance. This external funding is provided both on-budget and off-budget. While on-budget resources can be coded by the respective ministries and agencies, information on off-budget support is limited. The role of Development Partners in budget tagging is to support mobilization efforts for climate financing of the government example by financing gaps identified through the budget tagging exercise. 43 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Annex 2. Assessment of needed additional inputs for incorporating climate and environmental commitments in public financial management procedures and practices The piloting foreseen in the order of the MF approving the Guidelines is expected to lead to the conclusions of the necessary changes in the existing regulations related to budgeting. Based on the current assessment, the following gaps have been identified: ■ The MK Order on Program based budgeting with the Instruction on formation, assessment and implementation of program-based budgets (‘Постановление Кабинета Министров Кыргизской Республики от 24 декабря 2021 года № 349 О бюджетировании на программной основе, Приложение) does not include a requirement to perform green budget expenditure tagging. ■ The Methodology on Citizens’ Budget (‘Приложение 1 к постановлению Кабинета Министров Кыргызской Республики от 15 мая 2023 года № 249: Методика формирования гражданского бюджета по республиканскому бюджету Кыргызской Республики 15 мая 2023 года № 249’) does not stipulate a requirement to inform the general population about green budget expenditures. MF will decide on how to integrate green budget expenditure tagging in the national regulatory framework, taking into account not only the piloting of green budget expenditure tagging but also other ongoing initiatives for tagging of other cross-cutting issues in budget processes (for example, gender and SDGs). Specialized training program will need to be developed and implemented by the Ministry of Finance on green budget expenditure tagging. Last but not least, the IT system of the Treasury will need to be updated to include the possibility to reflect and report on green expenditure in program budget. It is likely that Kyrgyz Republic will need further support from development partners to implement the above. 44 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Annex 3. Cross-reference between the green tags and specific SDG targets Green objectives are closely interlinked with Sustainable Development Goals. Thus, the expenditures that have been tagged as green are expenditures that contribute also to implementation of different SDGs, see Table 7 below with the overview. Table 7: Linking the SDG implementation with the implementation of the green objectives by selected ministries Ministry and green tag / SDG MNRETS: Adaptation Mitigation Environment Ministry of Agriculture Adaptation Mitigation Environment Ministry of Emergency Situations Adaptation Environment Ministry of Energy Adaptation Mitigation Environment Ministry of Transport and Communications Adaptation Mitigation Environment State Agency of Architecture, Construction, Housing and Municipal Services Adaptation Mitigation Environment Ministry of Health Adaptation Environment More information on SDG monitoring in the Kyrgyz Republic is available on the website of the National Statistical Committee of the Kyrgyz Republic https://sustainabledevelopment-kyrgyzstan.github.io/. 45 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Annex 4. Government documents related to climate and environment Note, that this annex lists the documents that are valid at the time of the preparation of the Concept Document drafted from August 2023 – May 2024. Decree of the Cabinet of Ministers of November 15, 2021 № 263 On approval of the statute of the Ministry of Natural Resources, Ecology and Technical Supervision of the Kyrgyz Republic. http://cbd.minjust.gov. kg/act/view/ru-ru/158727 Presidential Decree No. 221 of October 31, 2018, “On the National Development Strategy of the Kyrgyz Republic for 2018-2040” (NSSD) http://cbd.minjust.gov.kg/act/view/ru-ru/430002 and http://www.stat. kg/ru/nsur/ Decree of the Government of the Kyrgyz Republic from 14.11.2019 № 605 Green Economy Development Program in the Kyrgyz Republic for 2019-2023. The document is available at: https://mineconom.gov.kg/ froala/uploads/file/c7f3091a147d04d046c5d9ef551249945643532e.pdf and https://mineconom.gov. kg/froala/uploads/file/91827e3f83f5a04a78e2dc827b7ef37f9a69b383.pdf Программа развития “зеленой” экономики в Кыргызской Республике на 2019-2023 годы (к Постановлению Правительства Кыргызской Республики от 14 ноября 2019 года № 605) (minjust. gov.kg) (http://cbd.minjust.gov.kg/act/view/ru-ru/453438) Updated nationally determined contribution of the Kyrgyz Republic (NDC), EN version: ht tps: //unfccc .int /sites/default /files/NDC/ 2022- 06/%D0%9E%D0%9D%D0%A3%D0%92%20 ENG%20%D0%BE%D1%82%2008102021.pdf The updated nationally determined contribution (NDC) contains a list of adaptation measures that will reduce the economic losses identified in the proposed NDC and covers all the most vulnerable sectors: water resources, agriculture, energy, emergencies, public health, forests and biodiversity, as well as new cross-sectoral sections: “Climate Resilient Areas and Green Cities” and “Improving Adaptive Reporting”. Decree of the President of the Kyrgyz Republic March 19, 2021 № 77 “On measures to ensure environ- mental safety and climate sustainability http://cbd.minjust.gov.kg/act/view/ru-ru/430478?cl=ru-ru. The decree sets priority measures in order to: reduce the negative impact of atmospheric air pollution on public health, improve waste management, reduce the negative impact of wastewater on environment, to ensure protection of glaciers, restore natural ecosystems and ensure the conservation of biodiversity, ensure chemical and radiation safety, improve land fertility. The decree also sets supporting measures related to financing and investments and to the efficiency of the environmental protection system and international co-operation in the field of environmental protection. Decree of the Government of the Kyrgyz Republic on March 17, 2014 #131 “On the Priorities for the Conservation of Biodiversity of the Kyrgyz Republic for the period until 2024 and the Action Plan for Implementation of the Priorities for the Conservation of Biodiversity of the Kyrgyz Republic for 2014-2020 http://cbd.minjust.gov.kg/act/view/ru-ru/96264?cl=ru-ru 46 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Decree of the Cabinet of Ministers of December 24, 2021 № 338 “On the issues of subordinate units of the Ministry of Natural Resources, Environment and Technical Supervision of the Kyrgyz Republic” Regulations of the Center of Climate Finance http://cbd.minjust.gov.kg/act/view/ru-ru/158877 Decree of the Cabinet of Ministers of January 30, 2020 № 46 On the Coordinating Council on climate change, environment and sustainable development http://cbd.minjust.gov.kg/act/view/ru-ru/159127?cl=ru-ru#unknown Decree of the Cabinet of Ministers of December 24, 2021 № 338 “On the issues of subordinate units of the Ministry of Natural Resources, Environment and Technical Supervision of the Kyrgyz Republic” Regulations of the Department of biodiversity and protected areas http://cbd.minjust.gov.kg/act/view/ru-ru/158873 Decree of the Cabinet of Ministers of March 9, 2021 № 83 on Regulation of the Ministry of Agriculture of Kyrgyz Republic http://cbd.minjust.gov.kg/act/view/ru-ru/158106 Decree of the Cabinet of Ministers of December 24, 2021 № 338 “On the issues of subordinate units of the Ministry of Natural Resources, Environment and Technical Supervision of the Kyrgyz Republic” Regulations of the Department of biodiversity and protected areas) http://cbd.minjust.gov.kg/act/view/ ru-ru/158603?cl=ru-ru Decree of the Cabinet of Ministers of November 15, 2021 № 262 on approval of the Ministry of Emergency Situations of Kyrgyz Republic http://cbd.minjust.gov.kg/act/view/ru-ru/158694?cl=ru-ru Decree of the Cabinet of Ministers of November 15, 2021 № 262 “On Hydrometeorological Service under the Ministry of Emergency Situations of the Kyrgyz Republic.“ http://cbd.minjust.gov.kg/act/view/ru- ru/158705?cl=ru-ru Decree of the Cabinet of Ministers of November 15, 2021 № 262 “On Service “Selvodzashita “ under the Ministry of Emergency Situations of the Kyrgyz Republic” Regulation of the Service http://cbd.minjust. gov.kg/act/view/ru-ru/158698?cl=ru-ru Decree of the Cabinet of Ministers of November 15, 2021 № 247 “On the Ministry of Energy of the Kyrgyz Republic” Statute of the Ministry http://cbd.minjust.gov.kg/act/view/ru-ru/158674?cl=ru-ru Budget Code of the Kyrgyz Republic of May 16, 2016 № 59 http://cbd.minjust.gov.kg/act/view/ru-ru/111338?cl=ru-ru The Budget Code of the Kyrgyz Republic establishes the basics of legal regulation of relations arising in the sphere of public finance management in the process of formation, consideration, approval, clarification and execution of the republican, local budgets. The BC KR provides for medium-term fiscal planning and the use of program budgeting in the planning and management of public institutions. The Ministry of Finance (MoF KR) is responsible for the preparation and execution of the medium-term and annual budget. The Cabinet of Ministers Decision No. 250 dated November 15, 2021 On the issues of the Ministry of Economy and Commerce. Statute of the Ministry http://cbd.minjust.gov.kg/act/view/ru-ru/158673?cl=ru-ru#unknown и https://mineconom.gov.kg/ru/ministry/regulation Strategy for the Sustainable Development of the Industry of the Kyrgyz Republic for 2019-2023 and Action Plan (СТРАТЕГИЯ устойчивого развития промышленности Кыргызской Республики на 2019-2023 годы). Decision of 27 September 2019 No. 502 “On Approval of the Strategy for Sustainable Development of Industry of the Kyrgyz Republic for 2019-2023 years”. It aims to improve the dedicated regulatory framework, create infrastructure and conditions for attracting investment in the industrial sector, and introduce industrial innovative technologies. The strategy sets priority measures for the development of key industrial sectors and defines the instruments for their development. One of such instruments is environmental development. The strategy defines that the development of industrial policy measures 47 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach should take into account negative environmental impacts, including climate change factors, and provide for adaptation measures in case of such impacts. Environmental priorities should be directed toward the development of material recovery and an integrated recycling approach and, consequently, the reduction of industrial waste. Climate Investment Program - Operational Framework for Managing and Accessing Climate Finance in the Kyrgyz Republic (2018). This document was prepared in cooperation with a range of international finance institutions. It aims to finance a range of climate resilient projects that are aligned with climate- related national policies. The program identifies the following key actions: ■ Improving the quality of climate services; ■ Improving food security from agriculture, through improved water resources, land management and agricultural practices; ■ Making energy supply infrastructure climate resilient; ■ Making transport infrastructure climate resilient; ■ Making municipal water supply climate resilient; ■ Making buildings climate resilient; ■ Increasing the climate resilience of healthcare; ■ Increasing the climate resilience of mining; ■ Enhancing private sector participation in climate resilience; ■ Enhancing the climate resilience of forestry and biodiversity; ■ Enhancing the climate resilience of emergency situations. The document can be accessed via https://cdn.climatepolicyradar.org/navigator/KGZ/2018/climate- investment-programme-operational-framework-for-managing-and-accessing-climate-finance-in-the- kyrgyz-republic_9940cbfd0be66a84b445f8b7341b0a5c.pdf Law No. 137 ‘On the energy efficiency of buildings’ (2011). (ЗАКОН КЫРГЫЗСКОЙ РЕСПУБЛИКИ от 26 июля 2011 года N 137 Об энергетической эффективности зданий). This Law establishes the legal basis for the assessment of energy efficiency and decrease in consumption of energy resources of existing and new buildings. Can be accessed on http://cbd.minjust.gov.kg/act/view/ru-ru/203377. Unofficial EN translation: https://climate-laws.org/document/law-no-137-on-the-energy-efficiency-of- buildings_987e?l=kyrgyzstan&o=10: https://climate-laws.org/document/law-no-137-on-the-energy- efficiency-of-buildings_987e?l=kyrgyzstan&o=10 Law No. 49 ‘On renewable sources of energy’ (2022) (ЗАКОН КЫРГЫЗСКОЙ РЕСПУБЛИКИ от 30 июня 2022 года № 49 О возобновляемых источниках энергии). This Law establishes legal, organizational, economic and financial bases, mechanisms for regulation of relations between the state, producers, suppliers and consumers of renewable energy sources, equipment for production, installations using renewable energy sources. Can be accessed on http://cbd.minjust.gov.kg/act/view/ru-ru/112382?cl=ru-ru. Law No. 71/2007 about state regulation and policy in the field of emission and absorption of greenhouse gases (ЗАКОН КЫРГЫЗСКОЙ РЕСПУБЛИКИ от 25 мая 2007 года № 71 О государственном регулировании и политике в области эмиссии и поглощения парниковых газов). This law determines the basis for state regulation, the procedure for the activities, rights, duties and responsibilities of state bodies, local governments, individuals and legal entities in the sphere of emission and absorption of greenhouse gases on the territory of the Kyrgyz Republic. Article 3 determines that the state climate policy is notably carried out in the following directions: 1) implementation of state regulation, 2) compliance of activities in order to protect the environment and public health, priorities for economic development, as well as international obligations, 3) ensuring national and environmental security, political and economic interests, as well as fulfilling the country’s international obligations, 4) 48 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach promotion of the use of economic mechanisms in national and international law, 5) gradual reduction and elimination of market disparities, fiscal control methods that are contrary to the objectives of this law, with their replacement by market mechanisms, 6) ensuring the functioning of the state monitoring system, 7) ensuring free access to information on actual and projected quantities of greenhouse gas emissions and the results of climate projects, 8) integration with domestic, foreign and international systems for recording and monitoring greenhouse gas emissions and removals and the results of climate projects. The law further discusses the methods of state regulation, implementation of specific mitigation programs and legal aspects. Law No. 88 ‘On energy saving’ (ЗАКОН КЫРГЫЗСКОЙ РЕСПУБЛИКИ от 7 июля 1998 года № 88 Об энергосбережении). The objectives of this Law are to create conditions for increasing the efficiency of use in extraction, production, processing, transmission (transportation), storage, distribution and consumption (transformation) of fuel and energy resources, protection of the interests of consumers and producers of fuel and energy resources by regulating relations between economic entities, as well as between the state and legal entities and individuals in the field of energy saving. It regulates relations aimed at: - efficient use of energy resources during their extraction, production, processing, transportation, storage and consumption; - implementation of state supervision over the efficient use of energy resources; - development of extraction and production of alternative fuels capable of replacing energy resources of more expensive and scarce types; - creation and use of energy efficient technologies, fuel and energy consuming and diagnostic equipment, structural and insulating materials, devices for metering the consumption of energy resources and control over their use, automated energy consumption management systems; - ensuring accuracy, reliability and uniformity of measurement in terms of metering of energy resources supplied and consumed; - information support on energy saving, use of new energy sources and fuels, means of measurement, regulation and control over consumption of energy resources; - technical standardization and metrological support of energy supply facilities (art. 4). 49 Green Budget Tagging in the Kyrgyz Republic. Conceptual Approach Green Budget Tagging in the Kyrgyz Republic Conceptual Approach September 2024