How financial planning is being restructured to meet sustainability goals

As the effects of climate change intensify, governments are being forced to rethink their fiscal priorities. For the economies of the Western Balkans, this means embedding sustainability into budget planning—a shift that is as much about political will as it is about technical reform.

In February 2025, officials from Kosovo and North Macedonia, alongside experts from Austria, the EU, and international institutions, gathered in Prishtina for a two-day Green Budgeting Workshop under the EU4Green initiative. The event served as a capacity-building exercise and a launchpad for integrating Green Budgeting into national fiscal policies. The objective? To ensure that public funds drive climate action rather than undermine it.

Beyond the Balance Sheet

The idea behind Green Budgeting is deceptively simple: align government spending with environmental objectives. In practice, this means everything from tracking the environmental impact of expenditures to ensuring that fiscal policy does not contradict national climate commitments.

In his opening remarks, Vadim Stirbu from the EU Office in Kosovo underscored the urgency of integrating sustainability into financial planning, noting that climate risks—rising temperatures, natural disasters, and depleting resources—must be accounted for in budgetary decisions.

Yet, implementation remains a challenge. Kosovo’s Ministry of Finance, Labor, and Transfers highlighted a lack of coordination between finance and environmental ministries, with no clear directives guiding how public budgets should reflect green priorities. This is not unique to Kosovo; across the Western Balkans, institutional silos hinder the effectiveness of climate finance.

Austria’s Green Budgeting Model: A Playbook for Reform?

The workshop leaned heavily on Austria’s experience with Green Budgeting, where public spending is assessed through a sustainability lens. The Austrian model goes beyond mere “green tagging” (categorizing expenditures as climate-positive or negative) and extends to impact assessments, spending reviews, and the integration of climate finance into the broader budget cycle.

Among the more technical discussions was the alignment of Green Budgeting with Green Bonds, a mechanism increasingly used by governments to finance climate projects through dedicated debt instruments. Austria, which issued its first Green Bond in 2022, has since developed one of the most structured green finance reporting systems in Europe.

Lessons from Kyrgyz Republic and Georgia

The workshop also drew insights from international experiences. The World Bank Group presented case studies from Kyrgyz Republic and Georgia, where governments have experimented with climate budget tagging and taxonomy development—tools that classify and assess the climate impact of public expenditures.

Kyrgyz Republic’s approach, for example, started with two pilot ministries, gradually expanding to more comprehensive green budget tagging across government spending. The Georgian model, on the other hand, focuses on linking national climate targets to public finance decisions—an approach that could be replicated in the Western Balkans.

From Workshops to Policy Action

The second day of discussions moved from theory to application. Participants engaged in a Green Budgeting exercise, applying real budget scenarios to assess climate impact. They also mapped out next steps for local implementation, discussing institutional coordination, funding priorities, and policy integration.

The key takeaway? Green Budgeting is not merely an accounting exercise; it is a governance tool that can reshape economic priorities. It requires political backing, technical expertise, and long-term commitment. Green budgeting is not absolutely new and non-existing and the first steps shall be to identify what is in already existing national budgeting processes relate to green budgeting.

For the Western Balkans, the transition to Green Budgeting is not a luxury—it is a necessity. With EU integration on the horizon, aligning public finance with climate policy will not only help these economies meet their Green Agenda commitments but also position them as forward-thinking partners in the global sustainability transition.

A Long Road Ahead

Despite the momentum generated in Prishtina, challenges remain. Political instability, bureaucratic inertia, and competing fiscal demands continue to slow progress. Yet, the workshop marked a critical step forward. The task now is to translate discussions into action, ensuring that sustainability becomes a permanent feature of fiscal policy in the Western Balkans.