Eco Budget

Editor's Notes

• #2 ecoBUDGET Introduction for Mayors and Councillors
• #4 The full cost of municipal action Decision makers in local government have an ongoing challenge: how to provide services to citizens with limited resources. Whether drilling a new well to provide drinking water, renewing a road surface, buying new buses or issuing driving licences, municipal services require resources. But municipal services require both financial and natural resources. New trucks cost clean air in that their operation burns oxygen, carbon dioxide and creates dust. A new road costs biodiversity in that green space is converted into asphalt and habitats are cut through. At the same time, a new road produces noise, i.e. it costs tranquillity. Similarly, new housing areas impose costs in terms of biodiversity, clean air, and fresh water since the additional inhabitants will convert more fresh water into sewage. Note: municipal action always has both financial and natural cost implications. >> For too long, we have been of the opinion that there were only two types of capital for development – financial and human capital, the latter being knowledge, skills, creativity and education. We have been living in illusion that there was nothing like environmental or natural capital, and that we could use environment, the environmental capital free of charge. Only now, we can clearly see that this idea is no longer carrying and not allowing for economic development processes, too. We have overspent more than 60 percent of the ecosystem services available, as we luxuriously live based on economic growth without reinvesting in the environmental capital stock. << Klaus Töpfer - Immediate past Executive Director, UNEP
• #5 Managing Expenditure Through a Budget How do decision makers manage financial resources? Like all public institutions, local governments usually manage their financial resources through an annual budget. Financial budgeting systems are well established, accepted, and routinely applied by the municipal administration and the decision making body. Every year, municipal councils set a framework for financial spending through a budget. The budget allocates financial resources for various purposes and establishes maximum expenditure levels for specific purposes. Through prudent management of the budget, decision makers determine the financial health of the local authority; they allow for investment and incur or repay debts. Throughout the financial year, the administration must ensure that expenditure is kept within the approved budget. Significant excess of expenditure requires prior approval by the Council. Financial control is exercised through mechanisms such as accounting, monitoring budgets and auditing or financial and budgetary reporting. At the conclusion of the year, a balance sheet (statement of financial position) gives a snapshot of business at that time listing assets and liabilities of the local government - also referred to as the local government’s equity or net worth. Note: Local government leaders bear responsibility for all resources (i.e. both monetary and natural), for debt, for property, for assets management >> As we can manage our artificial resource - money - in terms of a budget, why shouldn’t we do the same with natural resources? << Konrad Otto-Zimmermann - Secretary General, ICLEI
• #6 ecoBUDGET: Towards an Integrated Managementof all Municipal Resources While all resources should be managed soundly, local budgeting usually addresses only financial resources. ecoBUDGET is an environmental management system uniquely designed with and for local governments. It allows municipalities to manage natural resources as efficiently as they manage financial resources. The traditional budgeting accounting system is complemented by an environmental budget, in which natural resources are measured instead of money. ecoBUDGET aims to plan, control, monitor, report on, and evaluate the consumption of natural resources (such as climate stability, air quality, land, water, raw materials, and biodiversity) for priority issues. The ultimate aim is to keep environmental spending within limits set in an environmental “Master Budget.” The Master Budget identifies indicators for short and long-term environmental – (and potentially social) targets orientated to the sustainable management of environmental resources. Once approved by the Council, the targets become politically binding for the entire organization. Political decision makers and senior urban managers are involved systematically in the ecoBUDGET cycle, allowing political steering in the use of environmental resources. ecoBUDGET embraces all environmental resources, i.e. the impact of delivering municipal services and environmental spending by the entire community (local government, industry, households, education institutions, transport, etc). The ecoBUDGET cycle mirrors the three phases of the municipal financial budgeting cycle including budget planning (i.e. the preparation of an environmental budget), budget spending (i.e. the implementation of planned measures to meet the budget), and budget balancing (i.e. balancing the annual environmental accounts). These are familiar to decision makers so that environmental budgeting becomes as much a part of local authority activities as financial budgeting. At the end of the budgetary year a Budget Balance presents a statement of the environmental situation and the degree to which the previous year’s Master Budget was met. A complementary set of indicators graphically displays progress towards short and long-term targets. Two more reports, the Statement of Environmental Assets and the Sustainability Analysis, supplement the municipality’s snapshot of its level of sustainability. >> We all know that there is a massive destruction of our environment. Our forest cover is thinning and we are experiencing scarcity of some natural resources. Knowing that it can help us protect the environment, I welcome ecoBUDGET even if it was my political opponent who started its implementation. << Luna Piezas - Lord Mayor, Tubigon, Philippines
• #7 Why manage environmental resources through a budget? The regime of the annual cycle regularly places environmental concerns on the political agenda and provides the opportunity for decision makers to consider the implications of policy or of any decision for resources. Budget planning emphasises issues of highest priority. Date-specific targets in the environmental budget set goals for environmental quality and resource use when delivering services. Monitoring and accounting of the full cost of municipal activities help to keep control over the impact of decisions and actions during the budget period. Thus, accounting aids an understanding of the cause-effect relationship of political decision making in relation to natural resources. How much land does it cost to build a road? How much clean air or tranquillity is lost by using that road? The balance report serves as a basis for decisions on targets and measures for the following budget period. In effect, environmental budgeting supports the sustainability performance of local governments and attention to natural resources and environmental quality is sustained. Resource management becomes highly integrated, effective and efficient. Importantly, ecoBudget, through its continuous feedback loop of setting targets, implementing action and evaluating performance supports accountability of political decision making. >> Nowadays, there are two ways to view development. The first considers monetary profit as being the only criterion to measure success. The second ensures that the impassable thresholds of workers’ dignity are not violated, that natural resources are conserved and that human health is not jeopardised. I believe that ecoBUDGET is instrumental for cities that strive to pursue the second form of development. << Sergio Cofferati - Lord Mayor of Bologna (Italy)
• #8 6 Good Reasons for ecoBudgeting 1st Advantage: Mayors and CEOs become true resource managers Budgeting supports mayors and managers to optimise the use of local government resources when deciding how to deliver services. Complementing financial management through an annual environmental budgeting cycle integrates natural resources in municipal resource management. Thus, it helps mayors and chief executive officers to become true municipal resource managers, like the Mayor of Tubigon, Philippines, and the Head of Planning Department , Växjö, Sweden. 2nd Advantage: Implementing the UN Millennium Development Goals Millennium Development Goal 7 calls for integrated resource management by referring to “managing and protecting the environment thus helping to reach the other Millennium Development Goals”. With ecoBUDGET, integrated environmental and resource management is introduced, notably implementing MDG 7. Experiences with ecoBUDGET in India and Philippines have proved the potential to provide goods and services, while protecting environmental resources and supporting poverty alleviation. 3rd Advantage: Environmental resources are managed in an integrated way ecoBudget is a cross-cutting management instrument affecting a wide range of natural resources and involving relevant stakeholders from local authorities (management, administrative and political) as well as the community (industries, households, traffic, etc.), national and global resource imperatives. 4th Advantage: Unwavering attention to nature & environment is sustained With its recurring planning, implementation and reporting routine, ecoBudget can sustain a longer (indefinite) peak time of political attention to natural resources. Ecological sustainability is sustained and is no longer subject to wavering consideration. 5th Advantage: Improved financial credibility ecoBudget provides for targeted implementation of measures and projects and assessment of resource efficiency. Accuracy and transparency of the ecoBudget documentation (including environmental budget, accounts and balance) allow for proving efficient and effective use of environmental investment in favour of ecological sustainability as requested by many (international) donor organisations. As a result, higher ratings can be achieved in rankings of banks and insurance companies as well as when bidding for project funding and grants. 6th Advantage: Local Capacity Development ecoBudget acts as a framework instrument with which local governments can manage their communities based on the needs and principles of ecological sustainable development. Firstly, it creates an enabling environment of appropriate policies, procedures and incentive structures that are needed for integrated environmental management. Secondly, it strengthens the capacity of institutions to implement integrated environmental management approaches through procedural discipline, training and intellectual support. Finally, it serves as a basis for activities that simultaneously address local, national, and global environmental issues within the context of sustainable development. >> Reduction in urban poverty, resource friendly development, good governance and enhanced administrative and management performance capacity are some of the basic elements of this (ecoBUDGET) process. << Mr. Kanna Lakshminarayana - Honorable Minister of Transport for Andhra Pradesh, India
• #9 The Phases of the ecoBUDGET The ecoBUDGET cycle consists of three phases similar to the municipal financial budgeting cycle. Each phase is completed by performing three steps. Phase 1 – Budget planning and approval Phase 2 – Budget implementation Phase 3 – Budget balancing
• #10 1. Budget planning and approval Based on the current environmental situation in the municipality, departments identify the natural resources they require for budget planning, identify priorities, set targets and prepare the environmental master budget which is presented to the Council for approval. Set up Administrative organisation of the process is key. Vital structures have to be set up or reviewed. A cross-departmental team should have the overall responsibility of managing and executing ecoBudget. The reporting structure and framework, as well as frameworks for managerial directives and internal audits, need to be developed. Preparation A Preliminary Report enables budget estimates to be prepared. It records the expected changes both in environmental consumption and within the political and legal framework and serves as the basis for the identification of priority resources, estimates of resource consumption and evaluation by the Council and the public. The Preliminary Report also identifies the need to prepare the (environmental) Master Budget and the steering document that politicians will refer to. The Master Budget contains: (i) The priority natural resources to be protected or effectively managed by the local government. Physical units using (environmental) indicators represent these resources. (ii) Strategic long-term targets for these resources to be accomplished in a given period, formulated on the basis of political decisions and orientated towards the principles of sustainable development. (iii) The spending framework (i.e. budget limits) within the forthcoming environmental budgetary year, represented by the individual indicators and operational short-term targets as an aid to achieving the long-term goals. Approval The Master Budget is approved by resolution of the Council. Council discussion, debate, and opinion forming in preparation for a political decision are central aspects of the procedure. Existing problems and contradictions are outlined in the text. The draft document should be made publicly available, e.g. through Local Agenda 21 committees, or local media. Political approval makes the environmental budget binding for the local government and all participating actors. This way, the budget becomes an integral and compulsory aspect of decision-making with targets and budgets being considered in all decisions, planning processes and actions. What are the main aims of ecoBudget? - Build a comprehensive political management approach to local sustainability. - Present the state of the environment to politicians and the public. - Enable decision makers and the administration to set priorities for environmental protection. - Limit the amount of pollution and use of natural resources in the community. - Plan and control the consumption of environmental goods throughout the budgeting period. - Integrate instruments for sustainable management of all resources, financial, human and natural. - Perform a periodical budgeting process for natural resources and environmental quality.
• #11 2. Budget implementation Following Council approval, programmes and measures are undertaken to meet the environmental targets. The implementation measures and compliance with the targets are monitored and accounted for. Implementation of measures Target accomplishment is no coincidence. In fact, conscious planning and management of measures is key. What measures and projects should be implemented in the forthcoming budget year? What actions should specifically be realised to support target achievement? And what are their environmental costs and benefits? In addition, numerous activities may already be in place without their impacts on the environment having been considered. And then, unexpected events may occur suggesting a reconsideration of priorities or spending limits. All this impacts on the local government’s environmental spending framework and should inform decision-making during the budget implementation period. Monitoring and accounting At the beginning of the budget year, an account is "opened" for each for each indicator of the environmental budget. After the accounts are established, it is crucial to regularly and frequently monitor impacts and keep track of data. Up-to-date bookkeeping of the accounts will show whether the components of the environmental budget are being adhered to. The importance of book-keeping must not be underestimated. It is only sound and structured monitoring and accounting that provides a basis for taking stock and evaluating achievements. Expense control, dealing with unbudgeted or excessive expenditure Up-to-date bookkeeping also provides information for decision-makers regarding the status of budget implementation and the environmental situation. Interim reporting to the Council and continuous monitoring allows for corrective measures when it seems unlikely that a target will be achieved. For example, the ecoBudget manager of Växjö, Sweden, presents a report to the Council every six months: this allows for the possibility that a target might be missed, dealing with events not budgeted for, and keeping politicians on top of budget implementation. Particularly challenging are unexpected events that occur: an investor interested in developing a business district or new settlement, an opportunity for financing an infrastructure project, or (on the down-side) an environmental disaster – flood, storm, fire, drought would change the environmental situation radically. Political consideration would supplement the master budget in the case of unexpected events. What are the activities implemented in ecoBudget? It is basically all events, measures, actions and projects planned within the budget period that have an impact on environmental resources. See the example of actions to achieve a good built environment in Tubigon, Philippines. - Launched the Municipal Ecological Solid Waste Management Programme - Hosted the Municipal Ecological Solid Waste Management Programme Poster & Slogan Making Contest - Carried out House-to-House Campaign on Household Waste Sorting
• #12 3. Budget balancing At the end of the budget year, just as with financial budgeting, a statement of the environmental accounts is prepared – the (environmental) Budget Balance. Budget Balance – a Statement of the Environmental Situation The Budget Balance reviews the Council’s environmental performance. This statement of environmental accounts shows whether resource consumption was kept within budgetary limits and what environmental quality has been achieved due to measures taken by the Council and other actors involved. The extent to which the municipality’s short and long-term targets have been met is displayed graphically. Decision makers and the public should be easily able to comprehend the results (both successes and failures) and identify what priorities should be addressed in the forthcoming budgeting period. Report and debate The results of the concluding budget period are fed back to the political decision-maker through environmental budget balance and a report presenting achievements and performance of policies and programmes. Two other documents supplement the municipality’s snapshot of its level of sustainability: the Statement of Environmental Assets takes stock of the amount of natural capital available to the municipality – just like a ‘savings book’. The Sustainability Analysis presents an overview of how efficiently the municipality has been using natural resources when delivering services to the citizens. Budget Balance and report is discussed by council members, ratified and presented to the public. Accountability is transferred to the Council. The conclusions drawn (with regard of priorities, targets, actions needed, process and organisation) influence the next budgeting cycle. The preparation process for the next ecoBudget begins.
• #13 ecoBUDGET in practice Växjö, Sweden: Becoming Fossil Fuel Free With its history of environmental action and long-term objective to become “Fossil Fuel Free,” the Municipality of Växjö was interested in adopting a structured method of implementing its environmental goals and monitoring the impact of its environmental initiatives. Växjö has introduced ecoBUDGET and systematically combined it with its financial accounting system. Nowadays, discussions about the city’s financial budget and ecoBUDGET take place during the same meetings and appear in the same financial documents. In May 2006, Växjö’s Councillors decided to replace the city’s Local Agenda 21 strategy and environmental policy with a new Environmental Programme that would include only measurable, long-term targets covering three areas: Living Life (focusing on consumption and waste issues), Our Nature (focusing on water and conservation issues), and Fossil Fuel Free Växjö (focusing on transportation and energy issues). ecoBUDGET is used to ensure that the programme goals are monitored, reviewed and achieved. >> The complete integration of the monetary and environmental budgets has given environmental issues and initiatives a higher status and resulted in greater environmental awareness among municipal councillors. As a result, Växjö is able to generate and implement innovative projects such as the construction of highly energy efficient buildings to implement their ecoBUDGET and meet their ambitious targets. << Ms Anna Karin Unger - ecoBUDGET Manager, Växjö, Sweden Guntur, India: Air Quality Improvement supports Local Economy Air pollution is one of the growing environmental problems in the city of Guntur. One of the main reasons for this increasing menace was traffic congestion at important junctions caused by hawkers selling their wares especially during peak hours. Identification of, the provision of identity cards and proper designated places for hawkers were made indicators of reducing air pollution. The GMC has completed the survey and identification of 1732 hawkers in the city. Initially, only 450 of them had identity cards. With the implementation of the budget, 1395 have now been issued identity cards. The city has been demarcated 500 Green Vending Zones, 10 Amber Vending Zones and 12 Red Vending Zones. Of the hawkers given identity cards, 950 have been allotted spaces in green and amber zones whereas the rest can roam around the city to sell their wares. Nowadays, the Council monitors the use of water to ensure quality and prevent wastage., Guntur has a strong solid waste management system – even using hawkers to collect garbage at the household level. This system has a strong sustainability component in that it has enabled Guntur to reach more households, while the hawkers also earn extra income from garbage collection. It is a win-win for the local government and the hawkers. Tubigon, Philippines: Implementing the Millenium Development Goals – Environment and Poverty (MDG) The foundation of the economy of Bohol Province –in which Tubigon is located - is agriculture, fishery and tourism. Consequently, the viability of the municipality’s (and the province’s) economy depends on the health of its natural resources: fertile soil, clean water, high biodiversity, adequate forest cover, and healthy mangroves, seagrass, and coral reefs. The poor in the province’s rural and urban areas are particularly dependent on the province’s natural resources. As well as addressing environmental issues, Tubigon has found that ecoBudget can be used to address poverty alleviation and the MDGs. As a result, Tubigon’s ecoBUDGET process is based on the strong participation of community groups and barangays (communes). Tubigon relies on eco-cultural tourism and agro-industry as primary economic drivers. The mangrove area is one of the main tourist attractions. ecoBudget helps protect the mangrove area. To this end, it can contribute to the economic growth in Tubigon. The impact goes beyond protecting the livelihood of small farmers and fisherfolk who rely on natural resources for their daily needs. It also has a very significant contribution to eco-tourism. >> Before, we did not know that we lost up to 60% of our water in transit due to leaks in the water pipes. Through the monitoring system introduced by ecoBUDGET, we were able to discover this huge loss. We are now working on bringing down the amount of losses to the minimum. By preventing the loss of water in transit, we can reduce the cost of production as well as conserve water << Noel Mendana - ecoBUDGET Manager, Tubigon, Philippines Bologna, Italy: Sustainable City Development RespectsResource Scarcety The City of Bologna has adopted ecoBUDGET as the core environmental management system for its institutional activities. It explores successful practices, factors, and conditions to support good governance for sustainable development. The first goal was to use ecoBUDGET as a management and communication instrument within the city’s Local Agenda 21 plan. However, Bologna found that there are multiple benefits to using the ecoBUDGET process. All major decisions regarding resource and territory management are assessed for their suitability against Master Budget targets. A key element of Bologna’s implementation of ecoBUDGET is in spatial and urban planning and using it for the execution of strategic environmental assessment. Building ecoBUDGET indicators and targets into planning processes and systems allows for early action that is generally more cost-effective than responding to changes as they occur. This also includes the ability to to clearly communicate the impact of different planning scenarios. ecoBUDGET is supporting the dissemination of the environmental impact of various scenarios defined by a structural plan as required by Italian legislation. In this way, ecoBUDGET has involve the municipality as a whole. Unique to Bologna is the application of so-called “mayoral targets” valid for one legislative term. In this way the city government aims to bind its political programme to a transparent and voluntary set of quantifiable targets. >> ecoBUDGET has helped Bologna to more effectively coordinate municipal initiatives and consequently provided a better structure for these initiatives since it is easier to see links and gaps between and among them. The process of setting targets and then carefully monitoring progress towards them has also been a valuable exercise for Bologna. << Ms Raffaela Guêze - ecoBUDGET Manager, Bologna, Italy
• #14 Responding to the climate change challenge We are experiencing more frequent and more extreme examples of climate change in our daily lives, e.g. rising sea levels, heat waves, floods, droughts, storms, landslides and forest fires. The economic and social consequences of these climatic events are forcing political leaders to consider ambitious and radical targets. However, targets responding to the challenge of climate change invariably need to be realised at the local level. Local governments have a huge potential to fight climate change by developing and implementing climate mitigation and adaptation strategies and by involving their citizens. ecoBUDGET is a tool that could assist local governments to combat climate change. There is need for a highly integrated approach. Given rapidly changing framework conditions, the traditional long and medium term planning approaches appear insufficient to tackle the problem. Instead, a cyclical management approach is suggested as a more favourable option as it allows timely corrections of measures when new information and data suggest action. By implementing ecoBUDGET, local governments will be able to restructure their entire decision making chain based on an integrated management and governance approach. Working with ecoBUDGET will develop capacities to respond to the challenge of climate change. Most importantly, within ecoBUDGET local political and administrative decision-making will focus on issues of strategic importance and environmental aspects with significant potential regarding climate change response (such as land use planning, energy planning, traffic planning). Environmental governance at the municipal level is a fundamentally complex process. Complexity, and lack of capacity often inhibit the formal adoption, design, implementation and maintenance of environmental or sustainability programmes. Local authorities need a simple, yet logical and familiar tool and approach to direct and drive environmental or sustainability programmes. ecoBUDGET is just that, it is: - simple when compared to more complex tools that require extensive document wars to implement; - logical as it is based on the classical plan, do check, improvement and reporting loops that underpin most management models; - familiar, as the process, approach and terminologies mimic financial budget and management processes that are entrenched practices in many city administrations, and - flexible, as it is process based, allowing city administrations to identify and address the environmental issues or challenges that are material to them. Prof. Johan Nel, Center for Environmental Management, Potchefstroom, South Africa.
• #15 Eco-Budgeting is Participatory Budgeting Citizen and stakeholder participation is the key to success. In fact, strong community involvement invariably leads to good results in accomplishing targets. It is an advantage to engage community and stakeholder groups from the start and to continue to engage them throughout the entire ecoBUDGET cycle. It is, however, the ecoBUDGET cycle that offers an ideal platform for improved local environmental governance based on community engagement in setting targets, agreeing on activities, implementing measures and evaluating progress towards municipal sustainability. Improved participation and communication between local government, stakeholder groups and the community have been recognised by all municipalities involved in ecoBUDGETING. How the public gets involved Community and stakeholder groups can literally be involved at each phase of the ecoBudget. However, it is important to note, that final power to approve priorities, targets, actions and resources used rests with the Council. ecoBudget managers usually work with different stakeholder and citizen groups to implement planned measures. Both informal meetings and community assemblies are held to coordinate citizen involvement. Tubigon, Philippines kicked off its first ecoBUDGET cycle with 15 local administrators as well as numerous representatives from the private and non-governmental sector. The Municipal Development Council short-listed environmental issues and concerns as well as looking at political priorities and applicability having regard to the capacity of the stakeholders to implement actions. Several dissemination events took place to keep the public involved and informed about the development of the draft Master Budget. With its strong support for community involvement, ecoBUDGET can be seen as transferring the idea of Participatory Budgeting, as originated by Porto Allegre, to environmental governance. Through its periodical routines, ecoBUDGET also clearly supports the Local Agenda 21 process. >> The crucial cause for the success of the ecoBUDGET programme in Guntur was the strong political commitment and the selection of issues that are of relevance to the people of the city. << Mr. Kanna Lakshminarayana - Honorable Minister of Transport for Andhra Pradesh, India >> ecoBUDGET is aimed at encouraging local governments and civil society to work together in introducing improved methods of development and environmental planning, through the introduction of improved systems for environmental management. << Mr Alistair MacDonald - Head of the Delegation of the European Commission, Manila, Philippines