Does it pay to be green? The impact of green budgeting on national outcomes

• In Event: Data Centers, Grid Infrastructure, and Energy Investment

Abstract

Several nations have adopted green budgeting (GB) to direct resources toward climate and environmental concerns. As a result of initiatives such as the Paris Collaborative on Green Budgeting (PCGB) and other movements like the Sustainable Development Goals (SDGs), GB has become a key item in policy agendas, encompassing a wide range of activities across sectors and administrative levels. However, there is still little empirical evidence on the effectiveness of GB itself (Wilkinson et al., 2008). Previous works, most of which are case studies, have found limited impacts even in advanced countries due to political constraints and challenges (Fernández, 2018; Jin, 2025; Russel & Benson, 2014). Skeptics doubt whether there are synergies between economy and environment, as the push toward economic growth has come at the expense of environmental concerns (Giordano, 2014). Using difference-in-differences and event study analyses, this paper examines the effects of GB across 63 countries from 2000 to 2024. The results show that GB leads to significant reductions in harmful CH₄ and N₂O emissions. Further, GB increases the number of climate change laws and policies in place, providing evidence to the Porter Hypothesis (Arjomandi et al., 2022; Tran et al., 2025), as GB leads to the strengthening of green governance. Countries that adopt GB may simultaneously pursue broader governance or sustainability reforms which, in turn, contribute to better environmental outcomes, particularly in terms of reducing harmful emissions. GB could not just function as a fiscal tool, but as a policy accelerator. It reflects a shift in the governance mindset, where environmental objectives are more systematically integrated into fiscal planning and public decision-making. Through subgroup analyses, we further explore whether the impact of GB varies according to economic development (per the Global Pecking Order Hypothesis), geographical features (per the Canary in the Coal Mine Hypothesis), and the robustness of existing GB tools.

Authors

• Marjorie De la Cruz, Florida International University
  Non-Presenting Co-Author

• Carloalberto Corica
  Non-Presenting Co-Author

• Yoon-Jung Choi, Florida International University
  Non-Presenting Co-Author

• Milena I Neshkova, Florida International University
  Presenting Author