Climate change is creating growing environmental, social, and economic challenges for communities. In response, more municipalities are setting climate goals, but achieving them requires more than strategies or plans. Climate priorities must be integrated into everyday decision-making and financial planning.
One practical way to achieve this is through climate budgeting.
What is climate budgeting?
Climate budgeting - a process that helps local governments, such as municipalities, include climate goals in their decisions, policies, and budgets. It ensures that climate actions are planned, funded, monitored, and improved over time.
For example, before funding a new infrastructure or transportation project, a municipality can assess not only its financial cost but also its impact on emissions, climate resilience, and long-term climate goals.
Climate targets are often guided by a carbon budget - the maximum amount of CO₂ that can still be emitted while keeping global warming within a specific limit. Staying within this budget requires emissions to decline steadily, with many municipalities aiming to reach net zero by 2050.
Figure 1. Sample carbon budget and GHG emissions trajectories from 2025 to 2050.
The graph compares projected business-as-usual emissions with a community emissions pathway designed to achieve net zero by 2050. Source: Marlowe et al. (2025), Climate Budgeting Guide: A Report from the Municipal Net-Zero Action Research Partnership (N-ZAP), p. 34.
Rather than focusing only on climate targets, climate budgeting brings together three interconnected elements: climate priorities, financial planning, and governance. Together, these elements help municipalities translate climate commitments into funded actions and ensure accountability throughout the budgeting process.
Figure 2. Key elements of climate budgeting.
Infographic derived from: Marlowe et al. (2025), Climate Budgeting Guide: A Report from the Municipal Net-Zero Action Research Partnership (N-ZAP).
Why should local governments adopt a climate budget?
Many municipalities already have long-term climate goals and action plans. However, the key question is not only what needs to be achieved, but exactly how to achieve it.
Climate budgeting helps translate long-term climate commitments into concrete action by tying climate goals and decision making to the annual finacial budget. It enables the identification of necessary measures and required resources, as well as the assessment of their impact.
This approach helps municipalities:
- Shift from long-term plans to concrete annual actions;
- Coordinate the work of all departments, not just environmental units;
- Consider climate implications prior to making budgetary decisions;
- Regularly evaluate results and adjust future actions as needed.
Figure 3. The seven-step climate budgeting process.
Infographic derived from: Marlowe et al. (2025), Climate Budgeting Guide: A Report from the Municipal Net-Zero Action Research Partnership (N-ZAP).
Step 1 - Build knowledge: Develop an understanding of climate budgeting and gather the necessary climate and financial information.
Step 2 - Assemble team and framework: Establish a cross-departmental team and define the governance structure and implementation plan.
Step 3 - Map and integrate the process: Align climate budgeting with existing planning and budgeting processes.
Step 4 - Establish baselines, targets, and trajectories: Set climate baselines, define targets, and identify the gap to be addressed.
Step 5 - Identify, evaluate, and prioritize measures: Assess climate actions, estimate their impacts and costs, and prioritize investments.
Step 6 - Prepare and adopt the climate budget: Develop the climate budget and integrate it into the municipal budgeting process.
Step 7 - Monitor, adjust, and report: Track implementation, evaluate progress, and continuously improve the approach.
Although climate budgeting helps municipalities integrate climate goals into the decision-making process more effectively, its implementation entails both benefits and certain challenges. Understanding these opportunities and barriers helps in preparing more effectively for successful implementation.
Figure 4. Climate budgeting opportunities and challenges.
Table derived from: Marlowe et al. (2025), Climate Budgeting Guide: A Report from the Municipal Net-Zero Action Research Partnership (N-ZAP).
Climate budgeting is an evolving practice. As municipalities gain experience, the focus can expand beyond emissions reduction to include adaptation, resilience, and climate risk management. Continued progress will depend on strong governance, staff capacity, reliable data, and practical tools that support informed decision-making and long-term planning.
Figure 5. Geographic distribution of the 17 municipalities consulted for the N-ZAP Climate Budgeting Guide.
Source: Marlowe et al. (2025), Climate Budgeting Guide: A Report from the Municipal Net-Zero Action Research Partnership (N-ZAP), p. 17.
While municipalities across Canada are at different stages, eight stand out as leaders and early adopters: Barrie, Calgary, Edmonton, Mississauga, Montréal, Saskatoon, Toronto, and Vancouver. Together, they illustrate how climate budgeting evolves from early planning to fully integrated budgeting practices.
Figure 6. Climate budgeting scope among Canadian municipalities.
Infographic derived from: Marlowe et al. (2025), Climate Budgeting Guide: A Report from the Municipal Net-Zero Action Research Partnership (N-ZAP).
The comparison shows how the scope of climate budgeting currently differs across Canadian municipalities.
The Canadian examples show that most municipalities currently prioritize emissions mitigation, while some are beginning to incorporate adaptation and resilience. Regardless of their starting point, municipalities can use climate budgeting to connect climate commitments with annual financial decisions, strengthen accountability, and build a more coordinated approach over successive budget cycles.
Ready to begin or strengthen your municipality’s climate budgeting journey?
Explore the full N-ZAP Climate Budgeting Guide for a seven-step implementation process, Canadian examples, practical considerations, and additional resources.
This is a summary of the Climate Budgeting Guide from the Municipal Net-Zero Action Research Partnership.
Citation
Marlowe, J., Meaney, M., Dunsky Energy + Climate Advisors, ElAlfy, A., Clarke, A., Telfer, L., Gross, A., Ma, K., Talbot, D., Ordonez-Ponce, E., MacDonald, A., & Zhou, Y. (2025). Climate Budgeting Guide: A Report from the Municipal Net-Zero Action Research Partnership (N-ZAP). Federation of Canadian Municipalities, ICLEI Canada, & University of Waterloo.