Policy Update
Tanvi Nerurkar
Background
Indian cities are increasingly at the forefront of the climate crisis. Rapid urbanisation, growing populations, and rising infrastructure demands have heightened exposure to challenges such as heatwaves, urban flooding, poor air quality, water stress, and pressure on essential services. These impacts affect public health, economic productivity, and overall quality of life. With India’s urban population projected to reach nearly 600 million by 2030, strengthening urban resilience has become a critical development priority.
Urban growth is simultaneously increasing pressure on housing, transport, water supply, sanitation, and energy systems, while climate change is amplifying the frequency and severity of extreme weather events. Heat stress, flooding, and water scarcity impose significant social and economic costs, placing additional strain on already resource-constrained city governments.
To address these challenges, the Government of India has launched initiatives such as the Smart Cities Mission, AMRUT, the National Clean Air Programme (NCAP), and various Finance Commission grants to promote sustainable and resilient urban development. Several cities have also prepared Climate Action Plans. However, climate initiatives often remain disconnected from municipal budgeting processes, making it difficult to track investments, assess outcomes, and prioritise future actions.
In this context, climate budgeting is emerging as an important tool for Urban Local Bodies (ULBs). It integrates climate mitigation, adaptation, and resilience objectives into public financial planning and expenditure management, ensuring that climate priorities become part of routine governance and investment decisions. By identifying and tracking climate-related expenditures, climate budgeting improves transparency, accountability, and resource allocation.
Globally, cities such as Oslo, London, and Paris have demonstrated the value of climate budgeting in aligning financial planning with climate goals. In India, the Brihanmumbai Municipal Corporation (BMC) has pioneered one of the country’s first municipal climate budgets, signalling a shift towards climate-responsive urban finance. As climate risks continue to intensify, climate budgeting offers a practical pathway for cities to strengthen resilience, improve governance, and support sustainable urban development.
Functioning
Climate budgeting gives city governments a way to classify, track, and match public spending with climate goals. It adds climate concerns to regular budgets instead of creating separate environmental budgets in which expenses are linked to climate action across different sectors. City departments sort projects and investments based on whether they help with climate mitigation, adaptation, or resilience. Spending on flood management, sustainable transport, renewable energy, waste management, urban greening, energy-efficient buildings, and water conservation can all count as climate-related.
The next step is to include climate priorities in the city’s annual budgeting and planning. Climate budgeting encourages departments to consider projects not only for their economic or infrastructure value, but also for their climate impact and resilience. This approach helps departments like planning, transport, public health, water, and environment work together.
A key part of climate budgeting is making climate budget statements and systems to track spending. These tools help cities see how much of their budget goes to climate activities and check if these investments are effective. Using climate indicators and performance measures also makes city governance more transparent and accountable.
Climate budgeting also helps cities connect with national urban development programs and funding sources. Programs like AMRUT, Smart Cities Mission, NCAP, and grants from the 15th Finance Commission already support projects in drainage, air quality, waste, green spaces, and sustainable services. Climate budgeting provides a way to organise and track these investments within a single climate-focused system.
Globally, the C40 Cities Climate Budgeting Programme is a leading framework that helps cities include climate goals in their financial planning. Indian cities are learning from international examples to develop climate budgeting models tailored to their needs.
Performance and Current Progress
The Brihanmumbai Municipal Corporation (BMC) took a major step in climate budgeting by launching one of India’s first city climate budgets for 2024–25. This is an important milestone in making climate-focused public finance a regular part of city management.
According to BMC’s climate budget report, about ₹10,224 crore was set aside for climate-related spending, making up nearly 32.18 per cent of its total capital spending. The budget included areas such as flood and water management, waste management, biodiversity, and air quality improvement.
Department-wise percentage of estimated cost of project works in BMC
(Source: Budget Estimates of BMC, 2020-21)
A large share of the budget went to flood resilience and water management, reflecting Mumbai’s high risk from heavy rain and coastal flooding. Other funds supported waste management, urban greening, and improving environmental quality. The climate budget also aligned its spending priorities with the Mumbai Climate Action Plan (MCAP), strengthening the link between planning and spending.
Mumbai worked with international climate groups, such as C40 Cities, and received support from organisations such as WRI India to develop this initiative. This example shows how city governments can make climate concerns part of regular, rather than treating them as separate environmental issues.
Across India, new policies indicate that climate-linked urban finance is receiving greater attention. The 15th Finance Commission now provides special grants to large cities for sanitation, waste management, and air quality. Investments from the Smart Cities Mission in digital systems have also improved city data, making it easier to track and monitor climate spending.
Even with these advances, climate budgeting is still new in India and not widely used by cities. Most Urban Local Bodies still face challenges, including limited financial independence, insufficient technical skills, and weak data systems needed for climate-focused budgeting.
Impact
Climate budgeting can significantly change how cities are integrating by making climate a part of financial and administrative decisions. One main benefit of climate budgeting is better financial transparency and accountability. By clearly showing climate-related spending, cities make it easier for everyone to see how much is invested in climate action. This openness helps policymakers, citizens, and investors assess how committed cities are to climate resilience.
Climate budgeting brings climate action into all city departments, not just environmental ones. It builds resilience into transport, water, housing, waste, and infrastructure planning. This teamwork matters because climate risks affect many parts of city management.
Another major impact is stronger urban resilience. Climate budgeting helps cities focus on projects like flood control, cooling systems, green spaces, sustainable transport, and water conservation. These efforts reduce environmental risks and improve public health, the economy, and quality of life.
From a financial perspective, climate budgeting can help cities attract more climate funding and green investments. Clear climate spending plans build investor trust and could lead to more green bonds, blended finance, and international climate funding for cities.
Climate budgeting also helps cities align with India’s broader sustainability goals, such as the SDGs, NDCs, and the goal of net-zero emissions by 2070. By including climate in city finance, cities can better support national climate and development targets.
Emerging Issues and Challenges
Despite its promise, climate budgeting faces many institutional, technical, and financial challenges in Indian cities. A challenge is the lack of a standardised national framework for municipal climate budgeting. Currently, cities lack a consistent way to classify and track climate-related spending, leading to inconsistent reporting and evaluation. In addition, many municipal finance departments have limited expertise in climate finance, environmental accounting, emissions assessment, and climate data analysis. These departments often operate with few staff and limited technological resources, making it difficult to institutionalise climate-responsive budgeting.
Fragmented city governance is another issue. Climate action plans are often created separately from city budgets, so planning and finance departments do not work closely together. As a result, climate priorities are often left out of annual spending and purchasing decisions.
Identified gaps and challenges for implementing Climate budgeting
(Graphic Source: Author)
Financial constraints still limit city climate action. Most Indian Urban Local Bodies depend heavily on state and central government funds because they do not raise enough money on their own. This lack of financial independence makes it difficult for them to invest in long-term climate and resilience projects. Data gaps and monitoring issues are also major concerns. Climate budgeting requires strong data systems to track spending, emissions reductions, resilience, and environmental results. However, many cities lack digital systems to monitor climate spending and outcomes.
Implementation problems also reduce the impact of climate grants and programs. Many cities struggle to use funds efficiently, complete projects on time, and coordinate between departments. Without better management and greater capacity, climate budgeting could become just a symbolic step rather than real change.
Way Forward
For climate budgeting to succeed in Indian cities, there must be stronger institutional reforms and better policy support at all levels.
First, cities with over one million people should make climate budget statements a regular part of their operations. Requiring annual reports on climate spending can make city governance more transparent and accountable.
Second, the Government of India should establish a national standard framework for climate budgeting in cities. A common way to classify spending on mitigation, adaptation, and resilience will make it easier to compare and maintain consistency across cities.
Capacity building is also essential. Municipal officials, planners, engineers, accountants, and finance teams need targeted training in climate finance, environmental accounting, emissions tracking, and resilience planning. City governments should organise regular training workshops in partnership with national institutes such as the National Institute of Urban Affairs (NIUA), international organisations such as C40 Cities and WRI India, and universities that offer courses in climate finance and urban sustainability. Exchange programs and exposure visits with cities that have successfully implemented climate budgeting, such as Oslo or Mumbai, can also build practical knowledge.
Additionally, developing online training modules and certification programs will ensure broad and flexible access for municipal staff. Municipalities should establish dedicated climate finance teams, supported by external advisors. Urban development schemes should incorporate mandatory climate-related performance indicators tied to resilience, emissions reduction, and sustainable infrastructure investments. These concrete actions will help cities sustainably build internal expertise and institutionalise climate budgeting practices.
Cities should use digital tools from the Smart Cities Mission for climate budgeting. Data platforms, public dashboards, GIS, and spending trackers can improve monitoring and transparency. Cities should also explore new ways to fund climate action, such as green bonds, blended finance, and partnerships with international climate funds. Greater access to climate finance will help cities invest in resilient infrastructure and low-carbon systems.
As demonstrated by successful implementation in countries such as the Philippines, Colombia, and Peru, it is necessary to develop a transparent methodology to determine what qualifies as climate finance, as well as how to classify, tag, and report the data (C40 Cities, 2021; C40 Climate Budgeting Programme, 2025).
Finally, via participatory governance i.e. involving people in decision-making should be a key part of climate budgeting. Engaging citizens, holding community meetings, and sharing information publicly can make cities more accountable and help climate investments address the needs of vulnerable groups.
Conclusion
Indian cities are increasingly recognising climate change as not only an environmental challenge but also a structural challenge. Indian cities now see climate change as both an environmental and a city management challenge. While climate action plans and sustainability efforts are growing, their real impact depends on how well climate priorities are built into city financial systems and fiscal implementation. By embedding climate considerations into municipal budgeting, expenditure tracking, and governance systems, cities can progress toward more accountable, resilient, and sustainable urban development pathways.
Programs like Mumbai’s Climate Budget show that city governance in India is slowly but steadily changing. To expand climate budgeting across more cities, there will need to be greater capacity-building, standardised rules, fiscal reforms, and better teamwork between departments.
As climate risks increase in Indian cities, the future of sustainable city management will depend not just on planning climate action, but also on funding, tracking, and integrating it into city systems. Climate budgeting is more than an environmental reform; it is a major change in how cities manage their finances for the future.
References
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2. C40 Cities. (n.d.). Climate budgeting programme. C40 Cities. Retrieved May 30, 2026, from https://www.c40.org
3. Baliga, L. (2024, March 14). BMC publishes first-ever climate budget report with ₹10k crore provision. Hindustan Times. https://www.hindustantimes.com
4. City of Oslo. (2024). Climate budget 2024. Oslo Municipality. https://www.oslo.kommune.no
5. Ministry of Housing and Urban Affairs. (n.d.). Atal Mission for Rejuvenation and Urban Transformation (AMRUT). Government of India. https://amrut.gov.in
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8. Mumbai Climate Action Plan. (2022). Mumbai Climate Action Plan. Municipal Corporation of Greater Mumbai. https://www.mcgm.gov.in
9. Press Information Bureau. (n.d.). Press releases and official statements on climate action and urban development. Government of India. https://pib.gov.in
10. The Fifteenth Finance Commission. (2021). Report for 2021–2026. Government of India. https://fincomindia.nic.in
11. UN-Habitat. (n.d.). Climate change reports. United Nations Human Settlements Programme. https://unhabitat.org
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13. World Resources Institute India. (n.d.). Climate governance and urban sustainability resources. World Resources Institute India. https://wri-india.org
About the Contributor
Tanvi Nerurkar is currently working as a Research & Editorial Intern at IMPRI. She holds a Bachelor’s degree in Architecture from VESCOA, University of Mumbai and is presently pursuing a Master’s in Urban Management at CEPT University, where she explores cities through research-driven policy approaches, adaptive governance frameworks, and sustainable development initiatives. Her objective is to contribute implementation-oriented policy research that supports the efficient functioning of cities and creates meaningful value for society at large.
Acknowledgement
The author extends her sincere gratitude to Ms Paridhi, Ameya Satam, and the IMPRI team for their invaluable guidance throughout the process.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
