The Role of the Ministry of Finance in Environmental Policy

Finance ministries across the globe have become very active in environmental policy in recent years. This is because climate risks are often framed as market failures and, therefore, should be corrected using economic tools such as emission trading or carbon tax (e.g., Nordhaus 2014). Not all finance ministries are equally enthusiastic about promoting environmental policy. Climate change risks involve much uncertainty. The expenditures are unknown and require long-term planning. Finance ministries dislike these aspects because they reduce their ability to control and predict expenditure (Hood et al., 2023). Consequently, finance ministries often oppose environmental programs because they entail enduring economic expenditures (Craig, 2020). Despite the important role of finance ministries in environmental policy, research on this subject remains limited, focusing primarily on specific economic tools or policies. The suggested paper aims to describe and explain the role of ministries of finance in environmental policy. The paper is based on the case of Israel from 2019 to 2025. The paper draws on a variety of data sources, including cabinet decisions, parliamentary committee meetings, reports of the state comptroller, and in-depth interviews with officials from the Ministry of Finance and the Ministry of the Environment. Preliminary findings suggest that the Ministry of Finance delays and often impedes the implementation of a broad environmental protection policy. Its position is often based on a different understanding of environmental needs and priorities than that of the Ministry of the Environment. The findings have implications for our understanding of environmental policy and the power relations between ministries.