Public finance for sustainable development

Part 2 of this Handbook provides an introduction to some of the key concepts, approaches and challenges to public finance necessary for sustainable economic development, using examples from both developing and developed economies. There are two primary ways to finance sustainable development designed to support the transition to a low-carbon, smart and efficient economy. The first is to integrate the agenda of sustainable development into a country’s public finance and tax system. Since governments play a key role in mobilising internal revenue by formulating budgets, it is important to emphasise the role of public finance in transitioning to a low-carbon economy. The second is to incentivise private investment in line with the Sustainable Development Goals (SDGs). While the public sector is crucial in freeing up the flow of private finance, governments in developing economies often fail to provide incentives for private investors to facilitate pathways for the implementation of low-carbon investment. Some guidelines for policymakers to design and reform internal revenue mobilisation initiatives considering the context and disruptions caused by the COVID-19 pandemic are also offered. The implications of effective collaboration between government, civil society and the private sector, which in turn can configure and endure sustainable development, are highlighted