Climate and Community: Understanding Environmental Change

Subsidies can encourage the development and adoption of renewable energy and energy-efficient technologies. However, subsidies for fossil fuels can create market distortions and impede the transition to a low-carbon economy. Reforming these subsidies, while ensuring a just transition for affected communities, is a critical financial challenge.

Environmental taxes, such as carbon taxes, can be used to internalize the external costs of pollution. By putting a price on carbon emissions, these taxes encourage businesses and consumers to reduce their carbon footprint and shift towards cleaner alternatives.