Policy Tools That Support Transition Into a Green Economy

This briefing describes how fiscal policy instruments—such as taxes, subsidies, and market mechanisms—can incentivize sustainable actions and discourage unsustainable practices. It highlights Germany's revenue-neutral motor vehicle tax based on CO2 emissions and discusses the applicability of similar province-specific fiscal mechanisms within the Canadian context, specifically for Manitoba.

• Fiscal policy instruments, including taxation, subsidies, fees, levies, and market mechanisms like emissions trading, are used to incentivize green investments and create disincentives for unsustainable practices, such as burning fossil fuels.
• Germany implemented a revenue-neutral motor vehicle tax reform in 2008 based on CO2 emissions and other pollutants. As of January 2012, vehicles emitting less than 110 gCO2e/km are tax exempt, while those exceeding this limit are taxed €20 for every additional 10 gCO2e/km.
• In Canada, various jurisdictions have used fiscal mechanisms to reduce emissions, such as Quebec's fuel tax, Manitoba's coal tax, and Ontario's feed-in tariff program.
• The implementation of fiscal instruments requires careful consideration of social and economic impacts, particularly regarding jobs and low-income residents, to avoid negative side effects.
• Revenues generated from fiscal instruments in Canadian jurisdictions are often recycled to support the green transition, such as Manitoba using coal tax revenue for biomass development, or used for low-income assistance and tax cuts.

APA

International Institute for Sustainable Development (2013). Policy Tools That Support Transition Into a Green Economy. https://www.iisd.org/system/files/publications/policy-tools-transition-green-economy-fiscal-instruments.pdf

Chicago

International Institute for Sustainable Development. Policy Tools That Support Transition Into a Green Economy. 2013. https://www.iisd.org/system/files/publications/policy-tools-transition-green-economy-fiscal-instruments.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Policy Tools That Support Transition Into a Green Economy |date=September 2013 |url=https://www.iisd.org/system/files/publications/policy-tools-transition-green-economy-fiscal-instruments.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2013policy, author = {{International Institute for Sustainable Development}}, title = {{Policy Tools That Support Transition Into a Green Economy}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = sep, url = {https://www.iisd.org/system/files/publications/policy-tools-transition-green-economy-fiscal-instruments.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }