Climate Policy Tools
The full toolkit governments use to address climate change — from regulation to innovation policy.
The Climate Policy Toolkit
No single policy can solve climate change. Effective climate strategy combines multiple tools:
Carbon pricing (taxes or cap-and-trade) internalizes the cost of emissions. Regulations set standards — emissions limits for power plants, fuel efficiency for vehicles, building codes. Subsidies and tax credits make clean alternatives cheaper (the IRA's $369 billion in clean energy incentives). Public investment funds R&D for technologies not yet commercially viable (green hydrogen, carbon capture, advanced nuclear). Phase-outs set end dates for polluting technologies (EU ban on new internal combustion cars by 2035).
The most effective approaches combine 'carrots' (incentives) with 'sticks' (regulations and pricing) — reducing the cost of the clean option while increasing the cost of the dirty one.