In this case, the tax is on features that are not in line with low-carbon development are increasingly applied by cities. Examples include taxes on low-density developments, which are more aligned with carbon-intensive private vehicle use than a more sustainable transit-oriented development. It can also cover rebates to a municipality from transportation or industrial polluters.

Instrument category

Municipal own source revenue (OSR) and policy steering instruments

Implementation status

Moderate - tried and tested

Enabling conditions and success factors
  • Decentralized government and a reasonably well-developed taxation system should be in place for cities to implement tax incentives and rebates.
Instrument benefits
  • Additional revenue can be generated from such tax schemes, although the ideal outcome is compliance with the incentivised action for low-carbon and resilient objectives.
Challenges and risks to implementation
  • Governments cannot give favourable conditions without first taxing citizens to obtain the money. This means that subsidies come with the hidden cost of taxation. Ultimately, taxpayers will have to pay higher taxes to fund government subsidy programs.

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