Tax Instruments as a Key Driver of the Green Transition: The Role of Fiscal Policy in Sustainable Development

Fiscal instruments are pivotal in the green transition, shaping economic incentives for sustainable development. This paper examines carbon taxes, environmental levies, green investment tax credits, renewable energy incentives, and energy subsidies, assessing their effectiveness in reducing emissions, enhancing energy efficiency, and driving ecological innovation. Well-designed tax policies, supported by a stable regulatory framework and equitable revenue redistribution, can align environmental goals with economic competitiveness. However, challenges such as carbon leakage, compliance costs for industries, and public resistance continue to hinder their implementation. Strengthening tax enforcement, improving the collection of environmental levies, and integrating green investment tax credits into broader macroeconomic strategies are essential for ensuring stable funding for environmental programs. This study evaluates the role of fiscal instruments in the green transition, identifying key challenges and opportunities for optimizing tax policies to reduce emissions, stimulate ecological innovation, and maintain economic stability through coordinated tax reforms and international cooperation.