How Ministries of Finance can Support Coherent Climate Policy Packages
Council on Economic Policies | 26 February 2026
Fiscal, Discussion Notes | Tags: Carbon Pricing, Decarbonization, Energy, Industrial Policy, Innovation, Policy Coherence, Tax Expenditures
This report was published by the Coalition of Finance Ministers for Climate Action.
The HP4 Policy Packages report provides Ministries of Finance with insights to support the design and implementation of policy packages for climate action that combine a set of fiscal and regulatory instruments. The report examines the gradual shift from stand-alone carbon pricing to multifaceted policyinstruments and discusses the various climate policies that Ministries of Finance can deploy in coordination with line ministries to achieve progress on decarbonization. It also outlines a structured approach to defining, assessing, implementing, and evaluating policy packages that combine multiple instruments.
Key messages:
- The success of the low-carbon transition will depend less on isolated climate measures than on the ability of governments to design and sustain coherent policy packages that align fiscal, energy, and industrial objectives within each country’s context.
- Ministries of Finance are well-positioned to coordinate coherent policy packages due to their powerful but underused range of fiscal levers and their position in central government.
- A structured approach to designing and implementing effective policy packages for climate action can help Ministries of Finance explore questions about instrument combinations, trade-offs, sequencing, and fiscal implications.
- Better modeling approaches are emerging that integrate macroeconomic, sectoral, and climate analysis to reflect real-world policy interactions, but more advanced modeling of interactions of climate instruments with other policy priorities and improved access to such tools and models are needed.
- A well-designed, well-sequenced, and well-coordinated policy package can deliver multiple dividends: it accelerates decarbonization, strengthens energy security, and supports affordability, productivity, and innovation. Near-term benefits also include investment surges and air quality improvements that can make policies more politically acceptable. Embedding climate objectives into fiscal planning also strengthens policy credibility.
This report was led by Patrick Lenain (Council on Economic Policies) with support from Magd Shamashan, Luke Hatton, and Priya Sahu. The overall effort was guided by Mads Libergren (Danish Ministry of Finance) and supported by Nick Godfrey, Hannah Maier-Peveling, and Hipólito Talbot-Wright (Grantham Research Institute on Climate Change and the Environment).
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