To bridge the cost parity gap, governments can implement a combination of carbon pricing and targeted investment incentives. Implementing a carbon tax or a cap and trade system internalizes the external costs of fossil fuels, such as pollution and health impacts, making clean energy relatively more competitive. To ensure this transition does not burden vulnerable populations, these policies should include revenue-neutral designs where carbon revenues are redistributed directly to low-income households as energy rebates or tax credits.
Additionally, supply-side subsidies such as production tax credits and investment tax credits can lower the capital expenditure for wind and solar projects. By shifting subsidies away from fossil fuel extraction and toward renewable deployment, market dynamics naturally favor cleaner options. Coupling these with grid modernization grants helps integrate variable renewable sources more efficiently. To prevent regressive impacts on utility bills, policymakers should also fund energy efficiency programs and weatherization assistance for low-income homes. This holistic approach reduces total energy demand and shields vulnerable consumers from price volatility while accelerating the shift toward a competitive, clean electricity market.
