Understanding Subsidies and Their Environmental Effects
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A subsidy is financial support provided by government to reduce the cost of a particular activity or product, and its environmental effect depends entirely on what is actually being subsidised, since a subsidy for renewable energy generation has a fundamentally different environmental effect to one supporting fossil fuel extraction or use.
Subsidies that lower the cost of environmentally harmful activities can inadvertently encourage more of that activity than would otherwise occur if its true cost, including environmental impact, were fully reflected in its market price, which is part of why reforming certain long standing subsidies has become a genuine focus of environmental policy discussion.
Conversely, subsidies targeted at emerging clean technology can help bring down costs during an early development phase when a technology is not yet commercially competitive on its own, a form of deliberate, temporary support intended to accelerate broader adoption until the technology can eventually stand on its own economic merits.