The Marshall Islands plans to implement a fossil fuel tax, as the country weans itself off international budget support.
The government released an economic policy statement on Tuesday, outlining a path to economic resilience.
With US direct financial assistance to its Pacific states ending in 2023, the Marshall Islands is scrambling to increase domestic revenues.
The economic policy statement said the tax system needed to be reformed, and a pollution tax introduced on goods and services, including fossil fuels.
"Where applicable, we will apply the polluter pays principle to enable prices of goods and services, including fossil fuels, to reflect the environmental costs resulting from consuming them," the report said.
Commercial fishing had become a main source of income and the capital Majuro's port would be strengthened as a tuna hub, the document said.
The tourism market was untapped and venture investments would be explored in the outer islands.
"After four decades of constitutional self-government and over three decades of free-association with the United States under the Compact of Free Association, we face uncertainties in our economic, security, and environmental outlooks," President Hilda Heine said in a statement.