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I’m not sure what you mean by “setting up the environment,” but there are providers for things like Kubernetes if you need to deploy services/applications into a cluster (one example). Is that what you mean?

I mean things like installing packages, coming repos, setting environment variables and the like. Is pulumi meant to be used for that? Or should I just use Docker?

You can use Pulumi to build your Docker images.
Pulumi can install software via the Command provider, but there are other tools that offer features specially to make that sort of job easier (package managers, Ansible, and more).
And a Pulumi app can run those, too!

I see. That answers my question. Thank you!