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Emission reducing tax policies in the U.S. having little effect

Current federal tax provisions in the United States might not be having as great an effect in bringing down greenhouse gas emissions as many might have hoped.

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A new report from the National Research Council found that several existing tax subsidies have unexpected effects, while others yield little reduction in greenhouse gas emissions per dollar of revenue loss.

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The report, “Effects of U.S. Tax Policy on Greenhouse Gas Emissions,” was conducted following a request from Congress. The Research Council evaluated important tax provisions that affect carbon dioxide and other greenhouse gas emissions. These included energy-related provisions such as transportation fuel taxes, oil and gas depletion allowances, subsidies for ethanol, and tax credits for renewable energy, as well as broad-based provisions that might have indirect effects on emission levels, like employer-provided health insurance, owner-occupied housing and incentives for investment in machinery.

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Examining the broader implications of tax provisions and climate change policy, they found that tax policies can make a substantial contribution to meeting the nation’s climate change objective, but the current ones in place do very little.

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Using energy economic models based on the 2011 U.S. tax code, the report found that the combined effect of energy-related tax subsidies on greenhouse gas emissions is minimal and could be negative or positive. They found that greenhouse gas reductions were actually achieved at substantial cost.

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It’s estimated by the U.S. Department of Treasury that the combined federal revenue losses from energy-sector tax subsidies in 2011 and 2012 totaled $48 billion.

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The models did find that subsidizing renewable electricity does achieve the end goal of reducing greenhouse gas emissions. Others though, such as subsidies for ethanol and other biofuels, may result in slightly increased greenhouse gas emissions.

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The study also found that broad-based provisions mainly effect emissions through their effect on national output. Once the broad-based tax provision is removed, the percent change in emissions is likely to be close to the percent change in national output.

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The report concludes that policies that target emissions directly, such as carbon taxes or tradable emissions allowances would be the most effective and efficient ways of reducing greenhouse gases.

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The study was sponsored by the U.S. Department of the Treasury. The National Research Council is the principal operating arm of the National Academy of Sciences and the National Academy of Engineering. – EcoSeed Staff



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