June 20, 2013 | 1
A new report by the National Research Council finds that in terms of the scale of GHG emissions reductions required to mitigate anthropogenic climate change, the U.S. tax code has a minimal and mixed influence on greenhouse gas emissions.
The full report, which was commissioned by Congress, is available on the National Academies Press website for free (PDF).
The primary finding is that many of the tax expenditures and subsidies only deal indirectly with climate objectives. Most of the tax mechanisms have other goals: for example, promote production and consumption of certain fuels, like biofuels (aided by tariffs on biofuel imports). As the report notes, biofuels tax credits encourage consumption of liquid fuels because they lower prices, offsetting any potential GHG benefit from the biofuels.
Production tax credits for renewable electricity generation have been an effective tool in terms of increasing the overall mix of renewable resources; installed wind generation capacity is hover around 12 gigawatts in Texas alone, with significant capacity in other states (and more due online from offshore farms). But the report cautions that the overall emissions reductions have been small, and costly per unit of GHG reduction.
However, If designed to directly address climate change objects, taxes could make a substantial contribution to reducing GHG emissions. Other studies have reached similar conclusions (for an overview of the economics of carbon pricing, see this earlier post “What economists say about carbon pricing”): one of the most reliable and economically efficient ways to reduce greenhouse gases is by assigning a price to carbon, either through a tax or an emissions trading scheme (which are really two means to the same end).
Download the full report here (PDF).
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