Tax breaks and subsidies do not reduce greenhouse gases, finds National Research Council report
A report from the National Research Council finds that current tax policies and subsidies are poor tools for achieving climate-change objectives.
"Several existing provisions have perverse effects, while others yield little reduction in GHG emissions per dollar of revenue loss," find authors of a June 20 report.
"If tax expenditures are to be made an effective tool for reducing GHG emissions, much more care will need to be applied to designing the provisions to avoid inefficiencies and perverse offsetting effects," authors add.
While the council avoids making specific tax policy recommendations, it does analyze weaknesses in current policies. Some tax expenditures are more efficient than others, allow report authors, but small emission reductions rarely offset the cost of tax expenditures.
One area where the report does recommend subsidies is in targeted research and development in technologies that support a low-carbon energy system.
Report authors say the most efficient way to reduce GHG is through policies that place a price on carbon emissions.
"In order to meet ambitious climate-change objectives, a different approach that targets GHG emissions directly through taxes or tradable allowances will be both necessary and more efficient," the report says.
Because the tax code is so complex, the report also stops short of estimating an aggregate impact of tax policies on emissions. Authors note that existing research and the best analytical tools have been unable to accurately determine the impact of subsidies and tax expenditures on GHG emissions. In fact, the committee commissioned an original economic modeling of tax policies for the study.
The report draws from analysis of tax provisions that account for 46 percent of all energy-related excise tax revenues as well as those accounting for 71 percent of the calculated revenue loss from the 10 largest energy-related tax expenditures in 2011, says the council.
- download the report, "Effects of U.S. Tax Policy on Greenhouse Gas Emissions"