Tax Policies for Low-Carbon Technologies / Gilbert E. Metcalf.

Format:

Book

Author/Creator:

Metcalf, Gilbert E.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15054.

NBER working paper series no. w15054

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

The U.S. tax code provides a number of subsidies for low-carbon technologies. I discuss the difficulties of achieving key policy goals with subsidies as opposed to using taxes to raise the price of pollution-related activities. In particular, subsidies lower the cost of energy (on average) rather than raising it. Thus consumer demand responses work at cross purposes to the goal of reducing emissions (especially as average cost pricing is used for electricity). Second, it is difficult to achieve technology neutrality with subsidies -- here defined as an equal subsidy cost per ton of CO2 avoided. Third, many subsidies are inframarginal. Finally, subsidies often suffer from unintended interactions with other policies.

I conclude with some observations on the use of price-based instruments. In particular I discuss how a carbon tax could be designed to achieve environmental goals of emission caps over a control period.

Notes:

Print version record

June 2009.