Study says subsidies and tax incentives for renewable energy have minimal effect on greenhouse gas emissionsby Jonathan DuHamel on Jul. 23, 2013, under Energy, Politics
The whole idea behind subsidizing renewable energy projects is to minimize greenhouse gas emissions according to the Obama administration. A new study by the National Research Council, an arm of the National Academy of Sciences, says such subsidies and tax preferences have almost no effect, yet the Department of the Treasury estimates that the combined federal revenue losses from energy-sector tax subsidies in 2011 and 2012 totaled $48 billion. The study was commissioned by the Treasury Department.
The National Academies press release:
U.S. Tax Code Has Minimal Effect on Carbon Dioxide and Other Greenhouse Gas Emissions, Report Says
WASHINGTON — Current federal tax provisions have minimal net effect on greenhouse gas emissions, according to a new report from the National Research Council. The report found that several existing tax subsidies have unexpected effects, and others yield little reduction in greenhouse gas emissions per dollar of revenue loss.
At the request of Congress, a Research Council committee was formed to evaluate the most important tax provisions that affect carbon dioxide and other greenhouse gas emissions and to estimate the magnitude of the effects. The report considers both 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 may have indirect effects on emissions, such as those for employer-provided health insurance, owner-occupied housing, and incentives for investment in machinery.
Using energy economic models based on the 2011 U.S. tax code, the committee found that the combined effect of energy-related tax subsidies on greenhouse gas emissions is minimal and could be negative or positive. It noted that estimating the precise impact of the provisions is difficult because of the complexities of the tax code and regulatory environment. However, it found that these provisions achieve very little greenhouse gas reductions at substantial cost; the U.S. Department of the Treasury estimates that the combined federal revenue losses from energy-sector tax subsidies in 2011 and 2012 totaled $48 billion. While few of these provisions were created solely to reduce greenhouse gas emissions, they are a poor tool for doing so, the report says.
The models indicate that the provisions subsidizing renewable electricity reduce greenhouse gas emissions, while those for ethanol and other biofuels may have slightly increased greenhouse gas emissions. They also suggest that broad-based provisions such as tax incentives to increase investment in machinery affect emissions primarily through their effect on national economic output. In other words, when a broad-based tax provision is removed, the percent change in emissions is likely to be close to the percent change in national output.
In addition, the committee examined the broader implications of tax provisions and climate change policy and concluded that tax policies can make a substantial contribution to meeting the nation’s climate change objectives, but the current approaches will not accomplish that. While the report does not make any recommendations about specific changes to the tax code, it says 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.
Some specific findings from the study:
Electricity generated from renewable energy, versus fossil fuels, lowers U.S. emissions of carbon dioxide by 0.3 percent.
For biofuels, “The findings indicate that removing all tax code provisions and the import tariff would result in a decrease of emissions of 5 million metric tons (MMT) per year of CO2 equivalent globally. This is less than 0.02 percent of global emissions.” In other words, we are not getting any bang for the buck by subsidizing biofuels.
Considering all tax provisions, subsidies, and tariffs for all sectors, the study found that “The impacts range from a -0.3 percent to a +0.2 percent change in emissions intensities over the period 2010-2035.”
Obama’s clueless “Climate Action Plan” will offer billions in subsidies to wind, solar, and biofuels projects in an attempt to lower carbon dioxide emissions, but this new study shows those billions will be useless in reaching that goal.