A federal report is endorsing a carbon tax as a far better method to combat climate change than the current web of energy tax provisions.
Despite spending billions of dollars on energy subsidies, the federal government’s Tax Code has done little overall to cut greenhouse gas emissions, according to a National Research Council report out Thursday, which concludes that a carbon tax or cap-and-trade system would be much more effective.
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“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 concludes.
That conclusion is far from surprising; the prospect of a carbon tax swirled heavily in Washington recently, even drawing interest from conservative groups such as the American Enterprise Institute. And many economists have said a carbon tax would be the most efficient way to address emissions.
But efforts to put a price on carbon have gotten little political traction in Congress or at the White House. The Obama administration has repeatedly denied that it would seek a carbon tax, while most Republicans have vowed to block such a measure in Congress.
“[M]any studies have found that the most reliable and efficient way to achieve given climate-change objectives is to use direct tax or regulatory policies that create a market price for CO 2 and other greenhouse gas emissions,” the report says.
“The committee finds that tax policy can make a substantial contribution to meeting the nation’s climate-change objectives but that the current approaches will not accomplish that. 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,” it adds.
The report notes that tax reforms that boost economic growth would most likely lead to an increase in GHG emissions — but that “the increased output is likely much more than sufficient to pay for reducing the higher emissions if efficient climate-change policies are employed to reduce emissions.”
In assessing the current Tax Code, researchers found that nailing down each individual provision’s effect on GHG emissions was difficult at best, thanks to a variety of confounding factors.
Ultimately, the report says, “the combined effect of current energy-sector tax expenditures on GHG emissions is very small and could be negative or positive,” meaning that tax policy may have actually contributed to a small increase in emissions.
A major sticking point in the report is biofuel tax provisions, which may be responsible for a slight uptick in GHG emissions — an example of the “often counterintuitive nature of the effects of tax subsidies,” the report says.