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Using Tax Expenditures to Achieve Energy Policy Goals

  • Gilbert E. Metcalf

Tax expenditures are a major source of support for energy related activities in the federal budget exceeding direct budget support for energy by a factor of nearly six. Focusing on the policy goals of reducing greenhouse gas emissions and petroleum consumption, I find these tax expenditures highly cost ineffective at best and counterproductive at worse. The tax credit for ethanol is an example of a cost ineffective subsidy. The cost of reducing CO2 emissions through this subsidy exceeded $1,700 per ton of CO2 avoided in 2006 and the cost of reducing oil consumption over $85 per barrel.

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File URL: http://www.nber.org/papers/w13753.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13753.

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Date of creation: Jan 2008
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Publication status: published as Gilbert E. Metcalf, 2008. "Using Tax Expenditures to Achieve Energy Policy Goals," American Economic Review, American Economic Association, vol. 98(2), pages 90-94, May.
Handle: RePEc:nbr:nberwo:13753
Note: EEE PE
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  1. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
  2. Gilbert E. Metcalf, 2006. "Energy Conservation in the United States: Understanding its Role in Climate Policy," Discussion Papers Series, Department of Economics, Tufts University 0609, Department of Economics, Tufts University.
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