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How Clean is “Refined Coal”? An Empirical Assessment of a Billion-Dollar Tax Credit

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  • Prest, Brian C.

    (Resources for the Future)

  • Krupnick, Alan

    (Resources for the Future)

Abstract

US tax law provides nearly $1 billion annually in tax credits for “refined coal”, which is supposed to reduce local air pollution. Eligibility for the credit requires firms to demonstrate legally specified emissions reductions for three pollutants. Firms typically demonstrate eligibility through laboratory tests, but results from the lab can differ from those in practice. Using a nationally comprehensive boiler-level panel dataset, we find that emission reductions in practice are only about half of the levels required. We also show that the policy reduces social welfare. Because the tax credit is up for reauthorization in 2021, our work has immediate policy relevance.

Suggested Citation

  • Prest, Brian C. & Krupnick, Alan, 2020. "How Clean is “Refined Coal”? An Empirical Assessment of a Billion-Dollar Tax Credit," RFF Reports 19-05, Resources for the Future.
    • Handle: RePEc:rff:report:rp-19-05
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    File URL: https://www.rff.org/documents/2572/Refined_Coal_Report_rev_8-20.pdf
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