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Using Tax Expenditures to Achieve Energy Policy Goals

Author

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  • Gilbert Metcalf

Abstract

Tax expenditures are a major source of support for energy related to 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.

Suggested Citation

  • Gilbert Metcalf, 2008. "Using Tax Expenditures to Achieve Energy Policy Goals," Discussion Papers Series, Department of Economics, Tufts University 0715, Department of Economics, Tufts University.
  • Handle: RePEc:tuf:tuftec:0715
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    File URL: http://ase.tufts.edu/econ/research/documents/2008/metcalfTaxExpenditures.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Arik Levinson, 2011. "Belts and Suspenders: Interactions among Climate Policy Regulations," NBER Chapters,in: The Design and Implementation of U.S. Climate Policy, pages 127-140 National Bureau of Economic Research, Inc.
    2. Chandra, Ambarish & Gulati, Sumeet & Kandlikar, Milind, 2010. "Green drivers or free riders? An analysis of tax rebates for hybrid vehicles," Journal of Environmental Economics and Management, Elsevier, vol. 60(2), pages 78-93, September.
    3. repec:esr:resser:bkmnext351 is not listed on IDEAS
    4. Guerriero, Carmine, 2013. "The political economy of incentive regulation: Theory and evidence from US states," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 91-107.
    5. Li, Shanjun & Linn, Joshua & Spiller, Elisheba, 2013. "Evaluating “Cash-for-Clunkers”: Program effects on auto sales and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 175-193.
    6. Doug Auld, 2008. "The Ethanol Trap: Why Policies to Promote Ethanol as Fuel Need Rethinking," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 268, July.
    7. Guerriero, Carmine, 2011. "Accountability in government and regulatory policies: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 453-469.
    8. Li, Shanjun & Linn, Joshua & Spiller, Elisheba, 2010. "Evaluating “Cash-for-Clunkers”: Program Effect on Auto Sales, Jobs, and the Environment," Discussion Papers dp-10-39, Resources For the Future.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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