Working Paper: NBER ID: w13753
Authors: Gilbert E. Metcalf
Abstract: 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.
Keywords: Tax Expenditures; Energy Policy; Greenhouse Gas Emissions; Ethanol Tax Credit
JEL Codes: H2; H23; H24; Q42; Q48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax expenditures (H20) | CO2 emissions reduction (Q54) |
| ethanol tax credit (H25) | CO2 emissions reduction (Q54) |
| ethanol use (Q42) | CO2 emissions reduction (Q54) |
| tax expenditures for oil and gas (H20) | consumption of oil and gas (L71) |