Energy Tax Provisions: How Effective Are They?

Posted on June 26, 2022

Energy Tax Provisions: How Effective Are They?

Energy tax provisions are supposed to reduce greenhouse gas (GHG) emissions but have not effective in limiting GHG emissions, a study reveals. To counter this problem, the introduction of a carbon tax is seen as an effective alternative solution.

Energy-sector tax expenditures reach roughly $48 billion, but have little to no impact on reducing GHG emissions. According to a study, the current tax expenditures and subsidies are a poor tool for reducing GHG emissions and achieving climate change objectives, which has opened the debate on whether new taxes are needed to control GHG emissions.

Energy tax provisions are not helping because “few of these were enacted to reduce GHG emissions,” the study revealed, “As policies to reduce GHG emissions, however, are inefficient. Very little if any GHG reductions are achieved at substantial cost with these provisions.”

A carbon tax is a straightforward solution, but it will be difficult to put a price on carbon because congressional Republicans and the Obama administration are not backing it. Instead, other measures to reduce greenhouse gas emissions are being considered. The Obama administration is looking for alternative legislation.

The study has brought forth many important factors that limit effectiveness of tax provisions in reducing GHG emissions. The sooner effective tax provisions are introduced, the better it will be in reducing greenhouse gas emissions to protect the environment.

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