Table of Contents

Environmental Pricing

Environmental Pricing

Studies in Policy Choices and Interactions

Critical Issues in Environmental Taxation series

Edited by Larry Kreiser, Mikael S. Andersen, Birgitte E. Olsen, Stefan Speck, Janet E. Milne and Hope Ashiabor

Environmental taxes can be efficient tools for successful environmental policy. Their use, however, has been limited in many countries. This thoughtful book explores the scope of environmental pricing and examines a variety of national experiences in environmental policy integration, to identify the most effective use of taxation and policy for environmental sustainability.

Chapter 8: Do you get what you pay for with United States climate change tax provisions?

Hans Sprohge and Larry Kreiser

Subjects: economics and finance, economics of innovation, environment, environmental economics, environmental law, law - academic, environmental law, tax law and fiscal policy, politics and public policy, environmental politics and policy


Production tax credits for the development of non-fossil fuel sources of energy are pointless and lead to harm to the environment. Fossil fuel sources of energy are deemed to be inimical to the environment because they emit greenhouse gasses, such as, carbon dioxide (CO2), into the atmosphere resulting in global warming. Global warming is undesirable because it harms the environment. Ostensibly, non-fossil fuels such as, wind, biomass, and solar, are not harmful to the environment because they do not emit CO2 into the atmosphere. The cost of energy from non-fossil fuels is higher than from fossil fuels. The rationale for production tax credits is to provide economic support for alternatives to fossil fuel sources of energy until such time as when these alternatives become cost competitive with fossil fuels. The production tax credits for alternative sources of energy are pointless—like tilting at windmills. Taxpayers do not get what they pay for. The combined effect on greenhouse gas emissions of current United States (US) federal tax provisions is less than 1 percent of total US emissions. Furthermore, the Earth is cooling despite increased levels of CO2 in the atmosphere. One study shows that global warming is caused by chlorofluorocarbons, not by CO2. Another study shows that even if CO2 causes global warming, CO2 is not suppressed by renewable energy.

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