Effects of U.S. Tax Policy on Greenhouse Gas Emissions

199 Pages·2013·5.74 MB·English

by  Committee on the Effects of Provisions in the Internal Revenue Code on Greenhouse Gas Emissions

Effects of U.S. Tax Policy on Greenhouse Gas Emissions

Committee on the Effects of Provisions in the
Internal Revenue Code on Greenhouse Gas Emissions

Board on Science, Technology, and Economic Policy
Policy and Global Affairs

William D. Nordhaus, Editor
Stephen A. Merrill, Editor
Paul T. Beaton, Editor

Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions
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NOTICE: The project that is the subject of this report was approved by the Governing
Board of the National Research Council, whose members are drawn from the councils of
the National Academy of Sciences, the National Academy of Engineering, and the Insti-
tute of Medicine. The members of the committee responsible for the report were chosen
for their special competences and with regard for appropriate balance.

This study was supported by Contract/Grant No. TOS10-C-003 between the National
Academy of Sciences and the U.S. Department of Treasury. Any opinions, findings, con-
clusions, or recommendations expressed in this publication are those of the author(s) and
do not necessarily reflect the views of the U.S. Department of Treasury provided support
for the project.

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Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions

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Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions
Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions
COMMITTEE ON THE EFFECTS OF PROVISIONS IN THE
INTERNAL REVENUE CODE ON GREENHOUSE GAS EMISSIONS

William D. Nordhaus, Chair, Sterling Professor of Economics, Yale University
Maureen L. Cropper, Professor of Economics, University of Maryland,
College Park
Francisco de la Chesnaye, Program Manager and Senior Economist, Electric
Power Research Institute
Noah Diffenbaugh, Center Fellow, Woods Institute for the Environment,
Assistant Professor, School of Earth Sciences, Stanford University
David G. Hawkins, Director of Climate Programs, Natural Resources
Defense Council
Roberta F. Mann, Frank Nash Professor of Law University of Oregon School
of Law
Brian C. Murray, Research Professor and Director of Economic Analysis,
Nicholas Institute for Environmental Policy Solutions, Duke University
John M. Reilly, Co-Director of Joint Program on the Science and Policy of
Global Change, Senior Lecturer, Sloan School of Management, The
Massachusetts Institute of Technology
Drew Shindell, Senior Scientist, NASA Goddard Institute for Space Studies
Eric Toder, Institute Fellow, Urban Institute, Co-Director, Urban-Brookings
Tax Policy Center
Roberton C. Williams, III, Associate Professor, University of Maryland,
College Park
Catherine Wolfram, Flood Foundation Professor of Business Administration,
Haas School of Business, University of California, Berkeley

Project Staff

Stephen A. Merrill, Study Director
Paul T. Beaton, Program Officer
Aqila Coulthurst, Program Coordinator
Cynthia Getner, Financial Officer

v
Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions
BOARD ON SCIENCE, TECHNOLOGY,
AND ECONOMIC POLICY (STEP)

For the National Research Council (NRC), this project was overseen by
the Board on Science, Technology and Economic Policy (STEP), a standing
board of the NRC established by the National Academies of Sciences and Engi-
neering and the Institute of Medicine in 1991. The mandate of the STEP Board
is to advise federal, state, and local governments and inform the public about
economic and related public policies to promote the creation, diffusion, and ap-
plication of new scientific and technical knowledge to enhance the productivity
and competitiveness of the U.S. economy and foster economic prosperity for all
Americans. The STEP Board and its committees marshal research and the exper-
tise of scholars, industrial managers, investors, and former public officials in a
wide range of policy areas that affect the speed and direction of scientific and
technological change and their contributions to the growth of the U.S. and global
economies. Results are communicated through reports, conferences, workshops,
briefings, and electronic media subject to the procedures of the National Acad-
emies to ensure their authoritativeness, independence, and objectivity. The
members of the STEP Board and the NRC staff are listed below:

Paul Joskow (Chair), President, Alfred P. Sloan Foundation
Ernst Berndt, Louis E. Seley Professor in Applied Economics, Massachusetts
Institute of Technology
Jeff Bingaman, Former U.S. Senator, New Mexico
Ralph J. Cicerone (ex-officio), President, National Academy of Sciences
John Donovan, Senior Executive Vice President, AT&T Technology and
Network Operations, AT&T Inc.
Ellen Dulberger, Managing Partner, Ellen Dulberger Enterprises LLC
Harvey V. Fineberg (ex-officio), President, Institute of Medicine
Alan Garber, Provost, Harvard University
Ralph Gomory, Research Professor, Stern School of Business, New York
University
John Hennessy, President, Stanford University
William H. Janeway, Managing Director and Senior Advisor, Warburg
Pincus, LLC
Richard Lester, Japan Steel Industry Professor, Head, Nuclear Science
and Engineering, Founding Director, Industrial Performance Center
Massachusetts Institute of Technology
David Morgenthaler, Founding Partner, Morgenthaler Ventures
Luis M. Proenza, President and Chief Executive Officer, University of Akron
William J. Raduchel, Independent Director and Investor
Kathryn L. Shaw, Ernest C. Arbuckle Professor of Economics, Graduate
School of Business, Stanford University
vi
Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions
Laura D’Andrea Tyson, S. K. and Angela Chan Professor of Global
Management, Haas School of Business, University of California
at Berkeley
Hal Varian, Chief Economist, Google, Inc.
Charles M. Vest (ex-officio), President, National Academy of Engineering
Alan Wm. Wolff, Senior Counsel, McKenna, Long & Aldridge LLP

Staff

Stephen A. Merrill, Executive Director
Charles W. Wessner, Program Director
Paul T. Beaton, Program Officer
McAlister Clabaugh, Program Officer
Aqila Coulthurst, Program Coordinator
David Dawson, Senior Program Assistant
Sujai Shivakumar, Senior Program Officer
David Dierksheide, Program Officer
Cynthia Getner, Financial Officer

vii
Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions
Copyright © National Academy of Sciences. All rights reserved.
Effects of U.S. Tax Policy on Greenhouse Gas Emissions

Preface

The U.S. Congress directed the U.S. Department of the Treasury to re-
quest that the National Academy of Sciences undertake “a comprehensive re-
view of the Internal Revenue Code of 1986 to identify the types of and specific
tax provisions that have the largest effects on carbon and other greenhouse gas
emissions and to estimate the magnitude of those effects” (P.L. 110-343, Divi-
sion B, Title I, Sec. 117). Congress appropriated funds for this study in its 2010
appropriations (P.L. 111-117; Division C, Title I, Sec. 126).
After the National Academies accepted this assignment, the National Re-
search Council established the ad hoc Committee on the Effects of Provisions in
the Internal Revenue Code on Greenhouse Gas Emissions, which prepared this
report. Appendix B contains biographical information on the committee mem-
bers.
The committee met five times as it worked to prepare this report. At its
first meeting in April 2011, the committee held an open session for interested
members of the public to make presentations to the committee. The following
individuals responded to notice of that open session and made oral presentations
to the committee: Elizabeth Paranhos (on behalf of Environmental Defense
Fund); Jay Pendergrass (Environmental Law Institute); and Eric Pica (Friends of
the Earth). Two individuals could not attend in person but submitted written
statements: Janet Milne (Environmental Tax Policy Institute at Vermont Law
School); and Douglas Koplow (Earth Track). Additionally, the following indi-
viduals made presentations at the invitation of the committee: Mun Ho (Re-
sources for the Future); Gilbert Metcalf (Tufts University); and Ian Parry (Inter-
national Monetary Fund). During later meetings, the committee also requested
presentations from the following individuals: Alan Krupnik (Resources for the
Future); Stephen P. A. Brown (University of Nevada, Las Vegas); and Lessly
Goudarzi and Frances Wood (OnLocation, Inc.). We are grateful for the
thoughtful presentations that these individuals made.
The committee also made use of peer-reviewed scientific literature, work-
ing papers, government agency reports, and think tank reports as it deliberated
and in producing this report. The committee extends its thanks to Danny
Cullenward (Stanford University), Kathleen Foreman (University of California,
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Copyright © National Academy of Sciences. All rights reserved.