Increasing Energy Tax Rates Could Help Consumers Pay For Energy Efficiency
An energy tax is a tax that increases the cost of energy, also known as the fuel tax. Many arguments in favor of increased energy taxes have been based on the pursuit of macroeconomic goals, e.g., greater fiscal balance in the 1990s, and environmental benefits, e.g., lower pollution. Opponents argue that increased taxation will decrease private choices for energy consumption, reducing the efficacy of efforts to reduce carbon dioxide emissions and greenhouse gas emissions. In a recently published study, economists Steven Hendlin and Douglas McCracken examined the pros and cons of increasing the cost of energy through fuel taxes.
According to their findings
“We find little evidence that the passage of an energy tax reduces household utility expenses or purchases, or reduces utility prices.” The two researchers also suggest that the tax credit is not a cost-effective way to address the issues associated with global warming. Further, they state that the United States already has several programs in place to provide financial assistance to households that wish to reduce their energy consumption, such as the Natural Gas Assistance Program and the Energy efficient appliance tax credit.
McCracken and Hendlin also suggest
several other ways in which to implement energy tax credits, including encouraging energy efficiency in buildings; encouraging the construction of low-income housing; improving public transportation infrastructure; encouraging the development of alternative energy resources, and encouraging research and development of alternative energy technologies. As previously mentioned, the tax incentives for using alternative energy resources, including wind and solar power, are scheduled to phase out over time, according to the European Union. The two researchers also suggest that other revenue options, such as income and property tax, may need to be adjusted to take into account the phase-out of the incentive programs. They stated that this could result in a need to increase these rates, “based on assumptions about future revenues”, but that the magnitude of this increase would depend on the revenue projection of the individual state. They also noted that increasing these rates could help address the issue of state budget deficits.
Even if the government was able to increase these rates across the country
the increased amount would only provide a small portion of the cost of increasing electricity and heating bills revenue. In their study, McCracken and Hendlin project that if no action is taken to curb greenhouse gas emissions, the electricity and heating bills revenue will only increase by three percent over time, from six billion dollars to eight billion dollars per year. This study comes on the heels of another study that the United States will not meet its emissions reduction target until at least twenty-five years from now. Many experts have expressed doubts regarding this timeframe, arguing that it is unrealistic to expect the country to reduce its carbon footprint now.
Currently, the United States imposes no federal
or state environmental taxes on greenhouse gases, although some have suggested that this will change shortly. According to the Environmental Protection Agency, a federal standard requires that a certain percentage of carbon emissions being released into the air. In addition, there are currently seven different programs currently in place that offer incentives for reducing carbon emissions from your home, as well. In some cases, these incentives are worth more than ten thousand dollars per ton of carbon dioxide released.
The increase in fuel costs has resulted in many people
looking to lower their monthly expenses, either by changing their habits and eating habits or investing in energy-efficient appliances and other home improvements. However, these measures often do not lower energy prices for the long term. To tackle this problem, researchers at the Massachusetts Institute of Technology have suggested an alternative approach. Their solution, called the Renewable Energy Tax Credit, will ensure that the cost of your monthly household energy bills will gradually decrease over the next few years. With this tax credit, the government will support research and development in alternative energy efficiency, thus creating jobs and ensuring a healthier environment for everyone.