National Academy of Sciences

Natural gas fracking well in Louisiana

Last week, the National Academy of Sciences (NAS) launched an important project to assess the impact of the federal tax code on greenhouse gas emissions (ghg).  Tax expenditures now total more than $1 trillion per year, and trigger a wide variety of changes in the level and distribution of economic activity relative to a more neutral tax baseline.  Understanding whether these subsidies also exacerbate (or in some cases lessen) ghg emissions is increasingly important. 

The NAS has engaged a highly skilled panel for this initiative, and launched a website on which project information will be posted. 

Earth Track submitted written comments to the panel last week.  These comments summarize many of the issues that have come up in my work on environmentally-harmful subsidies over the two decades, and provides recommendations on how to address them.

I am anxious to see NAS' work successful.  Back in 2000, I was paired with a tax specialist to work on a similar research task for a large foundation.  The objective of that effort was to examine the tax code well beyond the energy tax breaks that had been examined to date, including policies in the areas of forestry and agriculture, transport, and housing. 

Unfortunately, there were early conflicts among contributors on how to view tax expenditures within the research scope.  This conflict slowed, and ultimately derailed, the project.  The specific disagreement:  should tax provisions that diverge from our existing tax system be treated as subsidies (my position) or ignored on the grounds that under other tax bases (e.g., a consumption rather than an income tax) those provisions would not be subsidies (my co-author's position). 

One of my current recommendations to NAS is that they address this issue quickly upfront -- such that a review of alternative tax systems and how they could help or hinder the challenges of climate change is considered, but as a standalone research task.  The core review and modeling of tax expenditure reforms should be based on the tax system we have now, and are likely to retain in most of its forms for many years to come.