Energy Industry Tax Subsidies: A Comparison of Investment Incentives
Tracey M. Roberts
University of California, Hastings College of the Law
October 27, 2013
This article compares the tax subsidies used to spur investment in the renewable energy industry to those provided to the fossil fuel industries. Subsidies for renewable energy take the form of temporary tax credits, require investors to hold their investments for long periods, and impose high knowledge and transaction costs as a result of the diversity in deal structures and risks. In contrast, investors in fossil fuels enjoy pass-through taxation under publicly traded partnerships. The subsidy is permanent, the investment is liquid, and the partnership interests are tradable. Investors enjoy much lower investigatory costs in determining the price to be paid for the investment. The article argues that instead of expanding tax credit regimes to support capital formation for renewable energy investments, Congress should expand the definition of “qualifying income” for publicly traded partnerships to include income from alternative energy resources. This would permit green energy investors to enjoy the level of certainty, liquidity and ease of investment currently available to investors in fossil fuels.
Keywords: Tax Subsidy, Production Tax Credit, Investment Tax Credit, Renewable Energy, Publicly Traded Partnerships, Master Limited Partnerships, Fossil Fuelsworking papers series
Date posted: October 27, 2013
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