Tax Benefits, Property Rights, and Mandates: Considering the Future of Government Support for Renewable Energy
20 J. of Envtl. & Sustainability L. 19 (2013)
52 Pages Posted: 24 Feb 2013 Last revised: 21 Mar 2015
Date Written: February 22, 2013
This essay explores the history of tax benefits, property rights benefits, and mandates for energy development for the purpose of gaining insights on how such incentives can best be used to encourage the development of renewable energy. Part I describes some of the tax preferences and other financial incentives the U.S. government has historically provided to the energy sector, including to fossil fuel development, renewable fuels (particularly ethanol), and renewable electricity sources. It compares and contrasts the varying types and levels of support for these energy sectors, and concludes that the tax preferences and other financial support provided to date to renewable electricity do not provide the same level of continuity for investment purposes and long-term growth as the support provided to the fossil fuel and biofuels industries. Part II turns to property rights incentives, and discusses the long-time property rights benefits states have conveyed to oil, gas, and other natural resource developers as well as to electric utilities to encourage the development and use of energy resources. This Part suggests that policymakers should use caution in conveying new property rights incentives to renewable energy developers to avoid upsetting existing certainty in property law and also to avoid a situation where the burdens of such changes fall too heavily on a small and discrete number of landowners. Part III considers mandates in the energy industry. These include: (1) state renewable portfolio standards (RPS) for renewable electricity; (2) the federal Renewable Fuel Standard (RFS) that benefits the biofuels industry; and (3) California’s Low Carbon Fuel Standard regulations that mandate use of an increasing amount of fuels with lowered GHG emissions each year in the state. It compares the federal RFS for biofuels with the lack of a similar mandate at the federal level for renewable electricity, and discusses the potential benefits associated with a federal RPS for electricity. Finally, Part IV considers the important role certainty and continuity play in efforts to support renewable energy development. Ultimately, this essay concludes that the continuity and relative certainty associated with certain types of tax benefits and mandates may be the best means of providing long-term support to renewable energy markets. Property rights incentives, on the other hand, should be used more sparingly to provide benefits to particular energy sectors or markets, but may be best used to create the nationwide, physical networks such as electric transmission grid expansions necessary for those markets to exist.
Keywords: tax policy, natural resources, energy policy, production tax credit, PTC, renewable fuel standard, low carbon fuel standard, climate change, renewable portfolio standards, eminent domain, split estate, biofuels, ethanol, wind energy, solar energy
JEL Classification: K23, K32, Q2, Q3, Q4
Suggested Citation: Suggested Citation