Environmental Tax Incentives in the United States: Will Recent Market Incentives Reduce the U.S.'s Dependence on Oil?
Market Instruments and Sustainable Economy, p. 573, Ana Yábar Sterling, et al., eds., 2012
20 Pages Posted: 16 Mar 2013
Date Written: 2012
The United States' has invested in non-renewable energy technologies (specifically fossil fuels) for over a century. The fossil fuel industry is robust, wielding significant power to control U.S. energy policies through its connections within the federal government. Yet, since 2005, the federal government has enacted a number of laws that provide financial incentives for alternative and renewable energy sources. These incentives (mostly tax benefits) address both supply and demand-side aspects of promoting alternative and renewable energy. However, given the long history of government support for fossil fuels, the impact of these recent initiatives in changing the U.S. energy mix is unclear. This article considers the long-term implications of federal financial support to the U.S. energy industry (both fossil fuel and alternative energy). The article demonstrates that alternative/renewable energy sources must receive a dramatic increase in investment incentives if the United States is ever to achieve a new energy mix that is not predominated by fossil fuels. Such incentives, however, should not last forever. Unlike fossil fuel incentives, which have subsidized non-renewables for over 100 years, federal assistance must cease when the subsidized industry can independently compete in the energy market. Looking back at historical energy policies chronicles not only the development of federal tax laws and policies, but also the contributions that the states have made toward encouraging a sustainable energy mix.
Keywords: fossil fuel, non-renewable energy, financial incentives, alternative energy, renewable energy, tax benefits
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