Abby L. Harvey
GHG Monitor
7/25/2014
While a national carbon tax could drive innovation in clean energy technologies, the feasibility of such a measure was questioned this week by a panel of experts at an event sponsored by the Bipartisan Policy Center and the American Energy Innovation Council. “A carbon tax is part of a form of consumption tax. Consumption tax as a whole has been debated for a long time in Congress,” Mark Mazur, Assistant Secretary for Tax Policy with the U.S. Department of Treasury said, “There really is no plausible way of getting a bipartisan political consensus on a carbon tax at the moment so the administration hasn’t put a ton of effort into developing that. It’s just not in a feasible set.”
If such a tax were to become feasible, the measure would be effective in spurring technological advancement said Richard Newell, Director of the Duke University Energy Initiative. Because of the way the market for energy is structured, there is currently no advantage to investing in clean energy initiatives. “There is no private market, individual incentive, to reduce greenhouse gasses,” Newell said. “So, from an innovation point of view there is a need for policy to induce that. Until kilowatts look different at the household, which they don’t for wind or solar or coal, there needs to be some other demand driver for that.” Placing a price on carbon would be the most effective way to create that motivation he said. “Once there’s that demand, there’s demand for new technology that has lower greenhouse gas emissions. Companies can sell that, companies can make money on that and it’s a self-reinforcing process at that point.”
Given the current political climate which makes it very unlikely that a carbon tax could be instituted, a different path to encouraging innovation would have to be taken. Mazur suggested that a tax credit may be a reasonable way to do this. “In the tax part of the world what you want to do is design benefits and incentives that are as efficient and effective as possible. So maybe a tax credit for technologies that reduce carbon emissions would be something that you’d want to have in there as a way to kind of drive that,” Mazur said.
