Cool Code: Federal Tax Incentives to Mitigate Global Warming

The Clinton Administration's fiscal year 1999 budget marks a revival of interest in using the federal income tax Code to influence energy demand. In the 1970s, Congress enacted tax incentives for energy conservation and alternative fuels. Now, the threat of global warming has again focused attention on energy use. This paper evaluates the proposed federal tax incentives to mitigate global warming, concluding that most of the government's funding for energy conservation, alternative fuels, and other global warming mitigation related expenditures is through the tax Code, rather than direct spending programs. The tax incentives in the Administration's budget proposal are best viewed as demonstration projects designed to provide information about the commercial potential of certain technologies, not a least cost method of reducing greenhouse gas emissions.