Is A Carbon Tax The Best Way To Promote Energy Efficiency?

Certain sections of this article were taken from “A Carbon Tax Could Be The Key To Boosting Innovation And Growth” written by Joe Kennedy for The Hill.

Taxes have many uses in our society from paying for public projects, to keeping our parks and roads clean and usable, to inspiring changes in big business. The one point very few can still deny is that global warming is having very real effects on our planet with some long term side effects. Scientific consensus has left some questions unanswered, but without a doubt temperatures are rising, ecosystems are changing, and how we produce energy is more important than ever.

Businesses are leading the way in encouraging energy efficiency upgrades and inspiring communities to tackle the issue head on. Emilygrene Corp. prides ourselves on doing more than installing these upgrades, but also promoting issues affecting clean energy and how we can all make a difference.

What is a carbon tax? A carbon tax is the most recent policy proposal to curb carbon emissions and drive innovation. The measure would implement a tax on the amount of energy used by businesses generated by fossil fuels. This, in turn, will reduce the cost of using renewable resources and installing updated technology. Additionally, it will create revenues that can be recycled for further tax cuts to research and capital investment.

Currently, there is little emphasis on encouraging the adoption of cleaner infrastructure that a carbon tax would address. But at what rate would that tax be? According to The Hill, “The optimal rate would be one that reflects the total societal cost from emitting carbon into the atmosphere. Most models estimate that this would be somewhere between $15 and $25 per ton of carbon, rising over time. To put that in perspective, a $25 per ton carbon tax would mean that the price of a gallon of gasoline would rise by 22 cents.”

Using carbon tax revenues to lower the after-tax cost of research and capital investment would boost economic growth, offsetting most, if not all, of the effects of the tax increase. To do so, Congress could increase the research and development tax credit. It could make permanent the expensing of capital equipment, which is now scheduled to expire in five years. It could also implement an innovation box, whereby companies pay lower taxes on profits derived from intellectual property, provided that the research and most production occur in the United States.

Source: The Hill

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