New at Castalia

Castalia Provides Leadership on Climate Change Policy

Castalia is engaged in the efforts throughout the world to develop and implement economically sustainable and environmentally effective clean energy and climate change policies. Castalia helps governments pursue policy objectives and helps businesses plan their responses to emerging carbon markets and other evolving environmental and climate change policies, while also leading the public debate on effective and sustainable solutions.

Castalia team members recently published an article exploring the way in which climate change policy, in the form of a carbon tax or cap-and-trade scheme, would interact with the existing portfolio of tax incentives for conventional and renewable energy in the United States.

Federal energy policy has historically provided tax incentives for the development of domestic conventional energy resources, such as oil, coal and gas, with the objective of increasing domestic energy security and correcting national security externalities. Starting in the 1970s, the purpose of energy policy was broadened to provide tax incentives for renewable energy, with the aim of diversifying domestic energy supplies and responding to a growing awareness of environmental externalities. Now, with the increasing near-term probability that the federal government will enact an economy-wide carbon pricing regime to address the externalities created by greenhouse gas emissions, policymakers need to consider how existing policy would interact with the incentives created different carbon tax and cap-and-trade options. The article provides background on energy policy in the United States, focusing on federal tax incentives, and identifies when energy tax incentives and carbon pricing will be complementary or conflicting from an economic efficiency perspective.

The published article in the Tax Notes journal is available here

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