Episode 122: How can tax policy influence which energy technologies we use?

How does tax policy affect our energy technology decisions? Karen Clay, Associate Professor of Economics and Public Policy in the H. John Heinz III College at Carnegie Mellon University explains.



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HOST: How can tax policy influence which energy technologies we use? On this week’s Energy Bite, Karen Clay, a professor at Carnegie Mellon University, has some answers.

CLAY: Tax policies such as taxes and tax credits influence both the energy technologies we use and the taxes we pay. These policies can be “carrots or sticks” that either encourage or discourage certain forms of energy.

Hydraulic fracturing for the production of shale gas is another significant and growing user of water. In fact, almost every aspect of energy production and use has an impact on water.

HOST: Can tax policies increase some forms of energy production?

CLAY: One study found that the national wind production credit has increased wind energy deployment by 1.4 gigawatts annually, and that it influenced the effectiveness of state polices that set state targets for these technologies.

HOST: What are the challenges with tax policies focused on energy technologies?

CLAY: Part of the price we pay at the pump for gasoline is for taxes. The federal portion of those taxes, about 18 cents per gallon, is used for projects supported by the highway trust fund. Due to the use of energy efficient technologies in vehicles, consumers use less gasoline than in the past and thus pay lower total gasoline taxes. Due to concerns about inefficient funds for the nation’s highways, some policymakers have proposed increasing this rate.

HOST: Would you be willing to pay more per gallon of gasoline to support the nation’s roads? Take our poll, see the results, and ask your energy questions at Energy Bite dot org.

ANNOUNCER: Energy Bite is a co-production between 90.5 WESA and Carnegie Mellon’s’ Scott Institute for Energy Innovation.


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