Economic Analysis of Tax-Credit Incentives for Business Investment in Energy Conservation and Production

摘要

Some provisions of the 1978 Energy Tax Act and the 1980 Windfall Profits Tax Act offer temporary tax credits to businesses making qualified investments in energy capital. These tax credits are intended to provide incentives for energy conservation, new energy source development, and the substitution of other fuels for oil and gas. Qualifying investments include: specially defined energy property (principally waste heat recovery equipment), alternative energy property, cogeneration equipment, intercity buses, small hydroelectric facilities, solar and wind energy property, ocean thermal energy conversion equipment, equipment for producing natural gas from geopressurized brine, equipment for producing shale oil, and solid waste energy recovery equipment. Efforts to analyze the consequences of the above-mentioned tax credits are reviewed. Included are summaries of the various methodologies used for analysis and details of the estimated consequences of the tax credits. For each tax credit under examination that is applied to a well-established technology, the impact of the credit on the time paths of investment and energy saved, the net economic cost of the credit, the direct revenue cost of the credit to the Federal Treasury, and the external benefits per barrel of oil (or the energy equivalent of a barrel of oil) required to offset the net economic cost of the credit are estimated. For the established technologies, it was found that the tax credits brought about increased investments and savings in energy use. However, to offset the tax-credit-induced market distortions, the external benefits required per barrel of oil, with one exception, is in excess of seven 1979 dollars. For the emerging technologies examined, it is found that the present energy investment tax credits generally do not provide sufficient incentives because the costs of these technologies are too high. (ERA citation 07:047157)