Open AccessThe Wind Energy Production Tax Credit as an Alternative to a Carbon Tax
Author(s) -
Jay A. Sher
Publication year - 2013
Publication title -
policy perspectives
Language(s) - English
Resource type - Journals
eISSN - 2377-7753
pISSN - 1085-7087
DOI - 10.4079/pp.v20i0.11787
Subject(s) - tax credit , carbon tax , production (economics) , warrant , wind power , natural resource economics , economics , value (mathematics) , carbon credit , carbon dioxide , environmental economics , environmental science , microeconomics , greenhouse gas , public economics , finance , computer science , chemistry , engineering , ecology , electrical engineering , organic chemistry , machine learning , biology
This paper attempts to determine an optimal level for the wind energy production tax credit based on the carbon dioxide reduction potential of wind energy. The optimal level is calculated using a conservative value for the social cost of carbon and an upper bound for the carbon dioxide reduction potential of wind energy. Even under the most efficient wind energy operation conditions, the reduction in carbon dioxide is not substantial enough to warrant the current value of the production tax credit. Further study is needed to determine why it is so overvalued.