Tag Archives: Carbon Tax

Tax Incentives vs. Carbon Tax

When Mark Strama spoke during lecture this past Thursday, the issue about incentivizing renewable energy versus taxing carbon came up.  Mark Strama said he believed that taxing carbon would result in a faster transition to renewable fuels, but that having tax incentives would be a better way to go about doing it. 

First off, tax incentives make renewable energy or other energy efficient devices cheaper to the consumer by providing tax credits to the companies that produce the products.  Without the tax incentives, the clean products would be far more expensive than other carbon intensive products.  Many of the tax incentives are actually tax credits, which differ from tax deductions because tax credits reduce the amount of income tax you have to pay, while tax deductions reduce the amount of income subject to tax.  According to The Emergency Economic Stabilization Act of 2008, there are currently many tax incentives in place for energy including renewable energy, transportation and domestic fuel security, and energy conservation and efficiency.  The renewable energy tax incentives include facilities that generate electricity from wind, solar, biomass, geothermal, hydropower, landfill gas, and trash combustion facilities.  For the transportation sector, there are tax incentives for hybrids, diesels, alternative fuel vehicles (compressed natural gas, liquefied natural gas, hydrogen, etc.), and there are incentives for electrical vehicles and plug-in hybrids coming soon.  The Renewable Fuel Standard is another way the federal government can provide incentives for renewable energy companies, which is a program that will increase the volume of required renewable fuel to 36 billion gallons by 2022. 

Similar to tax incentives above, the carbon tax is a way for the government to try and make renewable energy more cost competitive against cheaper fossil fuels.  According to an article on carbon tax, the carbon tax places a fee on the production, distribution or use of fossil fuels.  The government would determine the price per ton on carbon, which would result in a higher cost for fossil fuels and make renewable energy a more feasible option.  Although the carbon tax could work faster to make renewable energy more cost competitive, it is not necessarily good for the United States energy companies and economy in general.  An article regarding France’s recent abandonment of the carbon tax discusses that a carbon tax would put French companies at a disadvantage to other countries that do not have a similar tax.

In conclusion, I feel that the government providing tax incentives is a better way for renewable energy companies to enter the marketplace because it is fairer to all the companies involved.  While the fossil fuel companies are being hurt either way, having a carbon tax would penalize the companies much more severely, and possibly lead to economic difficulties in the US if other countries did not implement a tax.  Also, tax incentives give renewable energy companies more time to improve technology and lower costs so that in the future the companies can compete on their own.


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Carbon Taxes and Cap-and-Trade: Where Do Sports Fit In?

Over the past decade, fervent debate, a multitude of legislation, and global summits have centered on climate change.  Many bills such as H.R. 2454, or the “American Clean Energy and Security Act,” and S. 1733, or the “Clean Energy Jobs and American Power Act,” have laid the ground work for gradual restrictions on greenhouse gases and the transitioning of the U.S. economy away from fossil fuels to more environmentally acceptable energy sources.  While several methods to reduce greenhouse gas emissions are being considered, the most common policies are carbon taxes and the cap-and-trade system.  The central idea of emission reducing modes is to create ceilings for the production of environmentally harmful substances, specifically carbon dioxide, and to enforce penalties for exceeding the set limits.  Though the carbon taxing system is more generally applied and is therefore less-prone to manipulations by special-interest and other lobbying groups, it is significantly more restrictive in nature and thus less attractive than the cap-and-trade system, although both systems are highly scrutinized in the United States.

Since the majority of current legislation revolves around the cap-and-trade system, I wanted to learn precisely who would be regulated under such a policy.  As expected, the main focus for emission cuts include electricity producers, oil refineries, steel manufacturers, concrete producers, and many other companies that fall under the umbrella of “industry”.  The other somewhat unexpected area covered by the proposed system includes delivery services or companies that have significant distribution fleets.  Though the overall scope of these bills is to reduce the national levels of greenhouse gas emissions, their level of detail extends even to local, small producers and distributors.  At first glance these rather lengthy bills seem to be fairly all-inclusive, but it seems that little attention is given to recreational emissions.  While it is certain that transportation, including airlines, will be regulated in some way, there is little to no mention of treatment of recreation based emitters.

As a case study, I decided to do a rough estimation of the carbon dioxide emissions from NASCAR in a given year and to compare their output to regulated entities.  The analysis performed calculated carbon dioxide emissions for the three racing series covered under NASCAR: the Sprint Cup Series, the Nationwide Series, and the Camping World Trucks Series.  All necessary information was found using NASCAR’s website, which included racing mileage, stadium seating, and racer roster.  Any assumption made was taken as conservative as possible, and in some cases on the extreme low-end.  Assumptions made include 4.5 MPG for race cars, 27.5 MPG for fans with 3 passengers per car, fan travel distance of 100 miles, and 20 lbs CO2/gal gasoline for both race cars and fan vehicles.  Fan attendance included a high and low value corresponding to 150% of seating (estimates in-field seating which can be up to four times the stadium seating) and 75% of seating to simulate lower attendance due to depressed economy.

The emissions of carbon dioxide for racers and fans plus racers for the high attendance assumption were calculated to be 4.74 million pounds and 6.17 billion pounds per year, respectively.  The low level attendance emissions were found to be 6.09 billion pounds per year.  The previous values correspond to 0.0413% and 0.0408% of U.S. CO2 emissions accordingly. 

A direct comparison of NASCAR emissions can be made to a highly regulated industry such as refineries.  149 refineries in the United States produce roughly 277 million pounds of CO2 per year.  Therefore, annual carbon dioxide emissions for NASCAR correspond to approximately 3 average refineries.

While these values incorporate a number of assumptions, great care was taken to use only reported numbers.  Any non-reported values were estimated as conservatively as possible.  Therefore, the reported values should be accurate within an order of magnitude, especially since stadium lighting, racer transportation, and tire consumption were neglected.  I would like to conclude that, since the magnitude of output from racing emissions are approximately equivalent to a highly regulated industry, NASCAR CO2 emissions should also be regulated.

Though NASCAR lends itself easily to calculation, I would assume that other sports emit similar amounts of carbon dioxide due to stadium lighting, fan attendance, and event amenities.  The problem with implementing restrictions is how to evenly distribute the imposed burden.  Carbon taxing would apply directly to NASCAR due to fuel consumption, whereas the electricity burden for stadiums would be absorbed by electricity producers.  For cap-and-trade to be employed all recreational organizations should be included; however, the issue of stadium location would be problematic.  Most NASCAR stadium are located farther away from population centers than stadiums, therefore their corresponding burden would be greater than other sports.  In an effort of fairness, perhaps the most appropriate method is a combination of carbon taxes and cap-and-trade where most directly applicable.

The purpose of this analysis was to show that carbon dioxide emissions for recreational organizations should be regulated in the same manner as other industries since their emissions contribute similar amounts.  Creating policy to restrict sports emissions may require unique methods to incorporate fairness of application.











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