The Wind Energy Production Tax Credit as an Alternative to a Carbon Tax

Jay Sher

Abstract


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.

Keywords


wind energy; tax credit; carbon tax; energy production; carbon dioxide reduction; social cost

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DOI: http://dx.doi.org/10.4079/pp.v20i0.11787