Energy Tax Credits Announced

August 17, 2009

More than $2 billion in tax credits, from the stimulus bill, will be available to some energy manufactures. The Treasury Department, in collaboration with the Department of Energy, will give an investment tax credit of 30 percent for the manufacture of “particular types of energy equipment”:

Qualifying manufactures will produce solar, wind, and geothermal energy equipment; fuel cells, microturbines, and batteries; electric cars; electric grids to support the transmission of renewable energy; energy conservation technologies; and equipment that captures and sequesters carbon dioxide or reduces greenhouse gas emissions.

While these credits at least don’t target one energy source (like solar), the government is choosing winners in the energy industry. And tax policy ought to be neutral toward industry players.

Assuming the need for carbon regulation, the best option for the government is to just increase the cost of dirty energy and let markets do what they’re good at-finding efficient ways to produce goods at given prices.

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