The Distributional Effects of U.S. Clean Energy Tax Credits

Severin Borenstein, Lucas W. Davis

Chapter in NBER book Tax Policy and the Economy, Volume 30 (2016), Jeffrey R. Brown, editor
Conference held September 24, 2015
Published in June 2016 by University of Chicago Press
© 2016 by the National Bureau of Economic Research
in NBER Book Series Tax Policy and the Economy

Since 2006, U.S. households have received more than $18 billion in federal income tax credits for weatherizing their homes, installing solar panels, buying hybrid and electric vehicles, and other "clean energy" investments. We use tax return data to examine the socioeconomic characteristics of program recipients. We fi nd that these tax expenditures have gone predominantly to higher-income Americans. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the program aimed at electric vehicles, where we fi nd that the top income quintile has received about 90% of all credits. By comparing to previous work on the distributional consequences of pricing greenhouse gas emissions, we conclude that tax credits are likely to be much less attractive on distributional grounds than market mechanisms to reduce GHGs.

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This chapter first appeared as NBER working paper w21437, The Distributional Effects of U.S. Clean Energy Tax Credits, Severin Borenstein, Lucas W. Davis
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