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

Author

Listed:
  • Severin Borenstein
  • Lucas W. Davis
Abstract
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 find 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 find 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.

Suggested Citation

  • Severin Borenstein & Lucas W. Davis, 2015. "The Distributional Effects of U.S. Clean Energy Tax Credits," NBER Working Papers 21437, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21437
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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