Tax Credits For Low-Carbon Individuals & Businesses

December 24th, 2015 by Jake Richardson

Some of the questions posed for this year’s Masdar blogging contest are about a mutually beneficial relationship between government entities and citizens:

How can they partner to electrify transport?
How can they partner to switch to clean electricity sources?
How can they partner to get more people in transit and on bikes?
How can they partner to cut energy use?
How can they partner to reduce emissions from livestock?

There’s a simple answer to some of these questions: have governments create policies that reward individuals and businesses with tax credits when they consume and act in ways that produce less carbon.

For example, you don’t have to reduce emissions from livestock only, because you can reduce meat and animal products consumption by giving tax credits to consumers who eat more plants and less meat. The consumers would need to document their food purchases, and that might be inconvenient and even annoying initially, but eventually some people would change their behavior because they would want to save money on their taxes. Imagine if you could save $150 a year by having a mostly vegetarian or vegan diet. (There could obviously be some health benefits at the individual and societal levels.)

Similarly, purchasing and driving ULEVs, PZEVs, hybrids, and EVs should not only get tax credits upon the initial purchase, but for every year they are driven.

Most interestingly – how about a tax credit for those people who do not own any vehicles and use public transportation, ride a bike or walk? Some of these people don’t have much money, so they might be able to well utilize such a tax break, and they may as well be rewarded for not polluting as much as some other citizens. One of my former co-workers did not drive a car for 30 years, and not surprisingly, she saved tens of thousands of dollars. Why should someone like that not also be given a small tax credit every year?

For people who do own vehicles and drive themselves, how about using the car’s odometer and something like a smart meter that documents the number of miles driven, and then transmits that information to the IRS, or adds it to the IRS form that will be submitted so that vehicle owners who drive less than 10,000 miles or kilometers a year receive some tax credit for that?

There could also be a tiered system, so if you drive less than 5,000 miles or kilometers you receive an even greater benefit. It might also work to reduce vehicle registration fees for vehicle owners that only drive a certain number of miles each year or less. So, for a person who drove less than 10,000 miles in a year, there could be a 15% reduction in the vehicle registration fee. (This is just a hypothetical example.)

A similar kind of incentive could be created for homeowners who consume the least amount of electricity. If they are below a certain number of kilowatt-hours per year and that is documented by their utility, they can receive a reduction in property tax.

Additionally, for state tax reporting sometimes there is an option when taxes are filed electronically, to donate money for various charitable causes like cancer research or wildlife conservation.

An option for carbon offsetting could be added, so it would be very easy for a tax filer to select $10 or more for tree planting in order to help offset the amount of carbon that she or he generated that year. If this option were available at that point in the filing process, there would be more visibility for the low-carbon lifestyle.

Of course, these suggestions are hypothetical only – if carbon tax credits were actually implemented the details might be very different, but just like creative financing that happens sometimes for renewable energy projects to make them happen, tax credits for low-carbon lifestyles might be effective too.

Image Credit: Jan Seifert, Wiki Commons

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Tags: abu dhabi, low-carbon tax credit, Masdar, Masdar 2016 Engage Blogging Contest

About the Author

Jake Richardson Hello, I have been writing online for some time, and enjoy the outdoors. If you like, you can follow me on Google Plus.

Antony Berretti

The idea of individuals receiving tax credits is not new as in the UK this concept has been talked about for about 6 or 7 years now, but at a very low key level. I suggested in a report 5 years ago that communities would eventually be taxed similarly to the way we tax cars here. The greater the hp of a motor the higher the tax paid per annum. The problem is that governments can’t be trusted to manage the funds that this or any form of taxation produces. Our current Tory administration is an excellent example of poor governance where they take tax from motorists in millions every year for the improvement and maintenance of the road infrastructure, but of which only a portion goes to the actual road infrastructure and the rest goes to pet projects that have no value other than trying to buy votes for the next election to keep said party in power..
Personal Green Tax Valuation will be normal I think within 10 years in some or most European States in some form or, whether the administration of this form of incentive is successful depends on the willingness of states to leverage the savings and come down hard on those who openly try to avoid the changes society is attempting.
hybridbear

The headline made me think this was going to be about real tax credits & not just someone’s dream.
- http://zacharyshahan.com/ Zachary Shahan
  
  Same here 😛
Ross

The carbon tax credit could be the means of giving back revenue from an actual carbon tax on the use of fossil fuels.

Hit the polluters and spread the reward.
http://muckrack.com/dotcommodity Susan Kraemer

What excellent ideas. I like that it’s benefits for reductions rather than a carbon tax for carbon increases.

If the fees from a carbon tax are not used to cut more carbon use, then it could be a wash: ie if the fees are returned to people – the popular revenue neutral carbon tax – what’s to stop them using the funds to fuel more carbon intensive activities.

This elegantly rewards the good, but by reducing bills they would have had to pay.
Martin

Tax credits may be fine, but if there is a carbon tax, on all FF than it would be so much easier.
For example somebody who drives say 20.000 km/m a year would pay a lot more than somebody who drives 5.000 km/m a year, say with a carbon tax of $ 50 – 100 ton, at $ 50/t it would add about 11 c/l,, at $ 100/t 22 c/l.
So the incentive would be less cost if you drive less, additionally a lot of European countries have road fee, the bigger the engine the higher the fee, say a 1 l motor you pay $ 500 year,
But yes there have been incentives as well if you use public transit, you get a credit for say $ 50- 100 month from the tax department.
Or if you bike you get a $ 1000 credit from the tax department.
Or like they have done in some counties, free transit, cheaper for the government than building new roads, transit use went up 400 % overnight.