Carbon Audit Threatens to Cause More Economic Pain

Published December 1, 2008

An ominous carbon audit of the U.S. tax code has been initiated, along with several expensive “green pork” programs, as part of the bailout legislation passed by Congress on October 3 and subsequently signed by the president.

Section 117 of the legislation directs the National Academy of Sciences to “undertake a comprehensive review” of the federal tax code “to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects.”

While the $700 billion bailout legislation has been billed as a necessary, if extremely expensive, government intervention to fend off a potential economic catastrophe, the carbon audit and supplementary green pork provisions promise to drain economic activity instead of stimulating it, analysts say.

More Expensive Fuels

Carbon dioxide emissions are a byproduct of industrial activities that use inexpensive fossil fuels. Economists agree the only way to reduce emissions significantly is to make fossil fuels more expensive.

A carbon audit with a long-term goal of forcing consumers to pay more for the same energy they purchase cheaply today is a surefire way to further punish the American economy, said economist Sterling Burnett, a senior fellow of the National Center for Policy Analysis.

“Congress can mandate all the audits they want, but they can’t change the laws of economics,” Burnett said. “The Europeans have tried the same types of carbon restrictions, and their economies have been paying a terrible price as a result. They are now backing away from greenhouse gas limits as fast as they can, for good reason.

“Yet we are now diverting attention away from the core economic problems that led to such bailout legislation, and instead directing analysts to figure out how we can emulate Europe’s failures,” Burnett continued.

More Subsidies

In addition to a comprehensive audit of the federal tax code, the bailout legislation extends favorable tax treatment to wind, solar, and other inefficient renewable fuel technologies.

The bailout legislation is thus directing resources away from taxpayers into the pockets of the economically non-competitive renewable power industry, which already is subsidized by federal taxpayers to the tune of more than $23 per megawatt hour of electricity produced.

“Only Congress could take a bill it considered too bad to pass, get a worse bill back, and then pass it with great fanfare a week later,” Burnett said. “They took a bad bill, made it 300 pages longer, and littered it with green pork and pet projects that have absolutely no stimulus effect on the economy.”

Burnett added, “Subsidizing inefficient technology that cannot economically compete is not a stimulus—it is a drain on economic resources. If we are teetering on the verge of an economic catastrophe, these provisions will be more likely to push us over the cliff than to pull us away from the abyss.”


James M. Taylor ([email protected]) is a senior fellow of The Heartland Institute and managing editor of Environment & Climate News.