Tax Policy and Technological Innovation:
Key Partners in Productive Climate Change Policy

American Council for Capital Formation
July 18, 2001

(PDF)

INTRODUCTION

My name is Margo Thorning and I am pleased to present this testimony to the Senate Governmental Affairs Committee.

The American Council for Capital Formation represents a broad cross-section of the American business community, including the manufacturing and financial sectors, Fortune 500 companies and smaller firms, investors, and associations from all sectors of the economy. Our distinguished board of directors includes cabinet members of prior Republican and Democratic administrations, former members of Congress, prominent business leaders, and public finance and environmental policy experts.

The ACCF is now celebrating its 28th year of leadership in advocating tax, regulatory, environmental, and trade policies to increase U.S. economic growth and environmental quality.

We commend Chairman Lieberman, Senators Byrd and Stevens, and the Senate Governmental Affairs Committee for their focus on the role of technology in addressing climate mitigation. In our view, tax incentives should be a key component in the push to develop new technology. Given the ACCF’s extensive studies on the impact of tax policy on investment, my testimony will develop an aspect of what should become the foundation for an integrated approach to climate change policy. We believe that progress on technology proposals such as those in S. 1008, the “Climate Change Strategy and Technology Act of 2001,” is vitally important.

My testimony begins with a review of the macroeconomic consequences of near-term CO2 emission caps. It includes information from a number of analyses sponsored by the ACCF Center for Policy Research, the public policy research affiliate of the American Council for Capital Formation. These studies describe the economic costs of near-term caps on U.S. carbon emissions and the impact of emissions limits on the growth of the capital stock, as well as suggest tax incentives to encourage voluntary efforts such as the purchase of energy-efficient equipment and sequestration initiatives to reduce CO2 emissions both in the United States and abroad. (Summaries of the Center’s climate policy studies are available on our Web site, www.accf.org.) I also discuss issues related to long-term options for reducing CO2 concentrations. Finally, strategies for a cost-effective, long-term approach to CO2 stabilization are presented.

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