A Climate For Change?Understanding the tax implications of U.S. greenhouse gas regulation |
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A number of domestic and international considerations have led many political observers to conclude that the United States will take legislative action in the remainder of 2009 or in 2010 to address climate change, with a goal of achieving a gradual but significant reduction in greenhouse gas (GHG) emissions from their earlier levels by the middle of the century. Any broad effort by the federal government to dramatically reduce GHG emissions would be an extraordinary regulatory and tax development that would significantly impact businesses and consumers.
"A Climate for Change? Understanding the Tax Implications of U.S. Greenhouse Gas Regulation" describes general policy approaches to climate-change legislation and the resulting implications for tax policy. This report begins with a discussion of political and business considerations driving legislative action. Following this discussion, we turn to the largest component of the currently prevailing legislative approaches to climate change: a “cap-and-trade” program, which would seek to reduce GHG emissions by setting strict limits on the amount of GHGs that can be emitted under an allowance system and permitting the sale and purchase of allowances. Included in this discussion is a description of those GHGs that are commonly suggested for regulation under a cap-and-trade system.
After laying the groundwork for understanding cap and trade, we turn to the role of taxes in policy-driven efforts to directly limit GHG emissions. We begin by describing the debate that continues between advocates of a cap-and-trade approach and those who, as an alternative, would favor a direct tax on carbon and other GHGs. Following this discussion, we summarize the tax issues that will confront businesses if Congress adopts a cap-and-trade system, which will necessarily create new intangible assets worth hundreds of billions of dollars. Without further guidance, there will be significant uncertainty regarding the tax treatment of assets, liabilities and transactions arising as a result of cap and trade. Our report concludes with an overview of the issues that CFOs and tax departments should be considering now in order to prepare for what many business and political leaders consider to be an inevitable change.
Learn more from the full report in the PDF attached at the bottom of the page.
A Climate for Change?
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