Obama’s Accidental Emissions-Reduction Plan

Obama’s Accidental Emissions-Reduction Plan

September 07, 2010
Originally published in The National Review Online

President Obama’s imminent proposal to allow businesses to expense capital equipment through the end of next year is something my colleagues at CEI — particularly Marlo Lewis — have been advocating for some time. Not as “stimulus” (though it should have some stimulative effect — if not enough of one to overcome the negative effect of Obama’s refusal to maintain current income-tax rates in 2011). But as an emissions-reduction scheme.

The logic is simple, and the Dutch have shown (again, accidentally) how this works to reduce emissions: Businesses do not replace capital equipment as early or often as they might like because the tax code disincentivizes it — with depreciation schedules, instead of treating it like other business expenses. They therefore pospone purchasing newer, more efficient (and typically more energy efficient) equipment. Change that, and you should see newer technology put into use sooner.

In a way, this would simply pull inevitable technology investments forward on the calendar, in the same way that the cash-for-clunkers program did. But its still the smart thing to do. You get emission reductions without harming economic growth, but actually by encouraging it.

But there is a downside for Obama and the Dems: the political class do not get to reward their constituencies with cap-and-trade wealth transfers, the initiative won’t cause the cost of energy to “necessarily skyrocket,” and it won’t give politicians and bureaucrats expanded control over our lives.