Eliminating Tax Expenditures with Adverse Environmental Effects

The document identifies four U.S. federal tax expenditures, each causing an annual revenue loss exceeding $1 billion, that contribute to greenhouse gas emissions by promoting fossil fuel use. These include the expensing of exploration and development costs, percentage depletion, the alternative fuel production credit, and the exemption of qualified parking expenses. While removing these provisions would improve economic efficiency and reduce the budget deficit, the author notes that the resulting impact on greenhouse gas emissions would be small, meaning such reforms must be part of a larger climate strategy.

• The U.S. federal tax code contains provisions known as tax expenditures that increase greenhouse gas emissions by incentivizing the production and consumption of fossil fuels.
• Four specific tax expenditures, each resulting in an annual revenue loss of more than $1 billion, are identified as drivers of fossil fuel consumption: the alternative fuel production credit, percentage depletion, expensing of exploration and development costs (which encourage domestic production), and the exemption of qualified parking expenses (which encourages automobile commuting).
• While scaling back or eliminating these tax expenditures would reduce the budget deficit and promote economic efficiency, the impact on greenhouse gas emissions would be small, necessitating a broader strategy to combat climate change.

APA

World Resources Institute (n.d.). Eliminating Tax Expenditures with Adverse Environmental Effects. https://www.wri.org/research/eliminating-tax-expenditures-adverse-environmental-effects

Chicago

World Resources Institute. Eliminating Tax Expenditures with Adverse Environmental Effects. n.d. https://www.wri.org/research/eliminating-tax-expenditures-adverse-environmental-effects.

Wikipedia

{{cite report |author=World Resources Institute |title=Eliminating Tax Expenditures with Adverse Environmental Effects |url=https://www.wri.org/research/eliminating-tax-expenditures-adverse-environmental-effects |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldresourcesinstitutendeliminating, author = {{World Resources Institute}}, title = {{Eliminating Tax Expenditures with Adverse Environmental Effects}}, institution = {World Resources Institute}, url = {https://www.wri.org/research/eliminating-tax-expenditures-adverse-environmental-effects}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }