SHARING the WEALTH.

If We Shift Tax Burden From Work to Waste, Everyone Benefits

When the Exxon Valdez went aground in Prince William Sound in 1989, spilling millions of gallons of oil, it caused grievous environmental damage which will never be fully erased. But Exxon absolved itself of future responsibility with a $1 billion settlement. And because of the current tax laws, Exxon could deduct that settlement as a business expense, sticking taxpayers with $250 million of the cleanup.

All too often, the nation's tax policy is in direct conflict with environmental goals, including efforts to protect habitat and biodiversity. Few environmentalists give tax policy much attention, yet the tax code and budget policy in general may be the largest influences on conservation efforts. One tax break to the oil industry can create the opportunity and financial incentive to launch drilling expeditions in several sensitive habitats.

Our current internal revenue tax code dates back to colonial times and reflects colonial attitudes. It's based on the philosophy of people like Louis XIV's financial advisor, Jean Baptiste Colbert, who once said, "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." The tax code has since increased only in complexity, not in outlook. The original income tax law was 14 pages long; today, the code encompasses 7.5 million words, in 9,000 individual sections. Only four taxes are explicitly identified as "environmental," but many others have significant effects on the natural world.

When our nation was young, the emphasis was on opening up what seemed like a limitless wilderness, and little thought was given to natural resources. Despite our growing awareness of the long-term costs of environmental degradation, tax priorities haven't changed. In 1998, according to a Friends of the Earth report called Dirty Little Secrets: Polluters Save While People Pay, anti-environmental tax breaks, like those that subsidize oil exploration and logging in national forests, cost the nation $20 billion in a five-year period. Pollution, for the most part, is a business write-off. Eliminate these incentives and the resulting revenue would equal the federal income tax paid by 12 million low-income Americans, or the populations of both Arkansas and Montana.

Some tax shelters hit close to home. Professor Oliver Houck of Tulane University points out that the tax provision that allows Americans to deduct mortgage interest paid on second homes is a major impediment to the protection of threatened and endangered species. The subsidy, the largest U.S. tax break for development, cost the U.S. Treasury $43 billion in lost revenue in 1998. It is an economic motivator for vacation home construction, encouraging more of them (along with roads and related amenities) to be built in pristine or environmentally-sensitive regions. Such favorable circumstances also encourage the construction of larger homes, on larger pieces of land, with consequently longer access roads.

Oil and gas tax subsidies save the industries $1.3 billion per year, with oil companies getting subsidies for drilling on federal land and for exploring in deep oceans. One tax break allows large oil and gas producers to immediately deduct 70 percent of their "intangible" drilling and development costs--including expenses for wages, fuel, repairs, hauling, supplies and site preparation. The remaining 30 percent of costs can be deducted over five years. These quick tax deductions allow oil and gas companies to depreciate their assets much faster than they actually wear out, making new drilling projects very attractive and providing a $2.6 billion subsidy over five years.

Further incentives for the industry allow oil and gas investors to deduct losses even when they weren't substantially involved in the actual operation--a so-called "passive loss" deduction, which was eliminated for all other industries as part of the 1986 Tax Reform Act. This special loophole cost Americans $295 million in the last half decade.

In the real world, lucrative subsidies like these persuade oil and gas companies to drill in pristine areas they would otherwise leave alone, like the St. George Basin, off the west coast of Alaska in the Bering Sea. The region, a gateway for virtually every marine mammal, bird and fish species migrating through to the North Pacific, was estimated to have only a 28 percent chance of harboring commercially-viable offshore oil. Yet oil companies were willing to pay almost $500 million for exploration there, a dubious business proposition that makes sense only in light of the generous tax advantages.

The timber industry, like the oil and gas industries, enjoys its own special tax breaks that will cost ordinary taxpayers about $1.1 billion over the next five years. But many tax-shifting advocates believe that, rather than 'eliminating these tax breaks altogether, they should be reformed to reward sustainable timber practices.

But not all perverse polluter subsidies go to big corporations. Soccer moms and other sport-utility vehicle (SUV) owners are among the beneficiaries of the SUV exemption from the gas guzzler tax, which would run as high as $7,700 for a Lincoln Navigator. The tax code encourages the production and purchase of trucks and SUVs, now 51 percent of all vehicles sold, even though they spew 30 percent more carbon monoxide and hydrocarbons, and 75 percent more nitrous oxides, than ordinary cars. SUV sales are, of course, encouraged by extremely low gasoline prices, resulting in part from our timidity in imposing energy taxes.

Toxic Taxes

Mining companies also share the wealth; they are allowed to deduct exploration costs in the year they were incurred, rather than spreading them over the lifetime of the property (the usual practice for business investments). The practice encourages environmentally-destructive mining activity that would otherwise be dismissed as not economically viable. In recent years, mining companies have claimed more than $100 million annually in such deductions.

Mining is hardly an environmental activity; it irreparably scars the landscape and pollutes surface and ground water, destroying the habitats of many species of plants and animals, including those listed as endangered. There are more than 550,000 abandoned mines spread over 32 states, and many of them are listed on the Superfund National Priority List, with estimated cleanup costs in the billions, burdening taxpayers.

Another tax break for mining companies allows them to automatically deduct a certain percentage from their gross income to reflect their mines' dwindling value over time. This fixed depreciation, known as the percentage depletion allowance, results in a five to 22 percent reduction in annual taxable value (depending on the substance mined). The highest deductions are actually given to the most dangerous, toxic substances, including uranium, lead, mercury and asbestos, creating absurd contradictions in governmental environmental policy. Mining companies often recoup more money through this tax loophole than they actually invest in the mine! Government estimates show that taxpayers have, in effect, paid $1.5 billion in subsidies for mining operations through this deduction.

While taxpayers are subsidizing lead mining, local public health and environmental agencies are struggling with a vast children's health crisis caused by pervasive lead poisoning. Such poisoning, declining now because lead was removed from motor fuels, still affects nearly nine percent of U.S. preschoolers, 1.7 million kids. Federal agencies spend $200 million a year on prevention and testing programs. Mercury-contaminated fish have sparked another health crisis, even as the federal government subsidizes mercury mining.

In contrast to the tax breaks for extractive industries, solar and geothermal research and development received only $58 million in subsidies, $22.4 for pollution to every $1 for technological research and development. Other big polluters also get a free ride--the trucking industry, for instance, pays only 65 percent of what it should in taxes, according to some environmental groups. Agribusiness is favored with tax provisions that hurt small farmers and discourage sustainable and organic agriculture.

The Tax Shift

Environmentalists are proposing a "tax shift" to redirect the incentives in the tax code. The goal, as The Ecology of Commerce author Paul Hawken puts it, is to give people and companies positive incentives to avoid taxation. The green economists would purge the tax code of regulations and loopholes that clearly encourage environmental degradation, such as the $17 billion cost of tax-free parking. New levies would be applied on pollution-generators like products containing lead, gas-guzzling cars, ozone-depleting chemicals and the burning of fossil fuels. Taxes would be judged on their real contribution to the economy, in terms of job creation and productivity growth, equity for the people paying them, and resource conservation.

New and progressively-graduated taxes could shift 10 percent of the federal tax burden in the next 10 to 20 years. As defined by Alan Thein Durning and Yoram Bauman in their book Tax Shift, and by Redefining Progress in Tax Waste, Not Work, the levies could include:

* Carbon taxes to decrease the generation of greenhouse gases threatening worldwide climatic change. Governments could impose a tax--say, $50 per ton of carbon emissions--or combine a smaller tax with user fees or revenues from the sale of pollution credits;

* Pollution taxes to reduce the contaminants flowing into our rivers and streams, filling our landfills and eroding the quality of our soil. There are an estimated 250 human-made chemicals harbored in the living tissue of the average American;

* Point source taxes to reduce pollutants pouring forth from the outflow pipes and smokestacks of sewage treatment plants, factories and incinerators;

* Traffic taxes in the form of tolls imposed strictly during rush-hour congestion periods, could promote the use of carpools and mass-transit, as well as flextime work hours.

Tax incentives would be offered to invest in energy efficiency and technological improvements. For example, a system of new taxes and permits may dramatically reduce global warming gases and non-point source pollution, which is toxic runoff into rivers and streams. Taxes could be levied on development resulting in loss of biodiversity in wilderness areas. Other new taxes, some of which have already been proposed on the state level (see sidebar), are levies on carbon dioxide emissions and gasoline, taxes on pollutants, taxes on virgin materials and increased fees for using public resources.

Reforming tax laws is an important tool for conservation activists because tax policy is a blunt instrument and its influence on behavior sweeps broadly. Tax policy does not tell people or corporations how to behave; it merely creates incentives or disincentives, and it's a tool to complement environmental laws. Tax-based policies shift green reforms from "end of pipe" penalty solutions to economic incentives, a move that businesses should support because it reduces their regulatory burden.

Tax Confusion

Despite this, the public is confused about green taxes. Though a 1998 public opinion poll shows that an impressive 71 percent of American voters favor tax shifting as a way to reform the system (a sentiment that crosses party lines), voters have often been confused by well-financed media campaigns. In 1993, President Clinton proposed an energy tax that could have helped foster wind and solar power while reducing the budget deficit. The tax was defeated by two votes, however, because voters were convinced it was a bad idea by a $6 million oil and gas industry campaign. "Back then, we were novices at this," admits Gawain Kripki of Friends of the Earth. "But now the fine tuning and public education is ready."

One part of that public education effort is to demonstrate to Americans that they're getting unfairly taxed for working. More than 70 percent of U.S. families pay more in payroll taxes to support Social Security and Medicare than they do in federal income taxes. "Instead of taxing payrolls, America should tax pollution," says Redefining Progress founder Ted Halstead, who reckons that new levies on polluting industries could yield hundreds of billions of dollars in new revenues that could "strengthen our economy, boost wages and job creation, fix our troubled tax system and protect the environment, all without raising the deficit. What more could Americans want from a tax plan?"

The payroll tax is strikingly regressive. A worker making $30,000 a year is taxed at 15.3 percent, while his $300 a year boss pays only 5.7 percent of his income.

Some conservatives, who largely support flat taxes and other "reforms" championed by the rich, are cool to environmental tax shifting. Dan Mitchell, an economist with the Washington, D.C.-based Heritage Foundation, argues that "environmentalists think all energy consumption is bad. But I have no shame or embarrassment about energy consumption, because we need energy to help our economy grow." Like most conservatives, Mitchell inherently opposes any new taxation, but even he begrudgingly admits that green taxes have some validity. "If I were held down with a gun to my head and my left arm about to be cut off, and I had to raise taxes, there's little question that a tax on pollution or emissions would be the way to go," he says.

Though most politicians pay lip service to the environment, getting a sweeping tax shift through Congress is no easy task. Treasury Secretary Robert Reich, for instance, likes the concept of green taxes, but doesn't see it becoming policy soon. "I wish I could be optimistic, but politically, it's a very hard sell," he says. "Energy states are very powerful in Congress."

A congressional economist, who asked not to be identified, says the "clever" thing about tax shifting is that it doesn't shake out as a new burden on middle-class taxpayers. "You can make the average person break even, or come out ahead," she says. But she's skeptical about a tax shift's effect on the overall economy. "Can you reduce pollution without encouraging less production, and therefore less labor?" she asks, perhaps with the fate of laid-off coal miners in mind. Nada Eissa, a professor of economics at the University of California at Berkeley, thinks we can achieve that desirable end--if the right reforms are put in place. "An environmental tax where revenues are recycled to reduce payroll or income taxes could increase labor supply," she writes in a paper published by Redefining Progress.

Andrew Hoerner of the Washington, D.C.-based Center for a Sustainable Economy thinks that shifting the tax burden from work to pollution will boost the job prospects of working families all over the world, particularly in Europe, where environmental tax reform is becoming popular. "In the past," he says, "environmental, economic and social justice concerns have been seen as competitors for a limited pool of resources. Environmental tax reform is a member of an emerging family of policy approaches that harmonize these concerns by simultaneously promoting all of them."

The View From Europe

As the newly elected German government--a coalition of Social Democrats and Greens--takes control, another European nation will rev up its economy and protect the environment by shifting taxes onto pollution and taking pressure off existing taxes. Burdened by high social security taxes and unemployment, several European countries either have or are discussing increasing taxes on polluting fuels (like coal and gasoline), and using these revenues to reduce taxes on labor and employment to stimulate job creation.

"Germany is finally catching up with ecological tax reformers like the Netherlands, Denmark, Sweden and Norway," says Kai Schlegelmilch, project manager of the Climate Policy Division at Germany's Wuppertal Institute for Climate, Environment and Energy. Will the U.S. follow Germany's lead? Schlegelmilch fears that "increasing taxes in the U.S. is almost like committing political suicide." He suggests that "a very important first step is to phase out all environmentally-damaging subsidies, such as those for fossil fuels. But it has to be accepted that higher energy prices must follow." That may doom the reform right there. The powerful chairman of the House Ways and Means Committee, Bill Archer (R-TX), comes from oil country and views eliminating the billions of dollars in tax breaks enjoyed by oil and gas companies as a tax hike.

There are few Europe-wide green taxes, but many individual countries have successfully introduced them. Four main categories of green taxes are already in use:

* Fiscal environmental taxes are levied on waste and emissions. Sweden has placed taxes on carbon-based fuels and carbon dioxide emissions, as well as emissions from domestic airline flights. Denmark has instituted taxes to reduce waste generation and increase recycling and reuse.

* Incentive changes encourage less-polluting actions by taxing bad ones. Sweden taxes leaded gas and polluting diesel fuels, and synthetic fertilizer use. Nitrate emissions are charged at a rate four times that of regular emissions. France and Germany tax water pollution; revenues then are used to build new and better wastewater treatment plants.

* Cost-covering charges are levied on users for general waste and pollution. Germany has a tax on items as varied as hazardous wastes and disposable fast-food packaging. The Netherlands has a water pollution user tax, revenues from which build water treatment plants. It also taxes household wastes. Great Britain has a landfill tax, and uses the revenue to reduce assessments on payrolls.

* Specific cost-covering charges may also be levied, on everything from batteries to aircraft noise. France has implemented a sulfur dioxide tax and landfill fees, with the funds flowing into environmental investments. Denmark taxes pesticides, herbicides and fungicides, and is proposing taxes on the use of toxic heavy metals and chlorinated solvents. In January, Switzerland began taxing volatile organic compounds (VOCs) in order to reduce ground-level ozone; and high-sulfur heating oil will be taxed beginning July 1, with revenues going into the national health insurance fund. Other countries adopting green tax approaches include Korea, Taiwan and Singapore.

A Growing Consensus

The growing international agreement to shift the tax burden to polluting industries has as yet had little impact on the U.S., though green seeds have been planted in the states. The federal government raises $1.5 trillion in revenue each year, almost 90 percent of which comes from taxes on payroll, personal and corporate income. Through the incentives it creates, the tax code necessarily exerts a strong influence over the behavior of consumers, investors and businesses. But, all too often, these incentives lead to environmental harm.

Reforming the tax system now would have two benefits: The tax system would complement environmental regulation rather than frustrating it (as it now does); and the tax code could harness market forces so that they work for the environment, not against it. Given the large impact that taxes have, they could be a powerful tool for promoting sustainable development, while actually helping the economy and supporting labor. As the Worldwatch Institute puts it, "For progressives, [tax shifting] has the appeal of protecting the environment by making the polluter pay and reducing unemployment. For conservatives, it offers the advantage of using the market, rather than regulatory agencies, to protect the environment, and allows for cuts in much-resented income or sales

taxes that may inhibit constructive economic activity." And who could have a problem with that? CONTACT: Center for a Sustainable Economy, 1731 Connecticut Avenue NW, Suite 500, Washington, DC 20009/[phone]; Friends of the Earth, 1025 Vermont Avenue NW, Washington, DC 20005-6303/ [phone]; Redefining Progress, 1 Kearney Street, Fourth Floor, San Francisco, CA 94108/[phone].

RELATED ARTICLE: TAX REFORM: State by State

Though green tax reform isn't exactly becoming the law of the land, it is beginning to make inroads n the state level, where a blizzard of bills have been introduced and a healthy dialogue is building. Here's a look at some exciting developments in five states:

MAINE. Progressive financial ideas are alive and well Downeast: Maine has enacted some of the nation's strictest campaign finance reform laws. One of the most stalwart reformers is State Senator Peter Mills, the ranking Republican member of the Taxation and Labor Committee, who recently proposed that the State Planning Office study tax shifts to promote environmental objectives, including taxes on carbon emissions and other pollutants. The proposal was turned back on a technicality, but Mills wants to reintroduce it, and is seeking bipartisan co-sponsorship.

The Maine Center for Economic Policy and the Mainewatch Institute are developing an advisory committee to develop and test tax-shifting proposals. The committee will have input from four panels, representing industry, stakeholders (from oil dealers to environmentalists), tax experts and economists, and regular citizens. From this process, a consensus bill that can survive in the state legislature is expected to emerge.

Though per capita energy use is high in frigid Maine, the idea of shifting taxes from income and onto polluters has considerable appeal in a state with famously independent voters.

MICHIGAN. Through the work of Democratic State Representative Kirk Profit, the Michigan legislature has its own Subcommittee to Explore the Environmental Sensitivity of the Michigan Tax Code. Hearings began in 1997, and the committee soon evolved eight bills that offered tax incentives for a variety of positive activities. Through the legislation, manufacturers could earn tax credits for energy conservation, and for operating fleets of alternative fuel cars. Four of the eight bills were enacted during the last legislative session, including provisions to offer tax credits for the purchase and installation of recycling equipment; to partially exempt "green" car buyers from sales tax; and to completely exempt them from the state use tax.

The emphasis on credits for alternative fuel cars is particularly interesting in auto-dependent Michigan, where Congressman John Dingell, a Democrat from Dearborn, has called the Kyoto accords on global warming "a giant Ponzi scheme."

MINNESOTA. Green tax reform has an interesting history in Minnesota. It first appeared, in the form of a modest proposal for a .$6 per ton carbon tax to fund wind power incentives, in 1992. The group that issued that proposal, Minnesotans for an Energy-Efficient Economy, has since become very active in working for a tax shift, often in coalition with other state groups.

In 1996, a far-reaching Economic Efficiency and Pollution Reduction Act was proposed by State Senator Steve Morse and State Representative Ann Rest. The bill would have cut payroll and property taxes by $1.5 billion a year, with the revenue replaced by pollution taxes. It was defeated in a tie committee vote, and then reintroduced in revised form the following year. In its second incarnation, it completely eliminated property taxes, and used carbon tax revenue to pay for education. That version was withdrawn before a vote could be held.

Public opinion polls show that a majority support environmental tax shifting, particularly if it lowers property tax bills. Despite studies showing that industry costs could decrease if tax reforms were implemented, opposition to tax shifting in Minnesota has been vocal. The loudest voices against it are extractive industries, the Teamsters Union and airlines.

OREGON. Oregon Governor John Kitzhaber is intrigued by tax shift proposals, and Convened an Environmental Taxation Subcommittee that presented recommendations at the end of 1998. Northwest Environment Watch estimates that a tax transfer in Oregon could reduce business and income taxes from 46 percent of state revenues to 14 percent, and eliminate all property taxes. Taxes on pollution, carbon and traffic would be added to the 12 percent of state revenues that are already raised by environmentally-conscious levies.

A plethora of proposals are pending in Oregon's legislature in 1999, including: a tax on pesticides; an environmentally redirected water permit pollution fee that penalizes polluters; and legislative funding for a large-scale tax-shift study. Some Oregon activists are even lobbying for a plan to return pollution tax revenue directly to taxpayers in lump-sum payments. "1 think there's definitely a chance to air these issues at a higher level than was there before," says Jeff Allen, executive director of the Oregon Environmental Council.

VERMONT. Vermont's Department of Public Service issued a report last summer entitled Fueling Vermont's Future: Comprehensive Energy Plan and Greenhouse Gas Action Plan. It is a strikingly progressive document that emphasizes pressuring the marketplace to produce more environmental results by including social costs as part of market prices.

In the report, the state agency examines what would happen if a carbon tax were imposed, with revenues returned to taxpayers via other tax cuts; and if motor vehicle registration and licensing fees were reduced in favor of fuel taxes. The report estimates that the two tax shifts together would cut fossil fuel use in the state by 16.2 percent as soon as 2000, while also stimulating a 38.7 percent increase in the use of renewable energy. Energy use for transportation would decline 30 percent, and emissions that cause acid rain and smog would fall 20 percent. In the long run, the report concludes, such tax shifts would increase employment and make energy more affordable.

In 1996, Vermont passed Act 60, a radical refinancing of public school education that includes among its provisions a four-cent-a-gallon increase in the state's gasoline tax. Earlier provisions that included a more far-reaching pollution and energy tax were killed in committee. A bill based on the state report, which would implement most of its proposals, including a $100 per ton carbon tax, is pending in the state legislature.

RELATED ARTICLE: BACK TO BASICS:

The Income Tax Progressive Roots

One argument against a tax shift is that the change would violate the spirit of the progressive income tax. It sounds plausible, but in reality the opposite is true. If Congress kept the income tax for higher incomes and shifted part of the rest to polluting natural resources, the result would be the kind of system that early advocates of the income tax intended.

The income tax grew out of decades of turmoil as the U.S. evolved from an agrarian economy to an urban one in the years before World War I. Robber barons still rode high. The gap between rich and poor was the widest in American history. And as the country prepared for the first time to enter a European war, a major new funding source was needed. President Woodrow Wilson proposed an income tax, but on whom would it fall?

Business interests and Republicans wanted a broad-based tax that fell heavily on the masses. This would "bring home to them the responsibilities of government," and thus ensure less government, as one editorial writer put it. The Wilson administration basically shared this view. Populist Democrats, by contrast, thought ordinary Americans were already paying their fair share--and more--through excise taxes and tariffs. They saw the European war as a boondoggle for arms makers and big financial interests, who should pay for their own adventure.

"Jingoes should pay for jingoism," said Warren Worth Bailey, congressman from Allentown, Pennsylvania and a former newspaper editor. If the wealthy had to pay for war, legislators like Bailey thought, there likely would be less of it.

A number of populist leaders were followers of homegrown economist Henry George, who argued passionately that the robber barons were exacting gain from resources nature had created for the common good. They were reaping what they did not sow, and this "unearned increment" is what government should tax.

The income tax that Congress enacted was pretty much in this populist mold. Along with an estate tax and a levy on munition makers, it aimed squarely at the highest incomes, and at corporate profits derived from land and natural resources. The new system continued more or less until World War II, when Congress dipped directly into the paychecks of working people for the first time.

It was Franklin Delano Roosevelt who imposed "precisely the kind of revenue system that business groups had sought from the Wilson administration in 1916," says Professor Elliot Brownlee of the University of California at Santa Barbara. In broad outline, FDR's system lives on today. Even if Congress were to restore high rates at the top, as progressives urge, the income tax burden on the working and middle classes would still be large. Given that history, shifting part of that burden from work to polluting industries can be seen as a kind of restoration, a return to something resembling what the populist framers of the income tax intended.

RELATED ARTICLE: PEOPLE vs. POLLUTERS: Who Pays?

Green tax reforms would have many important consequences, not all of them readily apparent. One of the reasons that support is gathering for a tax shift is its political transparency: there's something for every interest group, plus a lot for the environment. Here's an abbreviated look at some of the many benefits to revising our aging tax structure, along with some of the potential pitfalls.

NEW TAX LEVIES (and/or ELIMINATIONS OF SUBSIDIES)

... that consumers might pay

Tolls during rush hours
Direct taxes on gasoline
Higher taxes on land use
Taxes on virgin products
Taxes on home use of fossil fuels
Higher fees on use of public lands
(i.e. national parks)

... that business might pay

Pollution and carbon taxes
Taxes on fossil fuel and nuclear
energy use
Taxes on "point source" emissions
Royalties on minerals mined on
public lands
Other fees for use of public lands
for mining and/or grazing
Higher taxes on pesticides and
fertilizers

NEW TAX RELIEF MEASURES

... that consumers might enjoy

Reduced payroll/Social Security
taxes
Reduced income tax
Tax credits for carpooling, transit
use, energy-efficient car purchases
Lower state sales tax
Lower taxes on buildings and
improvements to buildings

... that business might enjoy

Income tax cuts
Payroll/Social Security tax cuts
Tax incentives for energy efficiency
Lower taxes on buildings and
improvements to buildings
Tax cuts for recycling
Tax cuts for promoting employee
transit use and/or vanpooling

SOCIAL/ ENVIRONMENTAL BENEFITS

... to consumers

Cleaner air and water
Less exposure to toxic chemicals
Reduced fossil fuel use
Increased disposable income
Lower health care costs
Greater job creation
Revitalized urban areas

... to business

New opportunities to save dollars
Level playing field competitively
Reduced regulatory/compliance
costs
Cheaper labor costs
Capture new markets in clean
products

POTENTIAL CHALLENGES (Even if outweighted by benefits)

... to consumers

Higher prices on fossil fuels
Transition costs of moving to
cleaner fuels and less energy-intensive
products
Fewer driving miles

... to business

Transition cost, i.e. phasing out
inefficient production plant
Higher energy costs
Increased regulation
Smaller pool of investment
capital
Finding optimum balance
between land, labor resources
and capital in production

--JONATHAN ROWE

BRIAN DUNKIEL is staff attorney and director of tax policy for Friends of the Earth; M.

JEFF HAMOND is director of fiscal policy at Redefining Progress; and JIM MOTAVALLI is editor of E.