Federal, State, and Local Tax Policies for Climate Change : Coordination or Cross-Purpose?

Although the United States has not yet enacted comprehensive climate change legislation at the Federal level, federal tax laws affecting energy have significant climate change effects. At the regional level, several groups of States have joined together in climate change legislation. Most States and many localities have tax laws affecting energy. State and local governments often enact legislation in response to federal actions, or to fill gaps in federal legislation. When national, state, and local governments all attempt to influence energy use through tax legislation, without coordination, inefficiencies and conflicts are bound to arise. In the absence of Federal leadership on climate change, a second best alternative is coordination between Federal, State and local efforts to encourage energy-wise behavior. This essay explores alternatives for coordination and potential challenges