Energy taxation in the United States: A case study of the BTU tax proposal

The purpose of this case study is to review the BTU tax experience in the USA and to highlight the key issues that framed that national debate. Specifically, we focus on the central macroeconomic, environmental, distributional and political issues that determined the design of the tax and its ultimate fate. In doing so, we extract various insights and practical lessons concerning the use of energy taxes as a tool for achieving carbon dioxide emission reductions in the USA, either unilaterally or as part of an OECD wide initiative. Although the BTU tax was not designed solely to reduce carbon dioxide emissions, the carbon dioxide reductions implications of the tax were always an important element in its introduction and design. As much as one–fourth of the US carbon dioxide reduction goal would have been met by the BTU tax.