While some GOP lawmakers in the House and Senate wanted to kill federal subsidies for electric vehicles, wind, and solar power, the final version of the tax bill keeps the wind Production Tax Credit (PTC), the solar Investment Tax Credit (ITC), and the electric vehicle tax credit. The bill does kill the nuclear and “other” technology credits (geothermal, for example), and may reduce the tax equity value of the wind and solar credits.

Tax equity is the main financing tool for wind and solar projects, making up to forty to fifty percent of the funds for the average solar project and fifty to sixty percent of the funds for the average wind farm. The reduction of the corporate tax rate also means that there is less tax equity to use for renewable energy projects.

The Base Erosion Anti-Abuse Tax (BEAT) initially made the renewable energy sector very, very nervous, but a fix to that in the final version of the bill has many breathing a cautious sigh of relief. Essentially, the BEAT provision would require multinational companies to have two calculations of their taxes owed, one based on ten percent of a companies taxable income, and the other determining tax liability minus any tax credits, such as those from renewable energy. Multinational corporations would have been required to pay the difference if one figure ends up lower than the other, and this provision would have essentially eliminated tax incentives for investing in renewable energy. However, in the final version of the bill, energy companies will be able to offset eighty percent of that tax. This amendment, however, only lasts until 2025.

Beyond the loss of the “other” renewable energy credits for geothermal, nuclear, and other sources of energy, the main concern with the final version of the tax bill is that it will make the math for renewable energy tax credits more complicated and less attractive to energy companies. Moreover, the bill is also a huge boon to the oil, coal, and gas industries, who hailed the lower corporate tax rate as a victory. The bill also includes a controversial provision to allow oil drilling in the Alaskan Arctic National Wildlife Refuge (AANWR), a move hailed by Alaskan Senator Lisa Murkowski as an important step for US energy independence, while environmentalists counter that drilling in AANWR will do irreparable damage to wildlife and millions of acres of wilderness.

Carbon is the leading cause of global climate change, and carbon pricing offers a tangible, financial penalty greenhouse gas emissions. According to many economists, climate change is a “market failure.”Society at large bears the cost of emitting CO2, while the polluters accrue the benefits.

The EPA and other government agencies use estimates of the social cost of carbon (SC-CO2), a dollar value given to measure the long term damage caused by of a ton of carbon in a year, to weigh the potential economic effects of climate change and climate change policy. SC-CO2 is intended to be a fully comprehensive measure of the economic effects of greenhouse gas emissions, and includes changes in net agricultural productivity, human health, property damage, and changes in energy system costs, but the predicted changes are, some argue, missing crucial information due to the lack of information and research on the precise nature of the damage from climate change.

A March, 2017 executive order from President Trump took on the social cost of carbon. The executive order returns to using data from 2003 to calculate SC-CO2, and disbands the non-partisan group of scientists who estimate SC-CO2.

The two main types of policies use throughout the world to create a financial penalty for greenhouse emissions are a carbon tax and cap and trade. Both cap and trade and a carbon tax encourage the lowest cost emission reductions, generate government revenue, and provide an incentive for investors and entrepreneurs to develop low-carbon technologies.

A carbon tax creates a stable, direct price on greenhouse gas emissions, whereas a cap and trade policy establishes an emissions cap, or a set number of allowances of production of greenhouse gases each year. The carbon tax essentially sets the price of emissions and lets the market decide the emission reductions, whereas cap and trade sets the standard for emissions reductions and lets the market react. Both policies have their share of advantages and disadvantages, but cap and trade is arguably a favorite among environmental policy-makers while energy companies are usually on the record as preferring a carbon tax.

California has had a cap and trade program in place since 2013, and it is the fourth largest in the world. The state’s emissions trading system is projected to reduce greenhouse gas emissions from regulated carbon producers by at least 16 percent by the year 2020, and an additional 40 percent by the year 2030. 450 business responsible for 85 percent of the state’s greenhouse gas emissions are required to comply with the program.