Tax Incentives Matter: Wind Power Edition

By Joseph Lawler

This chart, from the Energy Information Administration, shows the power of tax incentives:

The wind production tax credit was scheduled to expire with the fiscal cliff in January. To be eligible for the credit, wind projects had to have begun commercial production by December 31st of 2012. As the chart shows, that meant that wind power companies got the job done in a hurry to take advantage of the deal: about 40 percent of the year's total production came online in December. As a result, last year the U.S. ended up adding more capacity for wind power than for natural gas.

As it happens, Congress extended the tax credit for another year. But this episode illustrates how responsive businesses can be to changes in tax rates.

Joseph Lawler is editor of RealClearPolicy. He can be reached by email or on twitter.

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