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What is an Energy Tax?

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  • Written By: Patrick Roland
  • Edited By: R. Halprin
  • Last Modified Date: 02 December 2016
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An energy tax is an added charge to the price of items like oil and gasoline in an effort to encourage energy conservation. Energy taxes differ from country to country but typically reward conservationist efforts with tax credits and apply added taxes to items that produce greenhouse gases. The U.S. National Energy Act is a example of one such program. Many people, however, oppose taxes aimed at curbing the environmental impact of fossil fuels.

The idea of taxing forms of energy that contribute to environmental pollution has gained popularity around the world over the past several decades. Often an energy tax is part of a larger initiative aimed at protecting the environment. One such act was the National Energy Act of 1978. An energy tax act was part of the package, along with regulations in public utilities, regulations on natural gas and guidelines for power plants and industrial fuel usage.

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The energy tax that was part of the National Energy Act shares a lot of common aspects with similar laws and regulations that other countries have enacted. The tax is intended to encourage users of fossil fuels to shift attention toward more environmentally friendly choices by making the harmful fuels more expensive. Another way these laws may promote cleaner energy is by levying a tax onto the price of gasoline. An additional measure is known as a "gas guzzler tax," because it adds a steep additional charge to the purchase price of any automobile that does not exceed specific miles-per-gallon guidelines.

The main focus of this type of energy plan is to make inefficient fuels and transpiration less desirable. An energy tax also frequently rewards environmentally conscious decisions. Alternative fuels tax credits provide a one-time income tax deduction for the purchase of electric, hybrid, or alternative fueled automobile. A similar type of energy tax credit is offered by some governments for homes that choose to use a type of solar, wind, or geothermal energy to power a home.

The stated intention of most governments that enforce an energy tax is to help it citizens by keeping the environment clean. Not all people agree, however, with the decision. In many cases, an energy tax is met with criticism. One major concern is that these taxes will pose an economic hardship on the taxpayer. Another frequent argument is that taxing environmental factors will make no significant improvement in the environment.

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