The tax treatment of oil and gas investment in the United States has been a contentious policy issue for decades. Against the backdrop of low oil prices and increased domestic production, this Council on Foreign Relations Press (CFR) Discussion Paper by Gilbert E. Metcalf models firm behavior in response to the potential loss of each of the three major tax preferences in the United States. The results of removing the preferences on energy prices, domestic production, and global consumption suggest that none of the three preferences directly and materially improve U.S. energy security or mitigate climate change, rather if eliminated, they could enhance U.S. influence to advocate for international climate action and generate fiscal savings.

The paper is available to download on the CFR website.