Greening the Tax Code
The close of 2010 witnessed the passage of one of the most significant pieces of tax legislation in nearly a decade, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The legislation elicited significant debate and controversy, in large part because Congress’ structuring of the Internal Revenue Code has an immense and direct impact on the nation’s spending habits and how financing is allocated in our market system. So what does any of this have to do with energy and environmental law? Often overlooked is the capacity of the tax code to help in remedying the nation’s energy and environmental problems. Below I identify one such energy and environmental problem, and how a revision to the tax code could play an important role in addressing this problem.
A startling juxtaposition emerges when comparing the investment practices of individuals saving for retirement to individual sentiments about renewable energy. A commanding ninety-two percent of Americans support more financing for renewable energy. However, the major financial and savings institutions that manage the assets of individuals often have the effect of directing significant financing to fossil fuel enterprises at the expense of renewable sources. For example, Fidelity is a prominent investment services firm that is the national leader in providing Roth Individual Retirement Accounts (“Roth IRA”) to individuals saving for retirement. Many of its clients select Fidelity mutual funds, such as its premier energy fund Select Energy Portfolio, for inclusion in their Roth IRA account. However, not a single one of this mutual fund’s top ten holdings are in the business of renewable energy.
The failure of the legal system and financial markets in directing capital to the renewable energy industry has stalled the critical transition from fossil fuels to sustainable energy sources. The nominal investments made by individuals saving for retirement is central to this insufficient and volatile financing. A congressionally enacted individual retirement account designed to induce populist investment in renewable energy would address the inadequate flow of financial resources that has constrained this industry.
This proposed savings instrument would be structured after the popular Roth IRA, however it would differ in that the only investments allowable for inclusion in the account (and the accompanying advantageous tax treatment), would need to be certified renewable energy investments. Implementation of this plan would require the collaboration of the Internal Revenue Service, Department of Energy, and Environmental Protection Agency, an innovative, collaborative effort that could channel much needed financing to the renewable energy industry.
 Yale Project on Climate Change, Climate Change in the American Mind 5 (2008).
 See Bruce Fraser, Alternative Energy Interest High Among U.S. Investor, Financial Advisor (June 14, 2007), http://www.fa-mag.com/fa-news/2932.html (according to a recent survey “nearly nine out of 10 investors agreed that alternative energy investments represent a dual opportunity to support the environment and generate profit at the same time. However, only one in five investors queried responded affirmatively that their financial advisor had discussed investing in alternative energy.”). Banks also function to perpetuate the flow of investor savings to fossil fuels. See Rainforest Action Network, Financing Global Warming 13 (2008) (In 2007 the five largest Canadian banks financed fossil fuel enterprises relative to renewable energy at a ratio of 14:1).
 Fidelity Retirement Accounts, http://personal.fidelity.com/products/retirement/?bar=p (last visited Mar. 1, 2010).
 Fidelity Select Energy Portfolio, http://personal.fidelity.com/products/funds/mfl_frame.shtml?316390103 (last visited Mar. 1, 2010).
 Id. (click on the link labeled “composition”).
 See Richard Paterson, Building a Sound and Sustainable U.S. Energy Policy 5–6 (2009). The current legal and economic regime creates systematic pressure for a rapid return on investment, an attribute that particularly challenges the renewable energy industry. See id.
 Jim Lane, The Big Shift: Four Principles for the Shift from a Fossil Fuel Based Society, Biofuels Digest (Feb. 13, 2010), http://biofuelsdigest.com/bdigest/2010/02/13/the-big-shift-four-principles-for-the-shift-from-a-fossil-fuel-based-society/ (“An energy finance system must permit individuals to participate, through investment, in de-risked large-scale pools of renewable energy assets . . . If the individual family only participates in the transition away from fossil-fuel based society through higher energy prices and through investments in fossil-fuel based companies, the transition cannot succeed.”).