incentives and policies for sustainable business programs: a perspective from ernst & young...
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Incentives and Policies for Sustainable Business Programs: A Perspective from Ernst & Young
September 7, 2012
Dominick Brook
Page 2 © 2010 Ernst & Young LLP
Disclaimer
► Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.
► Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited and of Ernst & Young Americas operating in the U.S.
► This presentation is © 2012 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of U.S. and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.
► Views expressed in this presentation are not necessarily those of Ernst & Young LLP.
Page 3 © 2010 Ernst & Young LLP
Circular 230 disclaimer
► Any US tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code (IRC) or applicable state or local tax law provisions.
► These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.
Page 4 © 2010 Ernst & Young LLP
Today’s agenda
► Relevance of Sustainability to businesses► Business implications
► Defining sustainability
► Business drivers
► Sustainability framework
► Sustainability incentives► Reduce - Energy efficiency
► Switch – Renewable energy and alternative fuels
► Innovation - R&D and Advanced Energy Manufacturing
► Offset – Clean Development Mechanism
► Traditional incentives► Legislative Update and Best Practices
Page 5 © 2010 Ernst & Young LLP
5
Business implications
5
Page 6 © 2010 Ernst & Young LLP
6
Defining sustainability
► This requires the balance of social, economic, and environmental demands — the three pillars of sustainability.
► The environment pillar is focused on environmental management of air, water and land systems , including greenhouse gas management.
► The social pillar includes management of issues such as ethical conduct, anti-corruption, labor practices, social justice and community engagement.
► The economic pillar reflects a need to decouple environmental degradation and economic growth. It also recognizes the value of providing jobs and tax revenue to promote local economies and infrastructure.
Environmental Economic
Social
Sustainable
Sustainability is a philosophy of meeting the needs of the present without compromising the ability of future generations to meet their own needs.
6
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Drivers of corporate response to climate change
Corporate response to climate change
Government regulation
Revenue generation
Expectations of stakeholders
► Environmental laws
► NGO operating guidelines
► Federal and state climate change programs
► Regional initiatives► Financial reporting
► New products and services
► Shorter payback models
► New business models
► Innovation investment
► Customers► Consumers► Investors► Employees► Media
Cost reduction
► High energy cost; expected increase in cost
► Operational efficiencies
► IT activity► Reduced waste► Cost of carbon
Page 8 © 2010 Ernst & Young LLP
Mapping incentives issues onto the climatechange response
Resource efficient buildings, plants,infrastructures
Carbon management
Behavioral switch
Low-carbon energy sources
Reduction ofresource intensity
of supply chain
Resource-efficientproducts
Sustainablesourcing of raw
materials
Managing stakeholderexpectations
Reduce
Switch
Innovat
e
Offset
• Energy-efficient buildings• Energy-efficient plants• Research into improved
processes• Investment in new technologies
• Fuel-efficient distribution
• Recyclable packaging• Research into
sustainable products
• Training work force• Educating
customers• Home working• Transport
• Climate/sustainability policies
• Non-financial reports• Audit of emissions• Clarity/robustness of
claims made
• Climate/sustainability policies• Non-financial reports• Audit of emissions• Clarity/robustness of claims
made
• Water• Education
• Green energy supplies
• Green energy generation
• ESCO’s• JV’s
• Energy efficiency in suppliers• Energy in transport• Recycling• Water saving
Page 9 © 2010 Ernst & Young LLP
Identifying the triggers of sustainability incentives
• Is your company investing in innovative R&D to create “green” products or services in response to market opportunities?
• Has you company invested in alternative vehicles for its fleet?
• Has your company invested in renewable energy?
• Does your company have or plan to install energy efficient property as part of a new building or a retrofit to an existing building (interior lighting, HVAC system, etc.)?
• Does your company have any LEED certified buildings?
• Does your company have diesel or gasoline powered vehicles/equipment that are used in an off-highway capacity?
• Has your company made significant capital expenditures to meet its energy efficiency goals?
Page 10 © 2010 Ernst & Young LLP
Today’s agenda
► Relevance of Sustainability to businesses► Business implications
► Defining sustainability
► Business drivers
► Sustainability framework
► Sustainability incentives► Reduce - Energy efficiency
► Switch – Renewable energy and alternative fuels
► Innovation - R&D and Advanced Energy Manufacturing
► Offset – Clean Development Mechanism
► Traditional incentives► Legislative Update and Best Practices
Page 11 © 2010 Ernst & Young LLP
Reduce: Energy Efficiency and LEED
Page 12 © 2010 Ernst & Young LLP
IRC Section 179D deduction - Overview
► Federal tax deduction of $0.30 to $1.80 a square foot of the building up to the total basis of the energy-efficient property placed in service
► Energy-efficient commercial building property includes:► Light fixtures and controls, not light bulbs► New or replacement HVAC systems and controls► New buildings or replacements windows, roofs and doors
► Property must meet energy efficiency targets (compared to ASHRAE 90.1-2001) and prescriptive requirements
► Effective 1 January 2006 through 31 December 2013 ► Obama has proposed revising the incentive as part of the
“Better Building Initiative”
Page 13 © 2010 Ernst & Young LLP
IRC Section 179D: value and benefit
Property Energy Efficiency (Compared to ASHRAE 90.1-2001)
Benefit (per sq. ft.)
Lighting (LPD) 25 – 40% LPD reduction $0.30 - $0.60
Lighting (Energy Modeling) 20% energy cost reduction $0.60
HVAC/HW 20% energy cost reduction $0.60
Building Envelope 10% energy cost reduction $0.60
Lighting + HVAC/HW + Envelope 50% energy cost reduction $1.80
Value of 179D deduction @ 35% ETR
Lighting Only HVAC, Building Envelope, Lighting
200,000 s.f building $21,000 - $42,000 $126,000
500,000 sq. ft. building $52,500 - $105,000 $315,000
1,000,000 sq. ft. building $105,000 - $210,000 $630,000
2,000,000 sq. ft. building $210,000 - $420,000 $1,260,000
Page 14 © 2010 Ernst & Young LLP
Certification requirements
► Energy modeling:► Model the building with the minimum requirements of ASHRAE Std 90.1-
2001 then compare to actual installation to calculate % reduction in energy costs
► Third-party site inspection:► After the property has been placed in service ► Confirming that the building has met, or will meet, the energy-saving targets
and prescriptive measures contained in the design plans and specifications
► Letter of certification:► By “an engineer or contractor that is properly licensed in the jurisdiction in
which the building is located”
Page 15 © 2010 Ernst & Young LLP
IRC Section 179D deduction:government allocation
► The 179D tax deduction can be allocated by a government entity to the designer of a government-owned building
► Government-owned building:► Federal, state or local government or a political subdivision ► May include: public secondary schools; public or state universities
buildings; airports; stadiums; arenas; city parking garages; corrections institutions (jails)
► Designer:► Person that creates the technical specifications for installation
of energy efficient commercial building property► May include: architect, engineer, contractor, environmental consultant or
energy services provider who creates the technical specifications for a new building or an addition to an existing building
Page 16 © 2010 Ernst & Young LLP
Best building types for 179D
► Large Square Foot Buildings► WHY – deduction is dependent on square footage► Corporate HQ’s, Office Towers etc.
► Parking garages, warehouses, distribution centers► WHY – single light fixture type – large spaces► Significant improvement in high-bay lighting since 2001
► LEED-certified buildings► WHY – Energy Efficient designs
Page 17 © 2010 Ernst & Young LLP
IRC Section 179D Deduction – Government Allocation
► The 179D tax deduction can be allocated by a government entity to the designer of a government-owned building
► Government-owned building► Federal, State, or local government or a political subdivision ► May include: public secondary schools; public or state universities
buildings; airports; stadiums; arenas; city parking garages; corrections institutions (jails)
► Designer► Person that creates the technical specifications for installation of
energy efficient commercial building property► May include: architect, engineer, contractor, environmental
consultant or energy services provider who creates the technical specifications for a new building or an addition to an existing building
Page 18 © 2010 Ernst & Young LLP
State and Utility incentives overview
► There are three major types of incentive programs:► Prescriptive measures - Basic
► $30 per light fixture, $20 per occupancy sensor, $100 per ton HVAC► Generally there is a menu for pre-determined equipment and amounts► Applies to more basic, simple measures - lighting, HVAC, controls
► Custom Measures - Intermediate► Usually covers what the prescriptive programs don’t, similar pay scale► Customer must define, measure and validate the energy savings► Opportunities for industrial equipment & more creative measures
► Demand Response/Load Curtailment - Advanced► Customer makes a commitment to the utility on an annual basis► When the utility calls, the customer is to shed the agreed upon load
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Page 20 © 2010 Ernst & Young LLP
How to be successful with state and utility incentives
► What works► Discussions with actual facility managers, plant managers, energy
teams and design teams will uncover potential opportunities► Layer all available incentives to maximize ROI► Start where electric prices are highest in your portfolio► Start early – many cash programs require pre-approval► Use DSIREUSA.org as a starting point, but verify that programs
are still open
Page 21 © 2010 Ernst & Young LLP
State and Utility Energy Efficiency Incentives
► Illinois - Energy Efficiency Grants► The State of Illinois and local governments have appropriated funds
for energy efficiency grants for inducing solar energy and/ or wind energy projects. This incentive is negotiated with the state and/ or local government based on a project’s specifications.
► Illinois - Energy Now► An energy efficiency program administered by the State that
provides millions of dollars in rebates to public facilities that make large-scale equipment improvements to their electric and natural gas systems. ► Includes the Public Sector Energy Efficiency Aggregation Program.
► Indiana - Sustainable & Green Building Incentives► Fee waivers and other design incentives for developers that
incorporate sustainability goals such as energy and resource efficiency, public transportation, and landscape and site design.► Offered in Bloomington and Indianapolis
Page 22 © 2010 Ernst & Young LLP
Reduce – LEED Buildings
Page 23 © 2010 Ernst & Young LLP
Green Building (LEED™)
► LEED – Leadership in Energy and Environmental Design
► LEED is a green building certification
► The LEED rating system is a voluntary, consensus-based national standard for high-performance, sustainable buildings
► Members of the US Green Building Council (USGBC), representing all segments of the building industry, developed LEED and continue to contribute to its evolution
► The USGBC is not associated with the federal government and is a non-profit organization
Page 24 © 2010 Ernst & Young LLP
LEED for New Construction
► LEED-NC is a one-time certification
► Higher certification levels can be achieved by earning additional points
► LEED-NC evaluates and recognizes the performance of buildings in 5 accepted green design categories:
► Sustainable Sites
► Water Efficiency
► Energy & Atmosphere
► Materials & Resources
► Indoor Air Quality
Page 25 © 2010 Ernst & Young LLP
A sample of LEED incentives in the US
VA – Separate Class of Taxation
MD – Baltimore, Carroll, Howard & Montgomery Counties Property Tax Credit
Chatham County, GA – Property Tax and County Tax Abatement
Cincinnati, OH – 100% property tax exemption
El Paso, TX – Grants for Commercial Buildings
Harris County, TX – Partial Tax Abatement
Southern California Cities – Financial Incentives
Monroe County, NY – tax abatement extension
NM – Sustainable building tax credit
OR – Business Energy Tax Credit
NV – Partial Abatement of property tax
Anchorage, AK – Permitting Fees Refund
Indianapolis & Marion County, IN – 30% Rebate
Florida Cities – Financial Incentives, Higher DensitiesChandler, AZ – LEED Fee
Reimbursement
Honolulu, HI – property tax abatement
King County, WA – Grants
SLC, UT – Expedited Plan Reviews
Longmont, CO – Fee Rebates
NY – 10% increase on other incentives
IA – Tax Credit
Il – Partial Funding
Page 26 © 2010 Ernst & Young LLP
LEED for New Construction
► Density Bonus► Expedited permitting► Fee Waivers/rebates► Grants/tax incentives► Utility Rebates
Page 27 © 2010 Ernst & Young LLP
LEED for existing buildings (LEED-EB)
► LEED has concentrated in new construction but existing buildings certified under LEED-EB have proven to lower operational costs
► The most important aspect when considering LEED EB is energy efficiency► Measured through EPA’s Energy Star Portfolio Manager► If a prospective building’s energy efficiency is at top quartile
performance, LEED-EB is much easier to achieve and /or a higher LEED level may be pursued
► Buildings that are already energy efficient may require very little beyond the required documentation, and adoption of policies and procedures to meet LEED-EB requirements
Page 28 © 2010 Ernst & Young LLP
Incentives for LEED for Existing Buildings
► Incentives available for the retrofit and adoption of policies and procedures in areas of three states:► New Mexico (Income Tax Credit)► Maryland (Property Tax Credit)► Virginia (Reduce Property Tax Rate)
► Other incentives:► Grants► Registration and certification fee reimbursement► Enhanced market values► Higher rents► Branding/Marketing► Utility Rebates► 179D/48
Page 29 © 2010 Ernst & Young LLP
Today’s agenda
► Relevance of Sustainability to businesses► Business implications
► Defining sustainability
► Business drivers
► Sustainability framework
► Sustainability incentives► Reduce - Energy efficiency
► Switch – Renewable energy and alternative fuels
► Innovation - R&D and Advanced Energy Manufacturing
► Offset – Clean Development Mechanism
► Traditional incentives► Legislative Update and Best Practices
Page 30 © 2010 Ernst & Young LLP
Switch- Renewable Energy/Alternative Fuels
Farm Picture
Page 31 © 2010 Ernst & Young LLP
Renewable Energy Investment Tax Credit (IRC §48)
► Equal to the energy percentage (30% or 10%) of the basis of each energy property placed in service during the tax year
► 30% Tax credit for:► Fuel Cells; Solar Energy; Small and eligible large wind; Closed
and open loop biomass and other eligible renewable systems► 10% Tax credit for:
► Geothermal, Micro-turbine, Combined heat and power, and Thermal ground-water energy
► Under the 2009 Stimulus Bill taxpayer can elect to take an investment tax credit of 30% rather than a production tax credit for wind, geothermal, biomass or hydropower
► Previously the basis of investment on which credit applied was reduced by other “subsidized energy financing”► Under H.R.1, the 2009 Stimulus Bill, this has been eliminated and
the credit can be taken on the full investment
Page 32 © 2010 Ernst & Young LLP
ARRA 1603 Grant in lieu of the ITC
► Extended by the tax cut extenders act in December 2010 through to 12/31/2011
► Converts a Section 48 ITC to a cash grant
► Can qualify if construction begins before 31 December 2011 and the property is placed in service before relevant credit deadline► Two safe harbors, continual construction, and 5% expended
before year end
► Application due 10/1/2012
Page 33 © 2010 Ernst & Young LLP
Renewable Energy Production Tax Credit (IRC §45)
► 2.2/1.1¢ per KWh credit for electricity produced by the taxpayer from qualified energy resources at a qualified facility and sold by the taxpayer
► Qualifying facilities through 31 December 2013► Closed-loop biomass, open-loop biomass, geothermal, small irrigation,
hydropower, landfill gas, waste-to-energy and marine renewables
► Wind placed-in-service date through 31 December 2012 ► AMT exempt for the first 4 years of the 10 year period► Under the 2009 Stimulus Bill the taxpayer can now elect to
take an 30% investment tax credit under Section 48 instead of a production tax credit
Page 34 © 2010 Ernst & Young LLP
Tax credit monetization
► As long as the US government continues to subsidize renewable energy and climate change through the taxcode those companies without large tax liabilities will needto monetize
► Many tax credits can be monetized as long as the monetization structure is in place prior to credit being generated
► Tax credit monetization tends to be a complicated process as transactions are not cookie cutter, therefore it works best for transactions with a large amount of credits
► Expiration of Section 1603 will result in increased activity around tax credit monetization
Page 35 © 2010 Ernst & Young LLP
State and Utility Incentives
► Vary greatly by state:► Corporate tax credits► Sales tax exemptions► Property tax exemptions► Utility rebates/production incentives► Grants► Loans
Page 36 © 2010 Ernst & Young LLP
State Renewable Energy and Alternative Fuel Incentives► Illinois - Solar and Wind Energy Rebate Program
► Offered by the State of Illinois to encourage investment in smaller scale solar and wind energy systems.
► The program offers incentives up to 30% of the project cost for business applicants with a maximum rebate of $30,000.
► Indiana - Renewable Energy Property Tax Exemption► Property tax exemption offered on systems that generate energy
using solar, wind, hydropower or geothermal resources. ► Includes entire renewable energy system and affiliated equipment
that is unique to the system, including equipment for storage and distribution.
► Indiana - Sales and Use Tax Exemption for Electrical Generating Equipment► Equipment, machinery, and tools used in the production of
renewable electricity are exempt from the State’s gross retail tax.
Page 37 © 2010 Ernst & Young LLP
Today’s agenda
► Relevance of Sustainability to businesses► Business implications
► Defining sustainability
► Business drivers
► Sustainability framework
► Sustainability incentives► Reduce - Energy efficiency
► Switch – Renewable energy and alternative fuels
► Innovation - R&D and Advanced Energy Manufacturing
► Offset – Clean Development Mechanism
► Traditional incentives► Legislative Update and Best Practices
Page 38 © 2010 Ernst & Young LLP
Innovation – R&D and Advanced Energy Manufacturing
Page 39 © 2010 Ernst & Young LLP
Innovation
► Internal product development► Alternative energy► More efficient products► Cleaner products► Battery technologies
► Joint development efforts► Contract research► LEED certifications
► Process improvement► Reduce emissions, reduce scrap► Cleaner manufacturing process/line► EPA Superfund program
Page 40 © 2010 Ernst & Young LLP
Department of Energy Grant Funding
► Provides grants for energy efficiency and renewable energy projects
► In FY2009, more than $2.2 billion in funding was awarded to businesses, industries, universities and others
► Funding Opportunity Announcements (FOA) made throughout the year to solicit grant applications for certain projects or technologies
► Check regularly for opportunities ► Application periods are typically 60 days or less
Page 41 © 2010 Ernst & Young LLP
48C tax credit for advanced energy manufacturing
► ARRA created a new allocated 30% ITC for facilities engaged in the manufacture of green products
► Potential qualifying assets and technologies :► Technologies that create energy from renewable resources (sun, wind, etc.)► Energy storage technologies (fuel cells, microturbines, etc.) used in
electric vehicles► Advanced transmission technologies that support renewable generation► Renewable fuel-refining or blending technologies► Energy conservation technologies (advanced lighting, smart grid)► Plug-in electric vehicles and vehicle components (motors, generators)► Property to capture and sequester carbon dioxide► Other property designed to reduce greenhouse gas emissions
Page 42 © 2010 Ernst & Young LLP
Other Innovation Incentives
► Additional opportunities around capital expenditure plans► R&D Loans and Credits► State Energy Program Funding► Traditional Incentives – Job creation tax credits, Cap-Ex related
incentives, property tax abatements, sales tax abatements
Page 43 © 2010 Ernst & Young LLP
Today’s agenda
► Relevance of Sustainability to businesses► Business implications
► Defining sustainability
► Business drivers
► Sustainability framework
► Sustainability incentives► Reduce - Energy efficiency
► Switch – Renewable energy and alternative fuels
► Innovation - R&D and Advanced Energy Manufacturing
► Offset – Clean Development Mechanism
► Traditional incentives► Legislative Update and Best Practices
Page 44 © 2010 Ernst & Young LLP
Clean Development Mechanism summary
What is the Clean Development Mechanism (CDM)?•A mechanism under the Kyoto Protocol that allows developed countries with a GHG reduction target to invest in projects that reduce emissions in developing countries.
•CDM investments give rise to a project revenue stream via the sale of CERs, or Certified Emission Reduction units from the CDM.
•Standardized CDM project cycle must be complied with, as well as the requirement for the project to meet the ‘additionality’ concept
•As of September 2011, there are 6,930 projects in the CDM pipeline, 3,492 of which are registered
Page 45 © 2010 Ernst & Young LLP
► Kyoto Protocol is the first international treaty in
which nations of the world agreed to undertake
targets in emission reduction
Classification of signatory countriesSet targets for reducing emissions
Kyoto Protocol
CopenhagenCancun
Flexibility Mechanisms to facilitate Low Carbon Growth
► The Protocol proposed flexibility mechanisms to enable participation of both Annex I and Non-annex I countries
in jointly reducing emissions globally
► Three flexibility mechanisms proposed –
► Clean Development Mechanism (CDM)
► Joint Implementation (JI)
► International Emissions Trading (IET)
► Nations agreed on an average
reduction of 5.2% of 1990 levels of
emissions of Greenhouse Gases
(GHGs)
► The Protocol recognized the concept of ‘common
but differentiated responsibilities’ in reducing
emissions
► Annex I countries received targets to
reduce emissions by 2012 (commitment
periods) while Non- annex I countries
did not have a target
Offset projects – Clean Development Mechanism
Page 46 © 2010 Ernst & Young LLP
UNFCCC / EBIssues CERs
ProjectIdentification
CDM Documentation
Validation by DOE
Registrationwith UNFCCC
ERPA
Generation ofCarbon credits
Project Operation
ProjectConstruction
Verification/Certification by DOE
CDM project promoter
Buyer of CER
Endorsement by DNA
CER
1 2 3Project
implementation CER TransactionKyoto approvals
Key CDM process steps are demonstrated in the diagram below
Clean Development Mechanism procedure: Availing carbon credits
Page 47 © 2010 Ernst & Young LLP
Today’s agenda
► Relevance of Sustainability to businesses► Business implications
► Defining sustainability
► Business drivers
► Sustainability framework
► Sustainability incentives► Reduce - Energy efficiency
► Switch – Renewable energy and alternative fuels
► Innovation - R&D and Advanced Energy Manufacturing
► Offset – Clean Development Mechanism
► Traditional incentives► Legislative Update and Best Practices
Slide 48
Qualifying Events for Traditional Incentives
► Create new business operations► Construction/purchase/lease of new facilities► Purchase of new machinery/equipment► Infrastructure improvements► Hiring and training of new employees
► Expand, realign or relocate existing facilities► Construction/purchase/lease of new/expanded facilities► Purchase of new machinery/equipment► Infrastructure improvements► Hiring/retention of new/existing employees► Training of new/existing employees
► Maintain existing facilities► Retaining existing workforce► Hiring due to employee turnover► Training of new and existing employees
Slide 49
Traditional Incentives: Opportunities
• Sales & Use tax exemptions/refunds
• Federal and state EZ Credits
• Federal and state research and development credits
• Capital investment tax credits
Tax Incentives
Training Benefits
• Training grants for prospective training expenditures
• Development and implementation of training programs through state agencies
• Training tax credits (retroactive or prospective)
Hiring Incentives
• Wage rebates, job creation grants and credits, employment related tax incentives
• WOTC/WtW• State point-of-hire
credits• Hiring and
employee screening assistance
PropertyTax Relief
• Negotiate real and personal property tax exemptions
• Structure Industrial Revenue Bonds (IRBs) for favorable property tax treatment
• Secure Tax Increment Financing (TIF) arrangements
• Property tax abatement
Non-Tax Incentives
• Infrastructure grants/assistance
• Low cost financing for capital expenditures
• Utility discounts• Waiver of permit
fees• Expedited permits• Free or discounted
land/building
“Green” Incentives
• Energy efficiency/GHG reduction incentives and credits
• Incentives for LEED-certified buildings
• §179D deductions• R&D and Manu.
incentives for green products
• Incentives for production of green products
New business operationsExpand, realign or relocate existing facilitiesMaintain existing facilities
Page 50 © 2010 Ernst & Young LLP
Today’s agenda
► Relevance of Sustainability to businesses► Business implications
► Defining sustainability
► Business drivers
► Sustainability framework
► Sustainability incentives► Reduce - Energy efficiency
► Switch – Renewable energy and alternative fuels
► Innovation - R&D and Advanced Energy Manufacturing
► Offset – Clean Development Mechanism
► Traditional incentives► Legislative Update and Best Practices
Page 51 © 2010 Ernst & Young LLP
2012 Legislative update
► Solyndra – new scrutiny on Sustainability-focused incentives► With cap and trade less likely in the US, tax incentives to
encourage renewable energy/energy efficiency may become more likely
► Incentives from states declining – more focus on federal incentives► Expired Incentives
► Alt. Fuel Tax Credit – Expired► Alt. Fuel Infrastructure Tax Credit – Expired► 1603 Grant in Lieu of tax credit
► Proposals/proposed extensions► Obama’s Better Building’s Initiative/179D► 48C extension – Introduced in multiple bills in last congress but not
based. Obama proposed $5B extension
Page 52 © 2010 Ernst & Young LLP
Best Practices
► Understand what your company’s sustainability goals are and who is accountable for accomplishing them
► Ensure Tax is talking to Sustainability, Facilities and Operations ► What is being planned? What is being considered?► What would they like to do if ROI/payback period was right?
► Don’t limit yourself to traditional green incentives, also consider: ► Property tax abatements, sales/use tax exemptions, EZ
benefits, cash grants, DOE grants
Page 53 © 2010 Ernst & Young LLP
Best Practices
► Aggregate green spend with general capital spend► New product lines? System upgrades?► Retention incentives? Leverage multiple facilities?
► Integrate your sustainability strategy at all levels across the organization► Places company at a competitive advantage► Better able to:
► Identify relevant incentives, grants and subsidies► Develop an environmental sustainability platform that reflects
broader business goals► Increase profits by improving the ROI and reducing the
investment payback period
Page 54 © 2010 Ernst & Young LLP
ImplementIntegrate Identify
With other departments
within the organization in
order to …
Sustainability initiatives and expenditures that trigger
incentives ...
Process to secure tax credits and
other related incentives
Best Practices
Page 55 © 2010 Ernst & Young LLP
Questions
Page 56 © 2010 Ernst & Young LLP
The presenters would like to thank you for your participation and feedback!
► Dominick Brook► Columbus, Ohio► +1 614.232.7375► [email protected]