The Need
Only when the federal energy tax incentives are extended long term (e.g., 8-10 years), are the private markets for these technologies truly allowed to develop. Our nation’s goal should be to provide incentives sufficient to allow this development to occur and then allow the incentives to expire. A long term extension gives the public time to modify its behavior to adopt and purchase energy-efficient products. Further, long-term tax incentives buy time for the private sector to develop technologies that eventually will make these programs cost effective on their own. For example, after a modest start three years ago, the energy efficient new homes credit is finally starting to show its value. Nationally, the credit experienced an almost three-fold increase in usage in 2007 over 2006 levels, as more home builders develop strategies to integrate energy efficiency components into their building processes.
Solutions
The following incentives, which encourage taxpayers to purchase products designed to conserve energy, should be retained and modified to extend their effective dates through 2016:
- Credit for home owners to retrofit existing homes with energy-efficiency improvements. Expires 2010.
- Credit for home builders to build new energy efficient homes. Expires 2010.
- Deduction for purchases of energy efficient property installed in commercial buildings. Expires in 2014
- Credit for purchases of energy efficient appliances. Expires 2011.
- Faster depreciation for the cost of smart electric meters and grid equipment for 10 years (instead of regular 20 years). No expiration date.
- Exemption from excise taxes for purchases of anti-idling devices and advanced insulation in heavy trucks. No expiration date.
- A comprehensive 10% investment tax credit for combined heat and power and waste energy recovery technologies, to motivate plant owners to save 20 to 40% more energy by utilizing waste heat from their processes.
