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RE: Tax exemption for environmental equipment



Melinda (cc: Burt and the P2Tech list)--

I am interested in the report you mentioned.  

Burt's question is very good.  

I think the devil is in the details of the tax incentive and the industry/technology/activity for which the tax incentive is pertinent.  Federal tax incentives for alcohol fuels helped create that industry (whether alcohol fuels are a net environmental positive is another discussion as is whether it is financially sustainable in the absence of tax breaks).  My understanding is that a number of wind and biomass power projects benefited significantly from federal 1.5 cents/kWh credits--however I'd wager that state use of public benefit charges and renewable portfolio standards are often more important.  Enthusiasts were buying hybrid cars before the alternatively fueled vehicle tax deduction was extended to them--but, if the deduction were to be extended, $2k income tax deduction would likely influence my next car purchase.

Between 1977 and 1985 there were various federal tax incentives for residential renewable energy and energy efficiency.  And during that time a fair number of fly-by-night companies installed poorly working solar water heaters, harming the image of solar thermal energy recovery.  Also the '70s-'80s rules were an example of how NOT to accommodate P2 type thinking.  The credits applied to add-on equipment such as weather-stripping, storm doors, and solar water heaters.  If you designed energy efficiency and solar into the building architecture you couldn't get a credit--I guess IRS didn't want to deal with deciding when a window is a window and when it's a passive solar energy collection device. 

It'll be interesting to see how NY's green building tax credits, MD's (and perhaps other states') sales tax exemptions for Energy Star products, and other tax provisions work.  And it'll be interesting to compare their effectiveness and cost-effectiveness to rebates that NY, NJ, and some others have for certain energy efficient equipment.  I'm sure that you're right that significant outreach and technical assistance are important.

Not many of these incentives appear to apply to industrial process P2.  

What may be a better type of tax incentive is to tax pollution and waste rather than to give tax breaks for reducing pollution and waste.

Anyway, just a few thoughts on the topic.

Cheers,
Rod

Rodney Sobin
Virginia Department of Environmental Quality
Postal: P.O. Box 10009, Richmond, VA 23240-0009
Street:  629 E. Main St., Richmond, VA 23233-2429
Tel. 804-698-4382	fax 804-698-4264  Rsobin@deq.state.va.us
DEQ Innovative Technology http://www.deq.state.va.us/innovtech
Chesapeake Bay Program Innovative Technology http://www.chesapeakebay.net/innovative.htm <http://www.chesapeakebay.net/innovative.html> 
Virginia Environmental Services Network http://www.vesn.org

	-----Original Message-----
	From:	Melinda Dower [SMTP:Melinda.Dower@dep.state.nj.us]
	Sent:	Wednesday, September 17, 2003 11:12 AM
	To:	wbhamner@cleanerproduction.com; p2tech@great-lakes.net
	Subject:	RE: Tax exemption for environmental equipment

	I have to agree wholeheartedly with Burt (and I've had several cups of
	java).  We (Prof. Robert Lake of Rutgers) did a good study on tax
	incentives and what kind would promote P2. The results showed that
	existing tax incentives for similar purposes (energy conservation and
	environmental treatment/control) were rarely, if ever, used. However,
	tax incentives when combined with a strong outreach and technical
	assistance effort could be beneficial.
	Unfortunately, I do not have an electronic copy of the report but can
	send hard copies if anyone is interested.
	Melinda Dower
	Office of Pollution Prevention and Right to Know
	N.J. Dept. of Environmental Protection
	(609) 292-1122

	>>> "Burton Hamner" <wbhamner@cleanerproduction.com> 09/17/03 10:05AM
	>>>
	I am curious about this whole concept.  Does anyone have evidence that
	a tax
	exemption for enviro equipment, or P2 technologies, really causes a
	reasonable number of companies (as in, more than 2 or 3), to actually
	make
	the investments that they would not make otherwise?  The benefits of
	the tax
	exemptions are not very significant compared to the whole cost, and
	the
	obstacles to investing in such equipment are significant and well
	known.
	Considering how much effort is needed simply to get a tax exemption
	like
	this in place and to implement it (with the review process for
	applicatoins
	etc), unless a LOT of companies are inspired to make investments that
	they
	would really not make otherwise (which is of course hard to
	demonstrate), I
	wonder if tax exemptions really make any difference.  The whole idea
	of
	market based mechanisms is that they move the market, not just one or
	two
	firms who would make the investment anyway and figure they can make a
	little
	extra money via the tax credit.  Does anyone have any data that shows
	how
	many  firms  made new investments in P2 or PC, stimulated by these tax
	credits?  Without such evidence, I am disinclined to believe that they
	are
	worth the effort.  And yes, I have already had my coffee so I am not
	just
	being cranky this morning.

	Burton Hamner, MBA, MMA
	Professor, Universidad de Pacifico
	Avenida Salaverry 2020
	Jesus Maria, Lima 11, Peru
	511-219-0100, x2354
	fax 511-219-0135
	email wbhamner@cleanerproduction.com 
	web http://www.cleanerproduction.com 




	-----Mensaje original-----
	De: owner-p2tech@great-lakes.net
	[mailto:owner-p2tech@great-lakes.net]En 
	nombre de Sobin Rodney
	Enviado el: Miércoles, 17 de Septiembre de 2003 08:49 a.m.
	Para: Tammy Allen; p2tech@great-lakes.net 
	Asunto: RE: Tax exemption for environmental equipment


	Tammy--

	It may be a bit out-of-date but back in '95 we put together a list of
	federal tax provisions that encourage innovative technologies.  The
	list is
	in U.S. Congress, Office of Technology Assessment, Innovation and
	Commercialization of Emerging Technologies ,OTA-BP-ITC-165, September
	1995
	on page 93.  The report is available via the OTA archives at
	http://www.wws.princeton.edu/~ota/   I've also appended an image of
	the
	table below but the image quality is not too good.

	Many of the provisions were/are energy related.  Again, be careful
	because
	the list is old so it may be worth looking at the US Code citations to
	see
	if they're still in force.  I'm not aware of any special credit or
	deduction
	at the federal level that would apply to purchase or installation of
	pollution prevention processes or pollution control equipment.

	In case you're interested, in Virginia there are some state tax credits
	and
	exemptions--sales tax exemption for pollution control equipment; income
	tax
	credits for recycling equipment, oil burning equipment, and for
	certain
	pollution control and disposal equipment. ... Not exactly the vanguard
	of P2
	policy is it?
	See http://www.deq.state.va.us/waste/ and click on "Tax Credit" on the
	lower
	left part of the page

	I hope this is useful.

	Rod

	Rodney Sobin
	Air Permitting Program Coordinator
	Virginia Department of Environmental Quality
	Postal: P.O. Box 10009, Richmond, VA 23240-0009
	Street:  629 E. Main St., Richmond, VA 23233-2429
	Tel. 804-698-4382	fax 804-698-4264  Rsobin@deq.state.va.us 
	DEQ Innovative Technology http://www.deq.state.va.us/innovtech 
	Chesapeake Bay Program Innovative Technology
	http://www.chesapeakebay.net/innovative.htm 
	<http://www.chesapeakebay.net/innovative.html>
	Virginia Environmental Services Network http://www.vesn.org 




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