The Senate Finance Subcommittee on Energy, Natural Resources, and Infrastructure held a hearing yesterday to examine how incentives for energy efficiency can fit into tax reform.
Steve Nadel, executive director of the American Council for an Energy-Efficient Economy, who testified before the committee, encouraged well-targeted energy efficiency tax incentives.
ACEEE analysis found that a five-year federal tax credit for several high-efficiency products and services cost the government less than one-tenth the cost of the energy resources saved over a 15-year period. According to ACEEE, the options with the best payback are tax incentives for commercial buildings (both energy-efficient new construction and energy-saving retrofits), energy-efficient new homes, heating and cooling equipment, and appliances, and combined heat and power systems.
ACEEE’s analysis reviewed tax incentives passed by Congress in 1978 and 2005 and found that the 2005 tax incentives were more effective than the incentives of the 1980s, which were too small and promoted tried-and-true energy efficiency measures that many consumers and businesses were installing on their own. The 2005 tax incentives were more targeted, emphasizing advanced technologies and paying higher incentives.
In his testimony, Nadel suggested that Congress should continue to target advanced technologies and practices that currently have a low market share with federal support over a defined period of time – usually around five years – so that the technologies’ market share can grow and prosper on its own after the tax incentives end.