Congress urged to adopt long-term structural energy-efficiency market changes

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Testifying at a Sentate hearing on the appropriate use of the federal tax code for investments of energy efficiency and tax reform, Steven Nadel, executive director of the American Council for an Energy-Efficient Economy (ACEEE), said that well-targeted energy-efficiency tax incentives will result in significant energy savings and get more energy-efficient products into the market faster.

This contention was cited as the result of an analysis by ACEEE which 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. The analysis reviewed tax incentives passed by Congress in 1978 and 2005. ACEEE's conclusion was that the 2005 tax incentives were more effective than those of the late 70s and early 80s. The latter were too small and promoted proven energy-efficiency measures that many consumers were already installing on their own. The 2005 tax incentives were more targeted toward advanced technologies and paid higher incentives.

According to ACEEE, the options with the "most bang per buck" 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.

Nadel suggested in testimony that Congress should continue to target with federal support advanced technologies and practices that currently have a low market share. With federal support of this goal for five years, the technologies' market share can grow and prosper on its own after tax incentives end.

"The most useful tax incentives target long-term structural changes in the market, using temporary federal assistance to build the market for energy-efficient products so that tax incentives can be phased out," Nadel said. "Adoption of these recommendations will result in substantial energy savings, large energy bill reductions, and stronger U.S. manufacturers and businesses."

For more:
- read the testimony

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