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Tax Reforms ‘Fail to Prioritize Energy Efficiency’

The US has an opportunity to create a corporate tax structure that encourages investments in energy efficiency and industrial modernization, according to a report by the American Council for an Energy-Efficient Economy.

But none of the corporate tax reforms currently being considered prioritize energy efficiency, ACEEE said in the report, Industrial Energy Efficiency and Tax Reform. The research digs into the potential for various reforms to influence investments that might reduce the energy intensity of the industrial sector.

Two broad-based options for tax reform—reduce corporate tax rate by eliminating tax expenditures, and 100 percent expensing for tangible personal property—have a great deal of support among corporate decision-makers, according to the report. However, the ACEEE is skeptical either one would lead to energy efficiency investments on their own.

Meanwhile, a pollution or energy tax, which has little support, would encourage investments in energy-efficient technologies and practices as well as make renewable energy more cost competitive, the report said.

The ACEEE said that tax reform to support industrial energy efficiency would have to encourage industrial modernization, because the energy intensity of manufacturing correlates directly to the vintage of the equipment. The energy needed to produce a good or service will decrease as businesses replace older, less efficient equipment with newer, more efficient equipment, ACEEE said.

An ACEEE report released in October found Nissan North American reduced its US manufacturing plants’ overall energy consumption by more than 30 percent through a host of energy efficiency investments, saving the company more than $11.5 million per year.

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