3Circular 230 disclaimerAny US tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code (IRC) or applicable state or local tax law provisions.These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.
4Today’s agenda Relevance of Sustainability to businesses Business implicationsDefining sustainabilityBusiness driversSustainability frameworkSustainability incentivesReduce - Energy efficiencySwitch – Renewable energy and alternative fuelsInnovation - R&D and Advanced Energy ManufacturingOffset – Clean Development MechanismTraditional incentivesLegislative Update and Best Practices
5Business implications “ROI is our business imperative. The biggest challenge we face is sustaining growth against the backdrop of environmental conservation and maintaining our company’s reputation.”- Global executive, 2010 Ernst &Young study“Big companies have decided that [corporate sustainability] is a long-term play.”- The World’s Greenest Companies, Newsweek October 2011Quotes from Newsweek “The World’s Greenest Companies”Rankings based on : environmental footprint (including greenhouse-gas emissions and water use); management (including environmental policies, programs, and initiatives); and disclosure“If governments are hesitating, many of the globe’s big companies missed the memo. Top-ranked companies are approaching green projects with increasing tenacity, even in this weak economy. Corporate sustainability, it seems, is here for the long haul—it makes sense not just for the sake of the planet, but for business. “Big companies have decided that this is a long-term play,” says Thomas Lyon, a professor at the University of Michigan’s Ross School of Business.For corporate executives, what matters is that waste cuts into profits, and that reducing wasted energy, for example, curbs greenhouse-gas emissions while bolstering the bottom line. We face a future in which resources that were once taken for granted—water, land, minerals, fossil fuels—will be limited and costly. Preparing now to succeed in—and even profit from—that difficult future could make all the difference. “We don’t expect a clear-cut policy in the U.S. any time soon,” says Mark Vachon, who leads the Ecomagination program at GE, No. 63 on the U.S. list. “But that doesn’t mean we ought to put our pencils down. In fact, having business lead in this space might be exactly what we should do.””5
6Defining sustainability This requires the balance of social, economic, and environmental demands — the three pillars of sustainability.The environment pillar is focused on environmental management of air, water and land systems , including greenhouse gas management.The social pillar includes management of issues such as ethical conduct, anti- corruption, labor practices, social justice and community engagement.The economic pillar reflects a need to decouple environmental degradation and economic growth. It also recognizes the value of providing jobs and tax revenue to promote local economies and infrastructure.Sustainability is a philosophy of meeting the needs of the present without compromising the ability of future generations to meet their own needs.EnvironmentalEconomicSocialSustainable6
7Drivers of corporate response to climate change Revenue generationCost reductionGovernment regulationExpectations of stakeholdersCorporate response to climate changeNew products and servicesShorter payback modelsNew business modelsInnovation investmentHigh energy cost; expected increase in costOperational efficienciesIT activityReduced wasteCost of carbonEnvironmental lawsNGO operating guidelinesFederal and state climate change programsRegional initiativesFinancial reportingCustomersConsumersInvestorsEmployeesMediaThe drivers of this response fall into 4 broad buckets. First, companies are trying to figure out how to make money out of the climate change movement. In some cases they are remaking themselves with new products, technologies and services. This is requiring significant capital investment and creation of new markets. Next, companies are concerned about rising energy costs as well as the desire to reduce their green house gas emissions, or their carbon footprint. Government actions both in the form of incentives and mandates are driving behavior. And finally Companies are mindful of the expectations of their stakeholders. Pick up just about any public disclosure of a companies climate change plan and it will likely include some element of these four buckets. Tax and Finance have an important role to play as there will be significant capital expenditures involved in almost all activities. Corporate leadership will have return on investment expectations before the expenditures can be approved. Often the ROI models will not work with out taking into consideration the tax benefits or costs associated with the plan.
8Mapping incentives issues onto the climate change response Energy-efficient buildingsEnergy-efficient plantsResearch into improved processesInvestment in new technologiesResource efficient buildings, plants,infrastructuresEnergy efficiency in suppliersEnergy in transportRecyclingWater savingFuel-efficient distributionRecyclable packagingResearch into sustainable productsReduction ofresource intensityof supply chainResource-efficientproductsReduceSwitch InnovateOffsetGreen energy suppliesGreen energy generationESCO’sJV’sLow-carbon energy sourcesTraining work forceEducating customersHome workingTransportBehavioral switchSustainablesourcing of rawmaterialsWaterEducationManaging stakeholderexpectationsClimate/sustainability policiesNon-financial reportsAudit of emissionsClarity/robustness of claims madeCarbon managementClimate/sustainability policiesNon-financial reportsAudit of emissionsClarity/robustness of claims made
9Identifying the triggers of sustainability incentives Is your company investing in innovative R&D to create “green” products or services in response to market opportunities?Has you company invested in alternative vehicles for its fleet?Has your company invested in renewable energy?Does your company have or plan to install energy efficient property as part of a new building or a retrofit to an existing building (interior lighting, HVAC system, etc.)?Does your company have any LEED certified buildings?Does your company have diesel or gasoline powered vehicles/equipment that are used in an off-highway capacity?Has your company made significant capital expenditures to meet its energy efficiency goals?
10Today’s agenda Relevance of Sustainability to businesses Business implicationsDefining sustainabilityBusiness driversSustainability frameworkSustainability incentivesReduce - Energy efficiencySwitch – Renewable energy and alternative fuelsInnovation - R&D and Advanced Energy ManufacturingOffset – Clean Development MechanismTraditional incentivesLegislative Update and Best Practices
11Reduce: Energy Efficiency and LEED Lighting ($ per lamp or fixture)HVAC system efficiency ($ per ton)Motor efficiency ($ per hp)Appliance purchases (Energy Star)Roofs with reflective coating or added insulation ($ per sq ft)Variable frequency drive ($ per kW)
12IRC Section 179D deduction - Overview Federal tax deduction of $0.30 to $1.80 a square foot of the building up to the total basis of the energy-efficient property placed in serviceEnergy-efficient commercial building property includes:Light fixtures and controls, not light bulbsNew or replacement HVAC systems and controlsNew buildings or replacements windows, roofs and doorsProperty must meet energy efficiency targets (compared to ASHRAE ) and prescriptive requirementsEffective 1 January 2006 through 31 December 2013Obama has proposed revising the incentive as part of the “Better Building Initiative”
13IRC Section 179D: value and benefit PropertyEnergy Efficiency (Compared to ASHRAE )Benefit(per sq. ft.)Lighting (LPD)25 – 40% LPD reduction$ $0.60Lighting (Energy Modeling)20% energy cost reduction$0.60HVAC/HWBuilding Envelope10% energy cost reductionLighting + HVAC/HW + Envelope50% energy cost reduction$1.80Value of 179D 35% ETRLighting OnlyHVAC, Building Envelope, Lighting200,000 s.f building$21,000 - $42,000$126,000500,000 sq. ft. building$52,500 - $105,000$315,0001,000,000 sq. ft. building$105,000 - $210,000$630,0002,000,000 sq. ft. building$210,000 - $420,000$1,260,000
14Certification requirements Energy modeling:Model the building with the minimum requirements of ASHRAE Std then compare to actual installation to calculate % reduction in energy costsThird-party site inspection:After the property has been placed in serviceConfirming that the building has met, or will meet, the energy-saving targets and prescriptive measures contained in the design plans and specificationsLetter of certification:By “an engineer or contractor that is properly licensed in the jurisdiction in which the building is located”
15IRC Section 179D deduction: government allocation The 179D tax deduction can be allocated by a government entity to the designer of a government-owned buildingGovernment-owned building:Federal, state or local government or a political subdivisionMay include: public secondary schools; public or state universities buildings; airports; stadiums; arenas; city parking garages; corrections institutions (jails)Designer:Person that creates the technical specifications for installation of energy efficient commercial building propertyMay include: architect, engineer, contractor, environmental consultant or energy services provider who creates the technical specifications for a new building or an addition to an existing building
16Best building types for 179D Large Square Foot BuildingsWHY – deduction is dependent on square footageCorporate HQ’s, Office Towers etc.Parking garages, warehouses, distribution centersWHY – single light fixture type – large spacesSignificant improvement in high-bay lighting since 2001LEED-certified buildingsWHY – Energy Efficient designs
17IRC Section 179D Deduction – Government Allocation The 179D tax deduction can be allocated by a government entity to the designer of a government-owned buildingGovernment-owned buildingFederal, State, or local government or a political subdivisionMay include: public secondary schools; public or state universities buildings; airports; stadiums; arenas; city parking garages; corrections institutions (jails)DesignerPerson that creates the technical specifications for installation of energy efficient commercial building propertyMay include: architect, engineer, contractor, environmental consultant or energy services provider who creates the technical specifications for a new building or an addition to an existing building
18State and Utility incentives overview There are three major types of incentive programs:Prescriptive measures - Basic$30 per light fixture, $20 per occupancy sensor, $100 per ton HVACGenerally there is a menu for pre-determined equipment and amountsApplies to more basic, simple measures - lighting, HVAC, controlsCustom Measures - IntermediateUsually covers what the prescriptive programs don’t, similar pay scaleCustomer must define, measure and validate the energy savingsOpportunities for industrial equipment & more creative measuresDemand Response/Load Curtailment - AdvancedCustomer makes a commitment to the utility on an annual basisWhen the utility calls, the customer is to shed the agreed upon load
20How to be successful with state and utility incentives What worksDiscussions with actual facility managers, plant managers, energy teams and design teams will uncover potential opportunitiesLayer all available incentives to maximize ROIStart where electric prices are highest in your portfolioStart early – many cash programs require pre-approvalUse DSIREUSA.org as a starting point, but verify that programs are still open
21State and Utility Energy Efficiency Incentives Illinois - Energy Efficiency GrantsThe State of Illinois and local governments have appropriated funds for energy efficiency grants for inducing solar energy and/ or wind energy projects. This incentive is negotiated with the state and/ or local government based on a project’s specifications.Illinois - Energy NowAn energy efficiency program administered by the State that provides millions of dollars in rebates to public facilities that make large-scale equipment improvements to their electric and natural gas systems.Includes the Public Sector Energy Efficiency Aggregation Program.Indiana - Sustainable & Green Building IncentivesFee waivers and other design incentives for developers that incorporate sustainability goals such as energy and resource efficiency, public transportation, and landscape and site design.Offered in Bloomington and Indianapolis
22Reduce – LEED Buildings LEED – Leadership in Energy and Environmental DesignLEED provides a framework that project teams can follow to achieve specific metricsDeveloped as a voluntary, consensus-based standard for high-performance, sustainable buildings…now being used internationallyMembers of the USGBC, representing all segments of the building industry, developed LEED and continue to contribute to its evolutionAs of July 2008 there were 63 different incentives at the state and local level for LEED-certified buildings ranging from tax credits and grants to density bonuses and free technical assistance.
23Green Building (LEED™) LEED – Leadership in Energy and Environmental DesignLEED is a green building certificationThe LEED rating system is a voluntary, consensus-based national standard for high-performance, sustainable buildingsMembers of the US Green Building Council (USGBC), representing all segments of the building industry, developed LEED and continue to contribute to its evolutionThe USGBC is not associated with the federal government and is a non-profit organization
24LEED for New Construction LEED-NC is a one-time certificationHigher certification levels can be achieved by earning additional pointsLEED-NC evaluates and recognizes the performance of buildings in 5 accepted green design categories:Sustainable SitesWater EfficiencyEnergy & AtmosphereMaterials & ResourcesIndoor Air Quality
25A sample of LEED incentives in the US Cincinnati, OH – 100% property tax exemptionIndianapolis & Marion County, IN – 30% RebateIA – Tax CreditKing County, WA – GrantsNY – 10% increase on other incentivesOR – Business Energy Tax CreditIl – Partial FundingVA – Separate Class of TaxationNV – Partial Abatement of property taxMonroe County, NY – tax abatement extensionTalk on these three:CINCINNATI, OH- LEED CRA Tax Exemption ProgramAutomatic 75% property tax exemption for developments that meet a minimum of LEED Certified for newly constructed or rehabilitated commercial or residential buildings.There is no cap on the maximum market value eligible for abatement for commercial/industrial developments although a minimum of $40,000 in costs is required. The commercial/industrial and multi-unit residential abatement is up to 15 years for new construction and 12 years for renovation. The tax abatement is automatic for LEED certified buildings after approval by city councilOREGON- Part of Oregon’s Comprehensive Business Energy Tax Credit (BETC), administered by the state Office of Energy, is tied to LEED certification.BETC also offers tax credits for Conservation efforts, Renewable Resoureces, High Performance Homes, Renewable Energy Projects, Transportaion, Alternative Fuels, and RecyclingFor LEED certified buildings the tax credit is for 35% of eligible project costs, distributed over five years – 10 percent in the first two years, and then 5 percent in the remaining 3 years.There is a pass-through option which allows a project owner to transfer the Business Energy Tax Credit project eligibility to a pass-through partner in exchange for a lump-sum cash payment.Tax Credit must be applied for within 30 days of applying for LEED registration –i.e. before design and construction beginNew Mexico – Sustainable building tax creditSB 463, enacted in April 2007, established a personal tax credit and a corporate tax credit for sustainable buildings in New Mexico. The tax credits apply to both commercial and residential buildings. Commercial buildings which have been registered and certified by the US Green Building Council at LEED* Silver or higher for new construction (NC), existing buildings (EB), core and shell (CS), or commercial interiors (CI) are eligible for a tax credit. The amount of the credit varies according to the square footage of the building and the level of certification achieved.For example for a LEED platinum certified building, there is a tax credit of $6.25 psf for the first 10,000sf, $3.25 psf for the next 40,000sf and $2.00 per sf over 50,000sf.Various LEED initiatives including legislation, executive orders, resolutions, ordinances, policies, and incentives are found in:45 states384 cities/towns58 counties14 federal agencies or departments17+ public school jurisdictions39+ institutions of higher educationMD – Baltimore, Carroll, Howard & Montgomery Counties Property Tax CreditSouthern California Cities – Financial IncentivesNM – Sustainable building tax creditChatham County, GA – Property Tax and County Tax AbatementAnchorage, AK – Permitting Fees RefundSLC, UT – Expedited Plan ReviewsHonolulu, HI – property tax abatementLongmont, CO – Fee RebatesFlorida Cities – Financial Incentives, Higher DensitiesChandler, AZ – LEED Fee ReimbursementHarris County, TX – Partial Tax AbatementEl Paso, TX – Grants for Commercial Buildings
26LEED for New Construction Density BonusExpedited permittingFee Waivers/rebatesGrants/tax incentivesUtility RebatesRamon through slide 42 by 1:42
27LEED for existing buildings (LEED-EB) LEED has concentrated in new construction but existing buildings certified under LEED-EB have proven to lower operational costsThe most important aspect when considering LEED EB is energy efficiencyMeasured through EPA’s Energy Star Portfolio ManagerIf a prospective building’s energy efficiency is at top quartile performance, LEED-EB is much easier to achieve and /or a higher LEED level may be pursuedBuildings that are already energy efficient may require very little beyond the required documentation, and adoption of policies and procedures to meet LEED-EB requirementsRamon through slide 42 by 1:42
28Incentives for LEED for Existing Buildings Incentives available for the retrofit and adoption of policies and procedures in areas of three states:New Mexico (Income Tax Credit)Maryland (Property Tax Credit)Virginia (Reduce Property Tax Rate)Other incentives:GrantsRegistration and certification fee reimbursementEnhanced market valuesHigher rentsBranding/MarketingUtility Rebates179D/48
29Today’s agenda Relevance of Sustainability to businesses Business implicationsDefining sustainabilityBusiness driversSustainability frameworkSustainability incentivesReduce - Energy efficiencySwitch – Renewable energy and alternative fuelsInnovation - R&D and Advanced Energy ManufacturingOffset – Clean Development MechanismTraditional incentivesLegislative Update and Best Practices
30Switch- Renewable Energy/Alternative Fuels Any energy resource that is naturally regenerated over a short time scale and derived:Directly from the sun, including solar thermal and photovoltaicsIndirectly from the sun including Wind energy and BiomassFrom other natural movements and mechanisms of the environment, including:HydroelectricHydrokintetic powerGeothermalFrom organic wastelandfill gaswaste-to-energy combustionRenewable energy does not include energy from fossil fuels or inorganic wasteFarm Picture
31Renewable Energy Investment Tax Credit (IRC §48) Equal to the energy percentage (30% or 10%) of the basis of each energy property placed in service during the tax year30% Tax credit for:Fuel Cells; Solar Energy; Small and eligible large wind; Closed and open loop biomass and other eligible renewable systems10% Tax credit for:Geothermal, Micro-turbine, Combined heat and power, and Thermal ground-water energyUnder the 2009 Stimulus Bill taxpayer can elect to take an investment tax credit of 30% rather than a production tax credit for wind, geothermal, biomass or hydropowerPreviously the basis of investment on which credit applied was reduced by other “subsidized energy financing”Under H.R.1, the 2009 Stimulus Bill, this has been eliminated and the credit can be taken on the full investmentOpen through 2017IRC §48: Renewable Energy Investment Tax Credit Tax Credit for investments in eligible renewable energy propertyEqual to the energy percentage (30% or 10%) of the basis of each energy property placed in service during the tax year30% Credit for: Fuel Cells; Solar Energy; Small and eligible large wind; Closed and open loop biomass and other eligible renewable systems10% Credit for: Geothermal, Micro-turbine, Combined heat and power, and Thermal ground-water energyValid on eligible energy property placed in service by December 31, 2016.Changes under the 2009 Stimulus BillReduction of the basis of investment on which credit applied by other “subsidized energy financing” was eliminated and credit can now be taken on the full investmentUnder the 2009 Stimulus Bill, a 1603 grant through the Department of the Treasury can be taken in lieu of the credit
32ARRA 1603 Grant in lieu of the ITC Extended by the tax cut extenders act in December through to 12/31/2011Converts a Section 48 ITC to a cash grantCan qualify if construction begins before 31 December and the property is placed in service before relevant credit deadlineTwo safe harbors, continual construction, and 5% expended before year endApplication due 10/1/2012PROMPT slide changeMike through Monetization/slide 60 by 2:05
33Renewable Energy Production Tax Credit (IRC §45) 2.2/1.1¢ per KWh credit for electricity produced by the taxpayer from qualified energy resources at a qualified facility and sold by the taxpayerQualifying facilities through 31 December 2013Closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy and marine renewablesWind placed-in-service date through 31 December 2012AMT exempt for the first 4 years of the 10 year periodUnder the 2009 Stimulus Bill the taxpayer can now elect to take an 30% investment tax credit under Section 48 instead of a production tax creditThe Production Tax Credit is claimed annually in each of the first ten years of operation of the renewable energy system. The credit will remain open for all wind property placed in service by the end of 2012, and by the end of 2013 for all other eligible renewable property.For companies producing energy sold to an unrelated person or company, the Production Tax Credit provides a per-kilowatt-hour tax credit. This tax credit has also been extended recently and the value of the credit is indexed for inflation.To provide developers with additional flexibility, under the ARRA facilities that were eligible for the Production Tax Credit can instead receive the 30% Investment Tax Credit.Section 45 – Points for focusDetermination of facility qualification, based on renewable energy source utilizedLimited IRS guidanceQualification based on facts and circumstancesAnalysis of qualification for upgraded or converted facilityExpansion of generating capacityDefinition of a qualified facility – integrated facility conceptCost analysis – 80/20 rule for expansionsSection 45 vs. Section 48 electionPTC vs. ITCNPV of credits based on ability to monetizePTCs are non-refundable, need taxable incomeElection is irrevocableEvaluation of tax structural issues
34Tax credit monetization As long as the US government continues to subsidize renewable energy and climate change through the tax code those companies without large tax liabilities will need to monetizeMany tax credits can be monetized as long as the monetization structure is in place prior to credit being generatedTax credit monetization tends to be a complicated process as transactions are not cookie cutter, therefore it works best for transactions with a large amount of creditsExpiration of Section 1603 will result in increased activity around tax credit monetizationHow does one accomplish this?Partnership Flip structureSale Leaseback structureMaster Tenant structure
35State and Utility Incentives Vary greatly by state:Corporate tax creditsSales tax exemptionsProperty tax exemptionsUtility rebates/production incentivesGrantsLoans
36State Renewable Energy and Alternative Fuel Incentives Illinois - Solar and Wind Energy Rebate ProgramOffered by the State of Illinois to encourage investment in smaller scale solar and wind energy systems.The program offers incentives up to 30% of the project cost for business applicants with a maximum rebate of $30,000.Indiana - Renewable Energy Property Tax ExemptionProperty tax exemption offered on systems that generate energy using solar, wind, hydropower or geothermal resources.Includes entire renewable energy system and affiliated equipment that is unique to the system, including equipment for storage and distribution.Indiana - Sales and Use Tax Exemption for Electrical Generating EquipmentEquipment, machinery, and tools used in the production of renewable electricity are exempt from the State’s gross retail tax.
37Today’s agenda Relevance of Sustainability to businesses Business implicationsDefining sustainabilityBusiness driversSustainability frameworkSustainability incentivesReduce - Energy efficiencySwitch – Renewable energy and alternative fuelsInnovation - R&D and Advanced Energy ManufacturingOffset – Clean Development MechanismTraditional incentivesLegislative Update and Best Practices
38Innovation – R&D and Advanced Energy Manufacturing
39Innovation Internal product development Joint development efforts Alternative energyMore efficient productsCleaner productsBattery technologiesJoint development effortsContract researchLEED certificationsProcess improvementReduce emissions, reduce scrapCleaner manufacturing process/lineEPA Superfund program
40Department of Energy Grant Funding Provides grants for energy efficiency and renewable energy projectsIn FY2009, more than $2.2 billion in funding was awarded to businesses, industries, universities and othersFunding Opportunity Announcements (FOA) made throughout the year to solicit grant applications for certain projects or technologiesCheck regularly for opportunitiesApplication periods are typically 60 days or less
4148C tax credit for advanced energy manufacturing ARRA created a new allocated 30% ITC for facilities engaged in the manufacture of green productsPotential qualifying assets and technologies :Technologies that create energy from renewable resources (sun, wind, etc.)Energy storage technologies (fuel cells, microturbines, etc.) used in electric vehiclesAdvanced transmission technologies that support renewable generationRenewable fuel-refining or blending technologiesEnergy conservation technologies (advanced lighting, smart grid)Plug-in electric vehicles and vehicle components (motors, generators)Property to capture and sequester carbon dioxideOther property designed to reduce greenhouse gas emissions
42Other Innovation Incentives Additional opportunities around capital expenditure plansR&D Loans and CreditsState Energy Program FundingTraditional Incentives – Job creation tax credits, Cap-Ex related incentives, property tax abatements, sales tax abatementsPROMPT slide changeMike through Energy Property/slide 50 by 1:55
43Today’s agenda Relevance of Sustainability to businesses Business implicationsDefining sustainabilityBusiness driversSustainability frameworkSustainability incentivesReduce - Energy efficiencySwitch – Renewable energy and alternative fuelsInnovation - R&D and Advanced Energy ManufacturingOffset – Clean Development MechanismTraditional incentivesLegislative Update and Best Practices
44Clean Development Mechanism summary What is the Clean Development Mechanism (CDM)?A mechanism under the Kyoto Protocol that allows developed countries with a GHG reduction target to invest in projects that reduce emissions in developing countries.CDM investments give rise to a project revenue stream via the sale of CERs, or Certified Emission Reduction units from the CDM.Standardized CDM project cycle must be complied with, as well as the requirement for the project to meet the ‘additionality’ conceptAs of September 2011, there are 6,930 projects in the CDM pipeline, 3,492 of which are registeredWhat is the Clean Development Mechanism (CDM)?CDM is a mechanism under the Kyoto Protocol that allows developed countries with a GHG reduction target to invest in projects that reduce emissions in developing countries.CDM investments give rise to a project revenue stream via the sale of CERs, or Certified Emission Reduction units from the CDM.There is a standardized CDM project cycle that must be complied with, as well as the requirement for the project to meet the ‘additionality’ concept (proof that the project would not have happened anyway)As of September 2011, there are 6,930 projects in the CDM pipeline, 3,492 of which are registered
45Offset projects – Clean Development Mechanism Set targets for reducing emissionsClassification of signatory countriesKyoto Protocol is the first international treaty in which nations of the world agreed to undertake targets in emission reductionThe Protocol recognized the concept of ‘common but differentiated responsibilities’ in reducing emissionsKyotoProtocolCopenhagenCancunAnnex I countries received targets to reduce emissions by 2012 (commitment periods) while Non- annex I countries did not have a targetNations agreed on an average reduction of 5.2% of 1990 levels of emissions of Greenhouse Gases (GHGs)The Protocol proposed flexibility mechanisms to enable participation of both Annex I and Non-annex I countries in jointly reducing emissions globallyThree flexibility mechanisms proposed –Clean Development Mechanism (CDM)Joint Implementation (JI)International Emissions Trading (IET)Flexibility Mechanisms to facilitate Low Carbon Growth
46Clean Development Mechanism procedure: Availing carbon credits Key CDM process steps are demonstrated in the diagram belowUNFCCC / EBIssues CERsProjectIdentificationCDM DocumentationValidation by DOERegistrationwith UNFCCCERPAGeneration ofCarbon creditsOperationConstructionVerification/Certification by DOECDM project promoterBuyer of CEREndorsement by DNACER123implementationCER TransactionKyoto approvals
47Today’s agenda Relevance of Sustainability to businesses Business implicationsDefining sustainabilityBusiness driversSustainability frameworkSustainability incentivesReduce - Energy efficiencySwitch – Renewable energy and alternative fuelsInnovation - R&D and Advanced Energy ManufacturingOffset – Clean Development MechanismTraditional incentivesLegislative Update and Best Practices
48Qualifying Events for Traditional Incentives Create new business operationsConstruction/purchase/lease of new facilitiesPurchase of new machinery/equipmentInfrastructure improvementsHiring and training of new employeesExpand, realign or relocate existing facilitiesConstruction/purchase/lease of new/expanded facilitiesHiring/retention of new/existing employeesTraining of new/existing employeesMaintain existing facilitiesRetaining existing workforceHiring due to employee turnoverTraining of new and existing employeesIt is possible to apply this template to exiting presentations.Have the latest presentation template openClick on the View tab and select NormalDelete all unwanted slidesClick on the Insert tab from the menu bar and select Slides from FilesClick on Browse. Navigate to the presentation you wish to update with the new template. Highlight the presentation and click OpenWait for the slides from the presentation to load and click on Insert All. Then click CloseCheck the inserted slides to ensure that the most appropriate master slide has been used on each slideTo change the master applied to a slide select the slide you wish to apply a different master to then click on the Format tab from the menu bar and select Slide DesignFrom the Used in This Presentation section choose the master you wish to apply to the slide and hover over it to reveal a drop-down arrow. Click on the arrow and select Apply to Selected SlidesIt is important to thoroughly check the presentation to ensure that no further formatting is needed.
49Traditional Incentives: Opportunities New business operationsExpand, realign or relocate existing facilitiesMaintain existing facilitiesTax IncentivesHiring IncentivesTraining BenefitsNon-Tax IncentivesPropertyTax Relief“Green” IncentivesSales & Use tax exemptions/refundsFederal and state EZ CreditsFederal and state research and development creditsCapital investment tax creditsWage rebates, job creation grants and credits, employment related tax incentivesWOTC/WtWState point-of-hire creditsHiring and employee screening assistanceTraining grants for prospective training expendituresDevelopment and implementation of training programs through state agenciesTraining tax credits (retroactive or prospective)Infrastructure grants/assistanceLow cost financing for capital expendituresUtility discountsWaiver of permit feesExpedited permitsFree or discounted land/buildingNegotiate real and personal property tax exemptionsStructure Industrial Revenue Bonds (IRBs) for favorable property tax treatmentSecure Tax Increment Financing (TIF) arrangementsProperty tax abatementEnergy efficiency/GHG reduction incentives and creditsIncentives for LEED-certified buildings§179D deductionsR&D and Manu. incentives for green productsIncentives for production of green products
50Today’s agenda Relevance of Sustainability to businesses Business implicationsDefining sustainabilityBusiness driversSustainability frameworkSustainability incentivesReduce - Energy efficiencySwitch – Renewable energy and alternative fuelsInnovation - R&D and Advanced Energy ManufacturingOffset – Clean Development MechanismTraditional incentivesLegislative Update and Best Practices
512012 Legislative updateSolyndra – new scrutiny on Sustainability-focused incentivesWith cap and trade less likely in the US, tax incentives to encourage renewable energy/energy efficiency may become more likelyIncentives from states declining – more focus on federal incentivesExpired IncentivesAlt. Fuel Tax Credit – ExpiredAlt. Fuel Infrastructure Tax Credit – Expired1603 Grant in Lieu of tax creditProposals/proposed extensionsObama’s Better Building’s Initiative/179D48C extension – Introduced in multiple bills in last congress but not based. Obama proposed $5B extension
52Best PracticesUnderstand what your company’s sustainability goals are and who is accountable for accomplishing themEnsure Tax is talking to Sustainability, Facilities and OperationsWhat is being planned? What is being considered?What would they like to do if ROI/payback period was right?Don’t limit yourself to traditional green incentives, also consider:Property tax abatements, sales/use tax exemptions, EZ benefits, cash grants, DOE grants
53Best Practices Aggregate green spend with general capital spend New product lines? System upgrades?Retention incentives? Leverage multiple facilities?Integrate your sustainability strategy at all levels across the organizationPlaces company at a competitive advantageBetter able to:Identify relevant incentives, grants and subsidiesDevelop an environmental sustainability platform that reflects broader business goalsIncrease profits by improving the ROI and reducing the investment payback period
54Best Practices Integrate Identify Implement With other departments within the organization in order to …Sustainability initiatives and expenditures that trigger incentives ...Process to secure tax credits and other related incentives
55QuestionsAnswer any questions participants may have about the breakout subject matter just discussed. Parking lot any questions you can’t answer today and get back to them with the answer.
56The presenters would like to thank you for your participation and feedback! Dominick BrookColumbus, Ohio