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Incentives and Policies for Sustainable Business Programs: A Perspective from Ernst & Young September 7, 2012 Dominick Brook.

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Presentation on theme: "Incentives and Policies for Sustainable Business Programs: A Perspective from Ernst & Young September 7, 2012 Dominick Brook."— Presentation transcript:

1 Incentives and Policies for Sustainable Business Programs: A Perspective from Ernst & Young September 7, 2012 Dominick Brook

2 Page 2 © 2010 Ernst & Young LLP Disclaimer ► Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ► Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited and of Ernst & Young Americas operating in the U.S. ► This presentation is © 2012 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of U.S. and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party. ► Views expressed in this presentation are not necessarily those of Ernst & Young LLP.

3 Page 3 © 2010 Ernst & Young LLP Circular 230 disclaimer ► Any 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.

4 Page 4 © 2010 Ernst & Young LLP Today’s agenda ► Relevance of Sustainability to businesses ► Business implications ► Defining sustainability ► Business drivers ► Sustainability framework ► Sustainability incentives ► Reduce - Energy efficiency ► Switch – Renewable energy and alternative fuels ► Innovation - R&D and Advanced Energy Manufacturing ► Offset – Clean Development Mechanism ► Traditional incentives ► Legislative Update and Best Practices

5 Page 5 © 2010 Ernst & Young LLP 5 Business 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

6 Page 6 © 2010 Ernst & Young LLP 6 Defining 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. Environmental Economic Social Sustainable Sustainability is a philosophy of meeting the needs of the present without compromising the ability of future generations to meet their own needs. 6

7 Page 7 Drivers of corporate response to climate change Corporate response to climate change Government regulation Revenue generation Expectations of stakeholders ► Environmental laws ► NGO operating guidelines ► Federal and state climate change programs ► Regional initiatives ► Financial reporting ► New products and services ► Shorter payback models ► New business models ► Innovation investment ► Customers ► Consumers ► Investors ► Employees ► Media Cost reduction ► High energy cost; expected increase in cost ► Operational efficiencies ► IT activity ► Reduced waste ► Cost of carbon

8 Page 8 © 2010 Ernst & Young LLP Mapping incentives issues onto the climate change response Resource efficient buildings, plants, infrastructures Carbon management Behavioral switch Low-carbon energy sources Reduction of resource intensity of supply chain Resource-efficient products Sustainable sourcing of raw materials Managing stakeholder expectations Reduce Switch Innovate Offset Energy-efficient buildings Energy-efficient plants Research into improved processes Investment in new technologies Fuel-efficient distribution Recyclable packaging Research into sustainable products Training work force Educating customers Home working Transport Climate/sustainability policies Non-financial reports Audit of emissions Clarity/robustness of claims made Climate/sustainability policies Non-financial reports Audit of emissions Clarity/robustness of claims made Water Education Green energy supplies Green energy generation ESCO’s JV’s Energy efficiency in suppliers Energy in transport Recycling Water saving

9 Page 9 © 2010 Ernst & Young LLP Identifying 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?

10 Page 10 © 2010 Ernst & Young LLP Today’s agenda ► Relevance of Sustainability to businesses ► Business implications ► Defining sustainability ► Business drivers ► Sustainability framework ► Sustainability incentives ► Reduce - Energy efficiency ► Switch – Renewable energy and alternative fuels ► Innovation - R&D and Advanced Energy Manufacturing ► Offset – Clean Development Mechanism ► Traditional incentives ► Legislative Update and Best Practices

11 Page 11 © 2010 Ernst & Young LLP Reduce: Energy Efficiency and LEED

12 Page 12 © 2010 Ernst & Young LLP IRC 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 service ► Energy-efficient commercial building property includes: ► Light fixtures and controls, not light bulbs ► New or replacement HVAC systems and controls ► New buildings or replacements windows, roofs and doors ► Property must meet energy efficiency targets (compared to ASHRAE ) and prescriptive requirements ► Effective 1 January 2006 through 31 December 2013 ► Obama has proposed revising the incentive as part of the “Better Building Initiative”

13 Page 13 © 2010 Ernst & Young LLP IRC Section 179D: value and benefit PropertyEnergy Efficiency (Compared to ASHRAE ) Benefit (per sq. ft.) Lighting (LPD)25 – 40% LPD reduction$ $0.60 Lighting (Energy Modeling)20% energy cost reduction$0.60 HVAC/HW20% energy cost reduction$0.60 Building Envelope10% energy cost reduction$0.60 Lighting + HVAC/HW + Envelope50% energy cost reduction$1.80 Value of 179D 35% ETR Lighting OnlyHVAC, Building Envelope, Lighting 200,000 s.f building$21,000 - $42,000$126, ,000 sq. ft. building$52,500 - $105,000$315,000 1,000,000 sq. ft. building$105,000 - $210,000$630,000 2,000,000 sq. ft. building$210,000 - $420,000$1,260,000

14 Page 14 © 2010 Ernst & Young LLP Certification requirements ► Energy modeling: ► Model the building with the minimum requirements of ASHRAE Std then compare to actual installation to calculate % reduction in energy costs ► Third-party site inspection: ► After the property has been placed in service ► Confirming that the building has met, or will meet, the energy- saving targets and prescriptive measures contained in the design plans and specifications ► Letter of certification: ► By “an engineer or contractor that is properly licensed in the jurisdiction in which the building is located”

15 Page 15 © 2010 Ernst & Young LLP IRC Section 179D deduction: government allocation ► The 179D tax deduction can be allocated by a government entity to the designer of a government-owned building ► Government-owned building: ► Federal, state or local government or a political subdivision ► May 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 property ► May 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

16 Page 16 © 2010 Ernst & Young LLP Best building types for 179D ► Large Square Foot Buildings ► WHY – deduction is dependent on square footage ► Corporate HQ’s, Office Towers etc. ► Parking garages, warehouses, distribution centers ► WHY – single light fixture type – large spaces ► Significant improvement in high-bay lighting since 2001 ► LEED-certified buildings ► WHY – Energy Efficient designs

17 Page 17 © 2010 Ernst & Young LLP IRC Section 179D Deduction – Government Allocation ► The 179D tax deduction can be allocated by a government entity to the designer of a government- owned building ► Government-owned building ► Federal, State, or local government or a political subdivision ► May 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 property ► May 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

18 Page 18 © 2010 Ernst & Young LLP State 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 HVAC ► Generally there is a menu for pre-determined equipment and amounts ► Applies to more basic, simple measures - lighting, HVAC, controls ► Custom Measures - Intermediate ► Usually covers what the prescriptive programs don’t, similar pay scale ► Customer must define, measure and validate the energy savings ► Opportunities for industrial equipment & more creative measures ► Demand Response/Load Curtailment - Advanced ► Customer makes a commitment to the utility on an annual basis ► When the utility calls, the customer is to shed the agreed upon load

19 Page 19 © 2010 Ernst & Young LLP

20 Page 20 © 2010 Ernst & Young LLP How to be successful with state and utility incentives ► What works ► Discussions with actual facility managers, plant managers, energy teams and design teams will uncover potential opportunities ► Layer all available incentives to maximize ROI ► Start where electric prices are highest in your portfolio ► Start early – many cash programs require pre-approval ► Use DSIREUSA.org as a starting point, but verify that programs are still open

21 Page 21 © 2010 Ernst & Young LLP State and Utility Energy Efficiency Incentives ► Illinois - Energy Efficiency Grants ► The 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 Now ► An 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 Incentives ► Fee 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

22 Page 22 © 2010 Ernst & Young LLP Reduce – LEED Buildings

23 Page 23 © 2010 Ernst & Young LLP Green Building (LEED™) ► LEED – Leadership in Energy and Environmental Design ► LEED is a green building certification ► The LEED rating system is a voluntary, consensus-based national standard for high-performance, sustainable buildings ► Members of the US Green Building Council (USGBC), representing all segments of the building industry, developed LEED and continue to contribute to its evolution ► The USGBC is not associated with the federal government and is a non-profit organization

24 Page 24 © 2010 Ernst & Young LLP LEED for New Construction ► LEED-NC is a one-time certification ► Higher certification levels can be achieved by earning additional points ► LEED-NC evaluates and recognizes the performance of buildings in 5 accepted green design categories: ► Sustainable Sites ► Water Efficiency ► Energy & Atmosphere ► Materials & Resources ► Indoor Air Quality

25 Page 25 © 2010 Ernst & Young LLP A sample of LEED incentives in the US VA – Separate Class of Taxation MD – Baltimore, Carroll, Howard & Montgomery Counties Property Tax Credit Chatham County, GA – Property Tax and County Tax Abatement Cincinnati, OH – 100% property tax exemption El Paso, TX – Grants for Commercial Buildings Harris County, TX – Partial Tax Abatement Southern California Cities – Financial Incentives Monroe County, NY – tax abatement extension NM – Sustainable building tax credit OR – Business Energy Tax Credit NV – Partial Abatement of property tax Anchorage, AK – Permitting Fees Refund Indianapolis & Marion County, IN – 30% Rebate Florida Cities – Financial Incentives, Higher Densities Chandler, AZ – LEED Fee Reimbursement Honolulu, HI – property tax abatement King County, WA – Grants SLC, UT – Expedited Plan Reviews Longmont, CO – Fee Rebates NY – 10% increase on other incentives IA – Tax Credit Il – Partial Funding

26 Page 26 © 2010 Ernst & Young LLP LEED for New Construction ► Density Bonus ► Expedited permitting ► Fee Waivers/rebates ► Grants/tax incentives ► Utility Rebates

27 Page 27 © 2010 Ernst & Young LLP LEED for existing buildings (LEED-EB) ► LEED has concentrated in new construction but existing buildings certified under LEED-EB have proven to lower operational costs ► The most important aspect when considering LEED EB is energy efficiency ► Measured through EPA’s Energy Star Portfolio Manager ► If 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 pursued ► Buildings that are already energy efficient may require very little beyond the required documentation, and adoption of policies and procedures to meet LEED-EB requirements

28 Page 28 © 2010 Ernst & Young LLP Incentives 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: ► Grants ► Registration and certification fee reimbursement ► Enhanced market values ► Higher rents ► Branding/Marketing ► Utility Rebates ► 179D/48

29 Page 29 © 2010 Ernst & Young LLP Today’s agenda ► Relevance of Sustainability to businesses ► Business implications ► Defining sustainability ► Business drivers ► Sustainability framework ► Sustainability incentives ► Reduce - Energy efficiency ► Switch – Renewable energy and alternative fuels ► Innovation - R&D and Advanced Energy Manufacturing ► Offset – Clean Development Mechanism ► Traditional incentives ► Legislative Update and Best Practices

30 Page 30 © 2010 Ernst & Young LLP Switch- Renewable Energy/Alternative Fuels Farm Picture

31 Page 31 © 2010 Ernst & Young LLP Renewable 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 year ► 30% Tax credit for: ► Fuel Cells; Solar Energy; Small and eligible large wind; Closed and open loop biomass and other eligible renewable systems ► 10% Tax credit for: ► Geothermal, Micro-turbine, Combined heat and power, and Thermal ground-water energy ► Under 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 hydropower ► Previously 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 investment

32 Page 32 © 2010 Ernst & Young LLP ARRA 1603 Grant in lieu of the ITC ► Extended by the tax cut extenders act in December 2010 through to 12/31/2011 ► Converts a Section 48 ITC to a cash grant ► Can qualify if construction begins before 31 December 2011 and the property is placed in service before relevant credit deadline ► Two safe harbors, continual construction, and 5% expended before year end ► Application due 10/1/2012

33 Page 33 © 2010 Ernst & Young LLP Renewable 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 taxpayer ► Qualifying facilities through 31 December 2013 ► Closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy and marine renewables ► Wind placed-in-service date through 31 December 2012 ► AMT exempt for the first 4 years of the 10 year period ► Under the 2009 Stimulus Bill the taxpayer can now elect to take an 30% investment tax credit under Section 48 instead of a production tax credit

34 Page 34 © 2010 Ernst & Young LLP Tax 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 monetize ► Many tax credits can be monetized as long as the monetization structure is in place prior to credit being generated ► Tax 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 credits ► Expiration of Section 1603 will result in increased activity around tax credit monetization

35 Page 35 © 2010 Ernst & Young LLP State and Utility Incentives ► Vary greatly by state: ► Corporate tax credits ► Sales tax exemptions ► Property tax exemptions ► Utility rebates/production incentives ► Grants ► Loans

36 Page 36 © 2010 Ernst & Young LLP State Renewable Energy and Alternative Fuel Incentives ► Illinois - Solar and Wind Energy Rebate Program ► Offered 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 Exemption ► Property 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 Equipment ► Equipment, machinery, and tools used in the production of renewable electricity are exempt from the State’s gross retail tax.

37 Page 37 © 2010 Ernst & Young LLP Today’s agenda ► Relevance of Sustainability to businesses ► Business implications ► Defining sustainability ► Business drivers ► Sustainability framework ► Sustainability incentives ► Reduce - Energy efficiency ► Switch – Renewable energy and alternative fuels ► Innovation - R&D and Advanced Energy Manufacturing ► Offset – Clean Development Mechanism ► Traditional incentives ► Legislative Update and Best Practices

38 Page 38 © 2010 Ernst & Young LLP Innovation – R&D and Advanced Energy Manufacturing

39 Page 39 © 2010 Ernst & Young LLP Innovation ► Internal product development ► Alternative energy ► More efficient products ► Cleaner products ► Battery technologies ► Joint development efforts ► Contract research ► LEED certifications ► Process improvement ► Reduce emissions, reduce scrap ► Cleaner manufacturing process/line ► EPA Superfund program

40 Page 40 © 2010 Ernst & Young LLP Department of Energy Grant Funding ► Provides grants for energy efficiency and renewable energy projects ► In FY2009, more than $2.2 billion in funding was awarded to businesses, industries, universities and others ► Funding Opportunity Announcements (FOA) made throughout the year to solicit grant applications for certain projects or technologies ► Check regularly for opportunities ► Application periods are typically 60 days or less

41 Page 41 © 2010 Ernst & Young LLP 48C tax credit for advanced energy manufacturing ► ARRA created a new allocated 30% ITC for facilities engaged in the manufacture of green products ► Potential qualifying assets and technologies : ► Technologies that create energy from renewable resources (sun, wind, etc.) ► Energy storage technologies (fuel cells, microturbines, etc.) used in electric vehicles ► Advanced transmission technologies that support renewable generation ► Renewable fuel-refining or blending technologies ► Energy conservation technologies (advanced lighting, smart grid) ► Plug-in electric vehicles and vehicle components (motors, generators) ► Property to capture and sequester carbon dioxide ► Other property designed to reduce greenhouse gas emissions

42 Page 42 © 2010 Ernst & Young LLP Other Innovation Incentives ► Additional opportunities around capital expenditure plans ► R&D Loans and Credits ► State Energy Program Funding ► Traditional Incentives – Job creation tax credits, Cap-Ex related incentives, property tax abatements, sales tax abatements

43 Page 43 © 2010 Ernst & Young LLP Today’s agenda ► Relevance of Sustainability to businesses ► Business implications ► Defining sustainability ► Business drivers ► Sustainability framework ► Sustainability incentives ► Reduce - Energy efficiency ► Switch – Renewable energy and alternative fuels ► Innovation - R&D and Advanced Energy Manufacturing ► Offset – Clean Development Mechanism ► Traditional incentives ► Legislative Update and Best Practices

44 Page 44 © 2010 Ernst & Young LLP Clean 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’ concept As of September 2011, there are 6,930 projects in the CDM pipeline, 3,492 of which are registered

45 Page 45 © 2010 Ernst & Young LLP ► Kyoto Protocol is the first international treaty in which nations of the world agreed to undertake targets in emission reduction Classification of signatory countriesSet targets for reducing emissions Kyoto Protocol Copenhagen Cancun Flexibility Mechanisms to facilitate Low Carbon Growth ► The Protocol proposed flexibility mechanisms to enable participation of both Annex I and Non-annex I countries in jointly reducing emissions globally ► Three flexibility mechanisms proposed – ► Clean Development Mechanism (CDM) ► Joint Implementation (JI) ► International Emissions Trading (IET) ► Nations agreed on an average reduction of 5.2% of 1990 levels of emissions of Greenhouse Gases (GHGs) ► The Protocol recognized the concept of ‘common but differentiated responsibilities’ in reducing emissions ► Annex I countries received targets to reduce emissions by 2012 (commitment periods) while Non- annex I countries did not have a target Offset projects – Clean Development Mechanism

46 Page 46 © 2010 Ernst & Young LLP UNFCCC / EB Issues CERs Project Identification CDM Documentation Validation by DOE Registration with UNFCCC ERPA Generation of Carbon credits Project Operation Project Construction Verification/ Certification by DOE CDM project promoter Buyer of CER Endorsement by DNA CER 123 Project implementation CER TransactionKyoto approvals Key CDM process steps are demonstrated in the diagram below Clean Development Mechanism procedure: Availing carbon credits

47 Page 47 © 2010 Ernst & Young LLP Today’s agenda ► Relevance of Sustainability to businesses ► Business implications ► Defining sustainability ► Business drivers ► Sustainability framework ► Sustainability incentives ► Reduce - Energy efficiency ► Switch – Renewable energy and alternative fuels ► Innovation - R&D and Advanced Energy Manufacturing ► Offset – Clean Development Mechanism ► Traditional incentives ► Legislative Update and Best Practices

48 Slide 48 Qualifying Events for Traditional Incentives ► Create new business operations ► Construction/purchase/lease of new facilities ► Purchase of new machinery/equipment ► Infrastructure improvements ► Hiring and training of new employees ► Expand, realign or relocate existing facilities ► Construction/purchase/lease of new/expanded facilities ► Purchase of new machinery/equipment ► Infrastructure improvements ► Hiring/retention of new/existing employees ► Training of new/existing employees ► Maintain existing facilities ► Retaining existing workforce ► Hiring due to employee turnover ► Training of new and existing employees

49 Slide 49 Traditional Incentives: Opportunities Sales & Use tax exemptions/refunds Federal and state EZ Credits Federal and state research and development credits Capital investment tax credits Tax Incentives Training Benefits Training grants for prospective training expenditures Development and implementation of training programs through state agencies Training tax credits (retroactive or prospective) Hiring Incentives Wage rebates, job creation grants and credits, employment related tax incentives WOTC/WtW State point-of-hire credits Hiring and employee screening assistance Property Tax Relief Negotiate real and personal property tax exemptions Structure Industrial Revenue Bonds (IRBs) for favorable property tax treatment Secure Tax Increment Financing (TIF) arrangements Property tax abatement Non-Tax Incentives Infrastructure grants/assistance Low cost financing for capital expenditures Utility discounts Waiver of permit fees Expedited permits Free or discounted land/building “Green” Incentives Energy efficiency/GHG reduction incentives and credits Incentives for LEED- certified buildings §179D deductions R&D and Manu. incentives for green products Incentives for production of green products New business operations Expand, realign or relocate existing facilities Maintain existing facilities

50 Page 50 © 2010 Ernst & Young LLP Today’s agenda ► Relevance of Sustainability to businesses ► Business implications ► Defining sustainability ► Business drivers ► Sustainability framework ► Sustainability incentives ► Reduce - Energy efficiency ► Switch – Renewable energy and alternative fuels ► Innovation - R&D and Advanced Energy Manufacturing ► Offset – Clean Development Mechanism ► Traditional incentives ► Legislative Update and Best Practices

51 Page 51 © 2010 Ernst & Young LLP 2012 Legislative update ► Solyndra – new scrutiny on Sustainability-focused incentives ► With cap and trade less likely in the US, tax incentives to encourage renewable energy/energy efficiency may become more likely ► Incentives from states declining – more focus on federal incentives ► Expired Incentives ► Alt. Fuel Tax Credit – Expired ► Alt. Fuel Infrastructure Tax Credit – Expired ► 1603 Grant in Lieu of tax credit ► Proposals/proposed extensions ► Obama’s Better Building’s Initiative/179D ► 48C extension – Introduced in multiple bills in last congress but not based. Obama proposed $5B extension

52 Page 52 © 2010 Ernst & Young LLP Best Practices ► Understand what your company’s sustainability goals are and who is accountable for accomplishing them ► Ensure Tax is talking to Sustainability, Facilities and Operations ► What 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

53 Page 53 © 2010 Ernst & Young LLP Best 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 organization ► Places company at a competitive advantage ► Better able to: ► Identify relevant incentives, grants and subsidies ► Develop an environmental sustainability platform that reflects broader business goals ► Increase profits by improving the ROI and reducing the investment payback period

54 Page 54 © 2010 Ernst & Young LLP Implement Integrate Identify 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 Best Practices

55 Page 55 © 2010 Ernst & Young LLP Questions

56 Page 56 © 2010 Ernst & Young LLP The presenters would like to thank you for your participation and feedback! ► Dominick Brook ► Columbus, Ohio ► ►


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