Scouring the net for all kinds of LEED/green building related news, I found out that Nevada’s “green” building tax break law is being put on hold indefinitely. This hold puts many HUGE dollar projects at risk.
The fact remains that it is cheaper for builders to use traditional materials/designs to complete a real-estate project as opposed to implementing LEED/Energy Star/etc…Upfront incentives are necessary to reap the terrific future benefits “green building” methods provide:
- less water consumption
- less waste
- less electricity
- less carbon emissions
Nevada is Upset Over $90M in Lost Revenue
The reason this law is put on hold is because Nevada did not anticipate the subsidies/tax breaks would amount to such a high dollar figure. You have to wonder why they are arguing over $90M in lost tax-revenue…this is the gambling capital of the world! They are obviously lacking in the financial modelling department. Instead of putting the law on hold, they should figure out a way to capitalize on the future efficiencies gained from the projects. Between RECs and Carbon Credits, there is a lot of “green” ambiguity to play with that could pay dividends over the lifetime of the project.
Green Buildings Will Create “Green” Energy Securities
From a purely capitalistic perspective, if someone gives you a discount, you owe them. If developers are receiving discounts in the form of subsidies/tax breaks, why is the government (federal/state/local)not collecting and effectively leaving cash on the table? As mentioned in my previous LEED post , I am certain the individuals/groups that pay for this kind of construction will be able to receive some kind of credit in the future for the carbon-footprint/efficiency savings they paid to create.
I don’t see a problem with government owning the rights to these credits in return for handsome savings. To me this is a win-win. The government gets to play in the energy credit market, and builders/developers get to save on upfront costs for their projects.
Upcoming Trends:
- If they aren’t currently allowed to do so, governments (federal/state/local) will begin to lobby congress to allow them to acquire the rights to these energy credits in exchange for tax breaks/subsidies. This could create a very interesting muni-bond market.
- Builders/developers will begin to lobby congress to allow them to price their new “green” efficiencies and sell them on the open market, be it RECs, Carbon Credits, etc…
May 5, 2007 at 7:16 pm
Nevada probably doesn’t get those credits since it’s a municipality… unless I’m wrong.
May 7, 2007 at 6:31 pm
This is definitely bad news, but I don’t think Nevada should try to collect the $$ savings from the people building the buildings… The whole premise of the tax credit in the first case is that there are inefficiencies in the market that work against green buildings, and the subsidies are the taxpayers’ incentive to help overcome those non-monetary barriers (because the taxpayers benefit from positive externalities such as reduced pollution and a more vibrant economy (b/c Nevada will be importing less power from other states, and so can keep more of their money at home.)
Are the tax breaks for LEED buildings the right size to reduce the non-monetary barriers to efficient buildings? I don’t know.
I’m not usually in favor of mandates, but in cases like this, where *complying* with the mandate will save the building owners money in the long term, I think it’s a better tool than incentives, for the very reason you point out: there is money left on the table. But just taking the money off the table without a mandate will simply return us to the status quo (which is what it sounds like is happening.)
May 11, 2007 at 10:21 am
I think municipalities have to become more creative in the ways they make revenue. Traditional tax revenue is boring…but when you get into this kind of space, there are many sides the government can step in and charge fees while giving discounts/incentives/credits/subsidies to the taxpayers.