Why Buying Green Pays – Government Incentives that Pay to Go Green
The dreadful tax season is here. And we all wish there were many items we can deduct and claim credit for.
However, if you made green and eco-friendly purchases or upgrades at home, you are probably one of those outliers that celebrate the tax season.
In my bio, I talk briefly about how I helped companies save money and reduce their carbon footprint through energy and resource efficiency. And since then, I have applied the skills I learned from this experience, to save many dollars for my household as well.
This blog post discusses the different types of government incentives that helps you go green, save money, and reduce your carbon footprint.
Disclaimer: I am not a Certified Public Accountant (CPA). It is advised that you speak with a CPA before taking action on claiming tax credit, tax deduction, or making any green purchases.
Tax season is here, and we all wish there were many items we can deduct and claim credit for (at least I do!).
Luckily, if you’ve made any purchases that have a positive environmental impact, you may be eligible for government incentives that can help your return on those green investments.
In the U.S., government bodies (federal, state, local), as well as utilities, provide incentives to encourage consumers to purchase products or services with a positive environmental impact.
For example in California, there are 110 financial incentives and 69 technical assistance programs that help promote energy efficiency and clean energy! Feel free to check out the Database of State Incentives for Renewables & Efficiency (DSIRE) to find out about the incentives offered in your state.
Why would the government provide incentives for purchasing and investing in products that are better for the environment?
Because the government needs our help in achieving their climate and environmental goals and implement the supporting policies.
For example, policies such as the Energy Policy Act of 2005, Energy Improvement and Extension Act of 2008, and the American Recovery and Reinvestment Act of 2009 were essential in creating tax incentives for energy efficiency and clean energy.
Without these incentives, consumers may be reluctant to choose an energy efficient dishwasher over a cheaper conventional dishwasher. And when consumers don’t purchase these goods, it will be difficult for the producers of energy-efficient products to compete with their conventional counterparts.
Therefore, consumers making more eco-friendly choices is vital to scaling up and making energy efficient, water saving, or carbon reduction products competitive. And ultimately, helping governments reach their climate and environmental goals.
However, you must act fast when taking into account those financial incentives because once the government believes they have reached their environmental goal, those incentives may expire and no longer become available.
What are the different types of government incentives available to consumers?
Government incentives for consumers including individuals and businesses can be categorized into financial incentives and non-financial incentives. Tax deductions, tax credits, rebates, grants, and loans are examples of financial incentives. Non-financial incentives often come in the form of technical assistance.
1. Tax Incentives
Tax incentive can be offered by the federal and state government in the form of tax credit or tax deduction. For example, if you installed renewable energy at your home, you may be eligible for a renewable energy tax credit.
Another well-known example is federal income credit for purchasing an all-electric and plug-in hybrid car.
It is always important to remember that there are eligibility requirements and conditions for such tax credits, so make sure to consult your CPA before you make the purchase.
Rebates are standardized payback incentive programs for particular technologies or product with established environmental impact savings or cost savings.
It is the most common financial incentive provided by the state, local governments and utilities to their residents and businesses. For example, as of March 2019, there are 1,129 rebate programs nationwide for energy efficiency and clean energy.
Rebates are on a first-come, first-serve basis until funding is no longer available, or when the government reaches its respective environmental goal.
Rebate programs can be designed for a single product or for multiple products. The payment amount also varies across programs.
Although rebates can be combined with other financial incentives such as tax credits, some rebates may be considered as taxable income. And of course, there is no double counting and you can only claim the rebate for a product once from one authority.
Rebates offered may be differ across regions and sectors (e.g. business or residential) because each region may have slightly different environmental goals and policies. Therefore, if you are curious about what type of rebates you can benefit from, start by visiting your local government or utility’s website.
For example because Southern California, the Metropolitan Water District of Southern California provides rebates for water conservation to its businesses and residents through the Socal Water$mart rebate programs.
And if you are a Foster City resident, the city provides rebate on compost bins for its residents to help reduce food waste (I wish I was a resident of Foster City ).
3. Grants and Loans
For large scale, high cost projects, government can provide support through grants and loans.
Grants are often provided in a cost-share model – government funds a certain percentage of the total project cost.
Similar to rebates, beneficiaries are often required to install products from a list of verified vendors.
High capital cost projects can also be supported through government-backed loans. These loans can offer lower interest rates and help lenders to qualify more borrowers.
For example, the California GoGreen Financing program offer loans for making green upgrades that include both energy and nonenergy-related improvements.
4. Performance-Based Incentives
If you read my blog on home energy saving tips, you may have read that small actions such as doing your laundry and dishes during off-peak hours, can help cut back on your energy bill.
And the more amazing thing is that, your utility may provide additional incentive for you to take those actions through performance-based incentives.
This type of incentive provides monetary compensation for achieving a specified level of performance that helps reduce environmental impact.
Because this often does not require big upfront capital costs, this could be a good way to get started on reaping the benefits of making green upgrades. And if you already have a green home or business, you can still improve your performance to reap the additional benefits.
Demand response program implemented by utilities is an example of a performance-based incentive. By working with your local utility to reduce your energy consumption during high energy demand hours, you can reduce energy consumption and save money. And this could be fun project for your family or business because by participating in this program, you can actually visualize how much you save.
5. Technical Assistance and Free Products
Technical assistance programs offer residents and businesses with knowledge and resources that can help them make more climate conscious and eco-friendly conscious choices.
You can find simple energy saving tips on your local utility’s website.
If you are really serious about making energy upgrades, the Department of Energy provides a comprehensive guide to greening your home.
Additionally, the local jurisdictions offer free products to help local residents and businesses get started on their energy efficiency and water conservation.
For example, Los Angeles Department of Water & Power (LADWP) provides free faucet aerators that can help you save water to eligible residential and commercial customers.
Going green is no longer a thing for those environmentalists, but it can be for everyone.
And with plethora of government incentives that support us to go green, it’s easier than ever.
Because different jurisdictions may offer different resources and incentives for going green, always start by looking into your city’s website for information.
Are there any other ways you know the government pays for going green? If so, please do share with us in the comments!