Tax Incentive for the Green Products

Topics: World energy resources and consumption, Taxation, Renewable energy Pages: 13 (6527 words) Published: April 28, 2013
The Tax Incentives for Energy sustainability Building

Nowadays, the built environment has a tremendous impact on the natural environment, human health and economy. Since buildings have substantial impacts on the environment, it has become necessary to pay more attention to environmental performance in building design (Pearman & Jager, 1989). Green buildings also describe as sustainable building, are developed to minimize the total environmental impacts which are making effective use of energy and resources, recycle materials and reduce the emission of harmful substances throughout its life cycle (, 2012). While green buildings have been commonly accepted in United States, Europe, however in most Asian countries including China, Hong Kong, India, Malaysia and others, the concept of green building is still in an early stage. Although there are a few projects that are intended to improve environmental performance including productivity, no concerted action towards environmental and sustainable design and the use of green building products exist yet (Hong & Chiang, 2007; Zhang & Liu, 2009). In this assignment, we are discussing the tax incentive or penalty given by various countries to promote green property development and energy efficiency consumption, and the effectiveness of such tax incentives.

(a) Tax incentives provided by various countries in enhancing for more environmentally friendly product consumption. May includes the tax penalties imposed for engaging in environmentally hazardous activities.

United Stated (USA)
US Government started to use income tax allowance as a policy instrument in the late of 1970s to promote energy conservation (Gillingham et al, 2006). There is several federal tax credit and deduction is provided by US federal Government under The Energy Tax Act of 1978 (ETA), for example federal tax credit for residential energy efficiency investments in homes built after 1977 and encourage residential investment in solar, wind and geothermal energy technologies (Jaffe and Stavins, 1994). Until now, there are three types of the tax incentive US federal Government given to encourage citizens to create the energy efficiency building.

Firstly, US federal Government proposed a tax deduction up to US$1.80 per square foot to owners or designer of energy-efficient features commercial building, which save at least 50% of the heating and cooling energy of a building (SBA. Gov, n.d.). There are 3 primary building components are analyzed to determine the qualifying credit, which are interior light systems, HVAC (heating ventilation and air conditional) system and building envelope with each available for a deduction up to 60 cents per square foot (IRS, 2006). Owner of the qualified commercial building did not achieve a 50% reduction of the power cost, the credit for the tax deducted will calculate according to the proportion of the cost of the building energy and power reduction (IRS, 2006).

US Government also provides a credit to an eligible contractor who develop a qualified alternative energy efficient home. The amount US$ 1000 and US$ 2000 tax credit on each property sold depending on energy saving achieve is given to the home builders manufactured homes (Watson, 2009). The tax credit amount US$ 2000 is applicable for manufactured a new energy-efficient home that achieves 50% energy savings for heating and cooling comparable home constructed in according to the International Energy Conservation Code (2004 IECC supplement) (, n.d). A reduced credit of $1000 is also available for manufactured home that meets certain lower level. Difference with the tax deduction, the tax credit allows the taxpayer to reduce its tax liability (Watson, 2009). In addition, the 30% investment tax credit (ITS) for qualifying development for non-business building, which is extended to January 1, 2017 (Hymel & Rogers, 2006). The qualifying improvements included...
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