Energy efficiency has been among the energy sectors hardest hit by the pandemic, with almost 340,000 jobs lost since the economic shutdown began in March. Most of those laid off are construction workers and contractors who can’t get into homes and businesses to do work.
Expanding existing tax incentives for energy efficiency improvements in homes and buildings is one of the best ways to put this sector back to work as the economy reopens. These incentives – such as a homeowner tax incentive for installing insulation or high-efficiency heating and cooling equipment – can quickly stimulate economic activity in the sector, giving consumers a strong incentive to invest while giving businesses the demand they need to maintain their workforce and rehire.
The resulting economic activity will help contractors – the vast majority of which are small businesses – as well as manufacturing plants across the U.S. that make insulation, windows and doors, heating and cooling equipment, and other building components.
Working with stakeholders across the industry, the Alliance has developed proposals for strengthening and modernizing these incentives so that they can have an immediate impact once it is safe for work to resume. The proposals are broadly supported by businesses, environmental groups, trade associations, and other organizations.
We propose strengthening and modernizing the Sec. 25C tax credit for homeowner improvements, the 179D tax deduction for commercial buildings, and the 45L tax credit for construction of high-efficiency new homes.
We know from recent history that this approach can work. An expansion of residential energy tax incentives under the American Recovery and Reinvestment Act (ARRA) significantly increased the number of claims in 2009 and 2010, generating billions of dollars in economic activity. Additionally, a Department of Energy analysis of just five product categories under the 25C homeowner incentive – furnaces, electric heat pumps, central air conditioners, gas water heaters, and electric water heaters – found that increasing the incentive for each product and extending them long-term would boost sales of high-efficiency products by 278% while generating $52 billion in consumer energy bill savings.
We are urging Congress to move quickly at the first opportunity to include these improved incentives in any future economic recovery package.