Treasury, DOE Move To Boost Green Manufacturing
August 13, 2009
03:11 PM
The Departments of Treasury and Energy today detailed its plans to implement a $2.3 billion tax credit program for manufacturers of advanced energy products. The credit is intended to help stimulate America’s economy by making the United States a more attractive location for manufacturers of solar, wind and other green technologies. This $2.3 billion investment in clean energy will pay significant dividends in the form of “green jobs,” bulking up America’s industrial base and boosting the production of homegrown renewable energy. As Chairman of the Senate Finance Subcommittee on Energy, Natural Resources and Infrastructure, Sen. Jeff Bingaman (D-NM) took the lead in adding this tax credit to the American Recovery and Reinvestment Act, enacted in February.
“Domestic demand for renewable energy technologies has grown rapidly, and we anticipate even faster growth in the immediate future,” Bingaman said. “We know that the right incentives will bring vital manufacturing to American soil. This program will put our country in a much better position to capture the economic potential associated with growing demand for technologies that harness renewable energy resources.”
Under Treasury’s program, companies that manufacture clean technology products in the United States can apply for a tax credit allocation. Successful applicants will be able to reduce their taxes by 30 percent of the amount they invest in establishing, expanding or retooling manufacturing facilities. The credit is capped at $2.3 billion, sufficient to leverage $7.67 billion in domestic capital expenditures.
Bingaman’s credit is notable because it is the first advanced energy credit that is not concentrated downstream – at the commercial or individual consumer level. While those incentives have created some U.S. jobs, such as in installation, most advanced energy technologies that are installed in the United States continue to be manufactured overseas. One major driver for this overseas manufacturing is the significant tax incentives that other countries offer. For instance, Malaysia and the Philippines offer solar photovoltaic manufacturers income tax holidays, for 15 years in the case of Malaysia, while Germany offers them up to 50 percent of investment costs. As a result, the U.S. is far behind, and is falling further behind, in “clean tech” manufacturing. A recent New America Foundation report found that in 2008, the United States ran an overall “green trade” deficit of $8.9 billion. According to one recent study, Japan represents 45 percent of global solar cell production while the United States accounts for just 9 percent. And European manufacturers now account for more than 85 percent of the global wind component market.
But just as the U.S. is losing ground in advanced energy manufacturing, we can anticipate rapid near- to mid-term growth in domestic demand for renewable energy technologies. This credit ensures that added demand will not be satisfied by imports – and that the United States can become an exporter of renewable energy technologies.
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