Buildings


water, indoor air quality and financial performance (UNEP SBCI and WRI 2009; UNEP SBCI 2009a).


Fiscal instruments and incentives These instruments include energy or carbon taxes, tax exemptions and reductions, public benefits charges, and capital subsidies, grants, subsidised loans and rebates. Further details as well as examples are provided in Box 8. They target energy consumption and/or upfront investment costs. Examples of their cost-effectiveness include (UNEP SBCI 2007b):


■ Tax exemptions: Benefit/Cost Ratio 1:6 for new houses (USA);


■ Public benefits charges: - US$ 53/tCO2 tCO2


(USA); and


■ Subsidies: Benefit/Cost Ratio 12:1 (Brazil), - US$ 20/ tCO2


(Denmark).


Taxes can reinforce the impact of other instruments such as standards and subsidies, affecting the whole building life cycle and making energy efficiency investments more profitable. They offer governments the possibility of investing


tax revenues into green-building


improvements. A challenge in their implementation remains low price-elasticity of demand, depending on how households spend their disposable income and the availability of substitute technologies.


Grants and subsidies are well suited to low-income households, which tend not to make investments in energy efficiency even if they have access to capital. By providing unconditional grants and subsidies, governments can provide direct capital rather than access to capital (UNEP 2009b). Grants are also best suited to encourage innovators and small businesses who would like to invest in R&D but find it difficult to access capital from the market. For example, the Danish energy authority made an agreement with the glass industry to develop highly-efficient double- glazed windows (de T’Serclaes 2007). Under the Energy Premium Scheme, the Dutch energy agency provided grants to evaluated buildings for introducing energy- saving measures (Keivani et al. 2010).


For middle- and upper-income households, preferential loans may be more appropriate for those wishing to carry out energy-efficiency improvements. These can be granted through public-private partnerships in which governments give some fiscal incentives to banks, which


31. World GBC is a worldwide union of national Green Building Councils: Available at http://www.worldgbc.org/


32. SB Alliance is an international organisation that regroups key actors from the property and construction industries, standard-setting organisms and national building research centres: Available at http://www.sballiance.org/


to - US$ 17/


Another effective measure for developers is a reduction or temporary freeze in property taxes tied to the energy performance of buildings. These rewards can be used to cover any additional costs that green-building measures incur, meaning that building green need not cost any more than conventional construction. For example, the Oregon Department of Energy offers energy tax credits to businesses that invest in energy conservation, recycling, renewable energy resources and reductions in transportation related energy use on both retrofit and new construction projects. The Business Energy Tax Credit is 35 per cent of eligible project costs, the increased project cost above industry standard. Since the scheme has been introduced more than 7,400 energy tax credits have been awarded (Oregon Department of Energy 2010). Tax exemptions and reductions are efficient in stimulating initial sales of alternative technologies. Important is that the tax credits are sufficiently high to create a real incentive.


Public benefits charges are a special form of energy tax, whose revenues are invested in efficiency improvements. In Brazil for example, all distribution utilities are required to spend at least 1 per cent of their revenue on energy- efficiency improvements. Governments can also require utilities to adopt a business model based on the delivery of energy service (including efficiency improvements) rather than the delivery of energy per se.


Finally, and across several of the categories above, public-sector financial institutions have an important role to play in addressing credit barriers. Backed by governments they also help local financial institutions to share the risk related to energy-efficiency projects. For example, the Asian Development Bank (ADB) has supported green buildings and other energy efficiency programmes through partial credit-guarantee schemes (UNEP 2009b). The total investments


towards new


energy-efficient green buildings and building retrofits supported by guaranteed loans is expected to exceed US$ 150 million by 2012 (ADB 2009).


365


in turn establish low interest rates for their customers. For example, KfW, a German development bank, launched preferential loans using a double-edged mechanism to finance them through public tax exemption for investments in efficiency projects coupled with direct public subvention (de T’Serclaes 2007).


For larger-scale, commercial greening efforts, the introduction of reduced fees and waivers can significantly aid the uptake of green building measures. Ordinarily, building and permit fees are significant barriers to new development projects – green or otherwise – as they are non-trivial and have to be paid upfront. Reducing or waiving these fees if a building meets certain green criteria helps stimulate green building development.


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