It’s Complicated: Why C&I and Complexity Are a Good Thing for the Environment

The complexities involved in structurally improving communal sustainability are substantial. They involve macro change in the form of energy shift, waste management solutions, and more. They involve micro change in the form of individual dietary habits, transportation choices, and general use of disposable goods.

It is through this lens of complexity that I assert what I believe to be one of the greatest unspoken truths of so-called “doing good”—it’s complicated. The structures that emerged through the post-Industrial Age are the very same that have dramatically improved the quality and length of human life across the globe.

No single piece of macro-economic policy is more fit to contend with this complexity than tax credits and incentives (C&I.) This is because C&I represents the best partnership between private and public entities inside the democratic boundaries of capitalism. That is to say C&I is a tangible manifestation of the need for profit balanced with the need for large scale change. We know this with such confidence because it is already happening.

C&I is already creating major green effects throughout the U.S. and around the globe. Here are four examples.

State Brownfield Programs

Perhaps no single effort is more emblematic of “cleaning up the environment” than literally cleaning up despoiled areas. The way that many brownfield programs function is a powerful example of C&I at work.

By incentivizing private industry to purchase and/or develop brownfields through a various array of tax abatement and grants, then tethering those benefits to successful remediation, government is able to not only clean up problematic areas but reactivate critical centers of commerce in underserved communities.

Energy Efficient Buildings and the Section 179 Deduction

This federal incentive often comes with state, county, and city piggyback incentives, all dedicated to the creation of energy efficient buildings. Originally set to expire in 2017, the Section 179 deduction was made permanent in 2020 (a rare distinction in the C&I world.)

State Incentives for Renewable Energy and Electric Vehicles

When many people think of “sustainability” they immediately think of hybrid and electric cars. This is a direct testament to the power of C&I as only 20 years ago imagining the infrastructure needed for a wide adoption of electric cars seemed inconceivable, much less the vehicle technology and market need. Sure enough, through multilateral scaffolding of C&I, jurisdictions were able to effectively incentivize the creation of charging stations, the manufacture of electric and hybrid cars (through the carbon offset credit), and the individual purchase of hybrid and electric cars. Here’s a great site to get lost in just to begin to understand the scope and breadth of such credits in the U.S. alone: https://www.dsireusa.org/

Diesel Emissions Reduction Act (DERA)

It’s no secret that highways with heavy traffic from commercial trucks experience more significant problems with air pollution, which lead to associated health problems. To curb these effects, the Environmental Protection Agency provides grants and rebates to reduce emissions from diesel engines. There has been much success through DERA in Oregon. If you’d like to read a case study, click here

I would like to conclude with a reference back to the introduction: doing good is complicated. Especially in terms of environmental improvement, doing good is complicated by virtue of how entrenched the existing, effective systems are. To be clear: electric cars are indeed a threat to a lot of industries and by extension, individual jobs and associated families. We should not be so cavalier in casting those concerns aside even though the threats of climate change are very real.

Capitalism provides the organic boundaries necessary for truly useful businesses and solutions to emerge. However, it also has gaps in areas, which could be useful, but are a significant distance from commercial or investor viability. What C&I does is to help us bridge those difficult gaps such that the profit model so integral to a free market is maintained while also protecting and providing for the long-term public health. C&I helps us to preserve the jobs threatened by emerging technologies while still moving towards those more environmentally beneficial solutions.

So as we use the occasion of Earth Day to refocus us all on the important work of sustainability, I would invite everyone to also realize that C&I is a major toolset in the effort to maintain the structure of capitalism while moving us towards the new large-scale solutions we very much need.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Laurence Sotsky is the CEO of Incentify, an enterprise technology firm dedicated to realizing the financial and societal goals of Tax Credits & Incentives (C&I).

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at TaxInsights@bloombergindustry.com.