A different approach
This industry has long had a love/hate affair with government energy efficiency rebates and incentives.
On the one hand, they provide a boost to business when they are in place. On the other, they skew business so many customers consider equipment upgrades only when the rebates line up. And they draw a whole bunch of shady so-called contractors with creative names like “Energy Rebate Home Heating” and such.
In its Fall Economic Statement, the federal government is trying a new approach – tax credits aimed at encouraging building owners to upgrade to low carbon producing equipment like geothermal, solar, waste heat recovery, etc. This helps the government towards its carbon reduction goals, providing a carrot rather than a carbon tax stick.
This initiative is aimed at commercial operations and is part of a significant job creation strategy, which is a good thing.
They will reduce the cost of the equipment by about one-third for profitable companies that pay enough taxes to write it off. They allow the customer – the building owner – to depreciate the equipment 100 percent in the first year rather than depreciating it over a longer period, typically four years. It’s a significant write-off.
Is this better than a rebate program? I suspect it is. By its very nature it limits the types of companies than can be involved. It is targeting solid companies; companies that can actually produce jobs. It’s also complicated enough – we’re not sure how complicated – to keep out the fly-by-nighters.
And I think – I am no tax expert – that a tax write-off is more attractive for business than a rebate.
The downsides are the same as a rebate program. How long is it going to last? The drawback of rebate programs is that a government can cancel them at a moment’s notice, as they have done in the past, leaving wholesalers with equipment they can’t sell and contractors with sales contracts they can’t honour. That makes it difficult to plan.
And will contractors be able to explain this new tax write-off to their customers, or must they bring along an accountant on sales calls? Will a new government cancel the whole thing?
However, rebates haven’t worked well. Perhaps tax write-offs are a better way to go. It’s something the industry has been pushing for. Depending on how this program works out, it could be expanded to other sectors, including residential. Time will tell.