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7 Key Government Incentives for Sustainable Business Practices (2022)

Sustainable Business Incentives 2

Cases of floods, bush fires, and hurricanes are becoming increasingly common and unpredictable. These occurrences, alongside rising temperatures and pollution, are evidence of a need for urgency in addressing climate change. 

As a result, most governments, including the United States, actively promote sustainable development by setting stringent targets. One of the most effective methods governments use to encourage sustainable development is offering incentives to individuals and businesses. 

In this post, we will explore key incentives used by the government to encourage businesses to embrace sustainable development:

But, Why Should You Want Your Business to Go Green?

While initial investments in green energy may be costly, they can save your business thousands of dollars in the long run. Some economic benefits of embracing sustainable business practices include; lowering utility bills, making extra money by selling ERCs to high emitters, and enjoying tax benefits and grants from federal and state governments. 

Other benefits of being a more sustainable business include:

  • Attracting climate change-conscious customers. Some customers prefer spending their money in an establishment that stands for what they believe in. 
  • Improve public health and cut pollution. If you care about your carbon footprint, embracing sustainability is the most effective way of ensuring you do just that. Also, it means a cleaner environment for you, your employees, and the community living near you.
  • You become an example to other businesses. If climate change and sustainable development are a major concern to you, there is no better way of getting the message out there than walking the talk. If people can see your talk in action and its benefits, they will be more willing to embrace it, and you will have played your role in making the world a better place.
  • Increase your business’s ability to comply with changing regulations. Sustainable development regulation keeps changing over time. What was a standard ten years ago is not a standard today and may keep changing as need demands. Embracing the highest level of sustainable business practices mean that even when policies change, you will have an easier time complying.

Transitioning from one model or running a business to another is not always as easy. So if you are starting a business, start as sustainably as possible to avoid the challenges of making it sustainable later. If you are unsure what to start, these free business resources can help you start and run a business. 

Take a look at this video by Science for Georgia to learn more about beneficial, sustainable business practices:

7 Government Tax and Grant Initiatives for Sustainable Business Practices

Governments worldwide are racing to achieve sustainable development per the United Nations Development Policies. The most common approach to reaching these goals is incentivizing small businesses to be more eco-friendly through tax breaks, grants, and penalties for businesses that fail to comply with the set standards.

Federal, state, and county governments in the United States offer tax breaks and grants for businesses keen on sustainability. The United States Environmental Protection Agency (EPA) creates guidelines that manufacturers must observe to control pollution. So, if your business meets the EPA standards, you could qualify for some of these tax and grant incentives.

One of the areas the government pays attention to when determining which businesses qualify for the tax breaks and grants includes a business investment in energy-saving equipment that qualify for tax write-offs. Another area is a business investment and installations of energy-efficient and saving heating and cooling equipment, solar energy, and green waste management efforts.

The United States Energy Department is responsible for maintaining the tax credits, savings, and rebates database. So, if you want to learn how much you can save regarding tax credits, rebates, or overall cost savings for running an eco-friendly business in the long run, you may want to check out that information from their website.

Below is a list of benefits and government incentives for sustainable business practices (and some penalties for non-compliance): 

1. The Business Energy Investment Tax Credit (ITC) 

The ITC is a tax credit extended by the federal government to businesses that invest in building or purchasing equipment used to produce renewable energy equipment. Equipment qualifying for this tax credit includes solar panels or equipment used in wind power generation. 

Additionally, you may want to check if your state or county government has tax incentives for renewable energy, which you could claim. Many states, counties, and cities have incentives, so it is worth considering.

2. Qualified Plug-in Electric Drive Motor Vehicle Credit

If you buy a plug-in hybrid or an electric vehicle for your business, you may be eligible for Qualified Plug-in Electric Drive Motor Vehicle Credit of up to $7,500. This figure may vary based on the size of the battery and the number of non-sustainable vehicles your business has acquired. 

Electric vehicle charging point

If your car serves business and personal purposes, it is possible to split your credit between personal and business taxes. You may also qualify for state and city tax incentives. For example, California offers up to $2,500 worth of credit for businesses that purchase electric vehicles.

3. Small Business Innovation Grants

You may be eligible for federal grants if your business deals with research and development. The federal government offers grants to organizations involved in research on sustainable development to incentivize them to conduct more research that meets federal research and development goals. 

Several federal agencies regulate and award sustainable business grants, such as the National Science Foundation, Environmental Protection Agencies (EPA), and National Oceanic and Atmospheric Administration (NOAA).

4. Green Jobs Initiative

Employees are a company’s biggest asset, and no matter what a company policy is, there is no way of getting it implemented until its employees are on board. The only way of bringing your employees onboard a sustainable business policy is by offering them training, which costs money. 

If you have a solid plan for training sustainable business practices, you could apply to get federal government grants through the Green Jobs Initiative. These grants are offered to businesses keen on training their staff on sustainable business practices. Also, access to these grants is merit and requires businesses to write a proposal for funding after meeting the set standards.

Sustainability written in white chalk on a blackboard, next to three overlapping circles that say people, planet, profit

5. Emission Reduction Credits (ERCs)

Emission reduction credits (ERCs) are a form of a trading system between industries. The ERCs approach does not limit the level of allowable pollution in a regulated area. 

Instead, polluters are assigned a specific pollution rate that they must adhere to. For example, motor vehicle limits can be set at specific grams per mile. If polluters keep their emissions below their assigned rate, they earn credits. 

The earned credits can be sold to other industries that exceed their limits. The ERCs approach faces criticism because it doesn’t have a cap on the total allowable emission in a given area. As new industries and businesses are allocated their limits, the emission levels will keep rising.

6. Green Community Grants

Green community grants are awarded to developers who embrace sustainable development in their way of doing business. 

Green community grants come in two types; Charrettes Grants that award businesses up to $5,000 to use sustainable building systems, and Sustainability Training Grants of up to $5,000 as an incentive for building and maintaining environmentally friendly housing.

7. Capped Allowance Systems

While there is no cap on the level of emissions in a given area, the total number of ERCs allocated to businesses in a given area act as the cap. This means that the emissions in a given area can increase with time as more businesses enter the scene, and this is where the Cap Allowance Systems come in. 

After reaching their limit, industries have two options; receive free allowances based on their historical emissions or purchase allowances from businesses whose emissions are below their set limit. That way, best performers get a financial advantage as higher emitters compete to buy their allowances, increasing the cost of doing business for high polluters.

Image of green fields with smoke stacks in the background

A Case for ERCs and Capped Allowance Systems

While these trading programs may not seem to help much in controlling the emission level, they provide the most cost-effective way of promoting sustainable development. Through these programs, polluters can decide whether to reduce their emissions, which comes with financial benefits, or buy allowances from firms that keep their emissions below their set rate. 

This creates a win situation for all; bigger industries can continue running even after exercising their allocation, and sustainable firms can get some dollars back for their efforts. Also, the high cost of running above emission limits motivates high pollutants to develop ways of keeping their emissions to the minimum.

Final Thoughts on Government Incentives for Sustainable Business Practices

There are so many reasons to transition to greener ways of doing business but, unfortunately, those reasons aren’t always economic ones! This is why government incentives for sustainable business practices are so important. These incentives can be the push many businesses need to move in a more sustainable direction, or the boost that allows them to make the initial investment in green energy options or setting up a new eco-friendly venture.

Frequently Asked Questions

Why are government sustainable business policies necessary?

Government sustainable business policies are important because they incentivize businesses and industries to take actions that help promote a cleaner and healthier world rather than focusing their attention on profits only. Check out the full guide for some of the best sustainable business incentives to consider.

Where can I find resources for sustainable business practices?

You will find the most reliable resources from credible sources such as EPA, the Energy Department, and other government agencies dealing with energy and environmental matters. Also, non-governmental organizations dealing with environmental matters and research institutions can provide reliable resources. Read the full guide for more info and useful resources on sustainable business practices.

Is transitioning to sustainable business practices expensive?

Yes. But this is only true when you are making initial investments and it's usually cheaper in the long run. Fortunately, you can take advantage of government incentives, including loans, grants, tax deductions, etc., which can make your transition less expensive and set up for sustainable business success!

References

EPA: Environmental Economic Incentives

DSIRE: Database of State Incentives for Renewables & Efficiency

Sacramento Air Quality Management: Emission Reduction Credits Program (ERC)

Simon Fraser University: Sustainable Business Resources

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