Finance

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Tax Credits and Incentives to Promote Sustainability

Program Overview

Governments have often used tax credits or incentives to motivate or increase investment in a particular sector or area. Depending on the government system, tax codes can be amended at the national, sub-national, and local levels. Tax credits and incentives can be used broadly to stimulate community revitalization, retain city residents, and reduce development costs. These tax credits and incentives can be applied specifically by businesses or individuals for activities ranging from energy efficiency projects, to enhancing site cleanup and redevelopment, to implementing a range of social programs. In the U.S., federal tax credits have been used to increase sustainability projects and have also facilitated the development of green low-income housing projects and the maintenance of public facilities. In many developing countries, governments sometimes reduce or eliminate corporate taxes for the purpose of attracting Foreign Direct Investment or stimulating growth in selected industries.

How to Apply this Program

Depending on the nation, tax credits or incentives intended to promote sustainability must be established at the federal and/or sub-national level. Once in force, the target audience, which may include individuals, institutions, or corporations, can access tax credits and incentives. Information on available tax incentives may be available through a number of channels, including tax lawyers and advisors or public information databases.

Contact Information

U.S. EPA's Center for Environmental Finance 
Website: www.epa.gov/envirofinance

Examples

Originally signed into law in 1997, the Brownfields Tax Incentive encouraged the cleanup and reuse of brownfields. Under this incentive, environmental cleanup costs were fully deductible in the year incurred, rather than capitalized and spread over time. This incentive expired in 2011.

The Pennsylvania Fresh Food Financing Initiative is a statewide financing program designed to attract supermarkets and grocery stores to underserved communities, to ensure fresh, healthy food is accessible to all Philadelphians. Developed as a public-private partnership between the Commonwealth of Pennsylvania, The Reinvestment Fund, The Food Trust, and the Urban Affairs Coalition, the Initiative supports operators with leveraged capital financing while using market analysis and public policy to drive further development of supermarkets. The program has been deployed in Philadelphia since 2004.