Senate Tax Bill Could Be 'Devastating' to Wind and Solar Power
Now, renewable energy trade associations are raising the alarm about an eleventh-hour provision called the Base Erosion Anti-Abuse Tax (BEAT) program that "would have a devastating, if unintended, impact on wind and solar energy investment and deployment," according to a letter addressed to the Senate.
The BEAT provisions "undermine our capacity to use renewable energy tax credits, which have value only if they can be monetized," a letter, signed by the Solar Energy Industries Association, the American Council on Renewable Energy, American Wind Energy Association and Citizens for Responsible Energy Solutions, warned.
As Utility Dive explained, while the BEAT provision is meant to make it harder for corporations to dodge taxes, it also renders impractical the monetization of the Production Tax Credit (PTC) for wind power projects and the Investment Tax Credit (ITC) for solar projects.
Tax credits have fueled the renewable energy industry's boom. The current PTC and ITC allows developers to deduct 30 percent of the cost of installing a solar or wind energy system from their federal taxes.
Greg Wetstone, president and CEO of the American Council on Renewable Energy, told Utility Dive that the BEAT provision would affect $50 billion in annual investment in renewable energy projects.
"This should not be happening now," he said. "It came out of nowhere." Apparently, the provision was inserted on Thanksgiving eve during a last-minute markup of the tax bill in the Senate finance committee.
Greentech Media delved further:
That problem is the Base Erosion Anti-Abuse Tax (BEAT) provision, which targets "earnings strippings," where large companies with foreign operations reduce their tax bills through cross-border payments they can then deduct in the U.S. The BEAT provision aims to circumvent that stripping with a minimum tax of 10 percent of taxable income.
BEAT would require every company to do two calculations: one quantifying 10 percent of a company's taxable income, including cross-border payments, and another quantifying the corporation's tax liability, excluding any tax credits the company received from tax equity investments.
The BEAT provision applies to all but R&D credits. If a company has invested in renewables, the second number could be lower than the first. If that's the case, the company would have to pay the difference in taxes.
"This is Defcon One," Wetstone also told TIME. "It would simply undermine the financial structure that is critical for renewable energy and bring a booming sector to a halt."
Environmental groups have also spoken out against the heavily contested tax bill.
Michael Brune, executive director of the Sierra Club, condemned the House version "for [gutting] incentives for renewable energy and electric cars while ignoring the tens of billions of dollars the government hands out to fossil fuel corporations (which, of course, would also see their taxes slashed)."
Here's the letter from the renewable energy trade groups in full:
We are writing on behalf of the thousands of leading investors, developers, manufacturers, and corporate energy consumers in the U.S. renewable energy sector to alert you to urgent concerns with the Base Erosion Anti-Abuse Tax (BEAT) provisions in the Senate Tax Cuts and Jobs Act. As drafted, the BEAT program would have a devastating, if unintended, impact on wind and solar energy investment and deployment.
While we are grateful that the Senate tax proposal leaves the current phase-down schedules for wind and solar energy tax credits unchanged, the bill's BEAT provisions undermine our capacity to use renewable energy tax credits, which have value only if they can be monetized. For multi-national companies covered under the BEAT provisions, the renewable tax credits would, as drafted, be subject to a new 100 percent tax. Not surprisingly, major financial institutions have indicated that, under such a regime, they would no longer participate in tax equity financing, the principle mechanism for monetizing credits. The tax equity marketplace would collapse under these provisions, leading to a dramatic reduction in wind and solar energy investment and development.
It is important to note that, while the BEAT provisions are intended to promote U.S. investment and job growth, the program's treatment of renewable energy tax credits – which are generated exclusively through investment in U.S. projects – would have the opposite impact, dramatically reducing American wind and solar energy investment and job creation. These sectors are important national economic drivers, generating nearly $50 billion in annual U.S. investment.
It is also extremely problematic that the BEAT provisions apply retroactively to tax credits generated by operating, as well as new, projects, and would penalize companies that have relied on the tax code. Companies holding tax credits would do their best to sell them immediately, even at great discounts, a phenomenon that would flood the marketplace and further damage tax equity markets. We do not believe it fair or appropriate for Congress to reduce the value of tax incentives that have been relied upon in good faith by investors and developers. Such a result is especially concerning in this case, given that the wind and solar power sectors agreed to the phase-down of their own tax credits as part of the bipartisan compromise captured in the PATH Act of 2015.
We respectfully, and urgently, ask that the BEAT program be amended to exempt the production and investment tax credits from the calculation of the base erosion tax, just as the research and development tax credit is exempted from the provision in the current draft. Please feel free to let us know if we can provide additional information regarding any aspect of this issue.
Maryland will become the first state in the nation Thursday to implement a ban on foam takeout containers.
- New Jersey Legislature Passes 'Most Comprehensive' Plastics Ban ... ›
- Canada to Announce Ban on Single-Use Plastics - EcoWatch ›
- The Complex and Frustrating Reality of Recycling Plastic - EcoWatch ›
- Dunkin' Says Bye to Foam Cups (But Bring Your Own Thermos ... ›
- Maine and Vermont Pass Plastic Bag Bans on the Same Day ... ›
EcoWatch Daily Newsletter
By Ajit Niranjan
Leaders from across the world have promised to turn environmental degradation around and put nature on the path to recovery within a decade.
- Destruction of Nature Is Triggering Pandemics, Say Leaders of WWF ... ›
- The UN Wants to Protect 30% of the Planet by 2030 - EcoWatch ›
- New WWF Report Calls for Protecting Nature to Prevent Future ... ›
Just days after a new report detailed the "unequivocal and pervasive role" climate change plays in the increased frequency and intensity of wildfires, new fires burned 10,000 acres on Sunday as a "dome" of hot, dry air over Northern California created ideal fire conditions over the weekend.
- California's Iconic Redwoods Threatened by Wildfires - EcoWatch ›
- California Wildfires Destroy Condor Sanctuary, at Least 4 Birds Still ... ›
- 7 Devastating Photos of Wildfires in California, Oregon and ... ›
- David Attenborough Calls For Ban on Deep-Sea Mining - EcoWatch ›
- Sir David Attenborough Set to Present BBC Documentary on ... ›
- David Attenborough Gives Stark Warning in New BBC Climate ... ›
Kevin T. Smiley
When hurricanes and other extreme storms unleash downpours like Tropical Storm Beta has been doing in the South, the floodwater doesn't always stay within the government's flood risk zones.
New research suggests that nearly twice as many properties are at risk from a 100-year flood today than the Federal Emergency Management Agency's flood maps indicate.
Flooding Outside the Zones<p>About <a href="https://furmancenter.org/files/Floodplain_PopulationBrief_12DEC2017.pdf" target="_blank">15 million</a> Americans live in FEMA's current 100-year flood zones. The designation warns them that their properties face a 1% risk of flooding in any given year. They must obtain flood insurance if they want a federally ensured loan – insurance that helps them recover from flooding.</p><p>In Greater Houston, however, <a href="https://doi.org/10.1111/j.1539-6924.2012.01840.x" target="_blank">47% of claims</a> made to FEMA across three decades before Hurricane Harvey were outside of the 100-year flood zones. Harris County, recognizing that FEMA flood maps don't capture the full risk, now <a href="https://www.hcfcd.org/floodinsurance" target="_blank" rel="noopener noreferrer">recommends that every household</a> in Houston and the rest of the county have flood insurance.</p><p>New risk models point to a similar conclusion: Flood risk in these areas outstrips expectations in the current FEMA flood maps.</p><p>One of those models, from the <a href="https://firststreet.org/flood-lab/research/2020-national-flood-risk-assessment-highlights/" target="_blank">First Street Foundation</a>, estimates that the number of properties at risk in a 100-year storm is 1.7 times higher than the FEMA maps suggest. Other <a href="https://doi.org/10.1088/1748-9326/aaac65" target="_blank" rel="noopener noreferrer">researchers</a> find an even higher margin, with 2.6 to 3.1 times more people exposed to serious flooding in a 100-year storm than FEMA estimates.</p>
What FEMA’s Flood Maps Miss<p>Understanding why areas outside the 100-year flood zones are flooding more often than the FEMA maps suggest involves larger social and environmental issues. Three reasons stand out.</p><p>First, some places rely on relatively old FEMA maps that don't account for recent urbanization.</p><p>Urbanization matters because impervious surfaces – think pavement and buildings – are not effective sponges like natural landscapes can be. Moreover, the process for updating floodplain maps is locally variable and can take years to complete. Famously, New York City was updating its maps when Hurricane Sandy hit in 2012 but hadn't finished, meaning flood maps in effect <a href="https://projects.propublica.org/nyc-flood/" target="_blank">were from 1983</a>. FEMA is required to assess whether updates are needed every five years, but the <a href="https://www.fema.gov/cis/nation.html" target="_blank" rel="noopener noreferrer">majority of maps</a> <a href="https://www.oig.dhs.gov/sites/default/files/assets/2017/OIG-17-110-Sep17.pdf" target="_blank" rel="noopener noreferrer">are older</a>.</p><p>Second, binary thinking can lead people to an underaccounting of risk, and that can mean communities fail to take steps that could protect a neighborhood from flooding. The logic goes: if I'm not in the 100-year floodplain, then I'm not at risk. Risk perception <a href="https://doi.org/10.1088/1748-9326/ab195a" target="_blank" rel="noopener noreferrer">research</a> backs this up. FEMA-delineated flood zones are the major factor shaping flood mitigation behaviors.</p><p>Third, the era of climate change scuttles conventional assumptions.</p><p>As the planet warms, extreme storms are becoming <a href="https://nca2018.globalchange.gov/" target="_blank">more common and severe</a>. If greenhouse gas emissions continue to increase at a high rate, computer models suggest that the chances of a severe storm dropping 20 inches of rain on Texas in any given year will increase from about 1% at the end of the last century to 18% at the end of this one, a chance of <a href="https://doi.org/10.1073/pnas.1716222114" target="_blank" rel="noopener noreferrer">once every 5.5 years</a>. So far, <a href="https://www.rstreet.org/wp-content/uploads/2020/02/195.pdf" target="_blank" rel="noopener noreferrer">FEMA hasn't taken into account the impact climate change is having</a> on extreme weather and sea level rise.</p>
Racial Disparities in Flooding Outside the Zones<p>So, who is at risk?</p><p>Years of research and evidence from storms have highlighted social inequalities in areas with a high risk of flooding. But most local governments have less understanding of the social and demographic composition of communities that experience flood impacts outside of flood zones.</p><p>In analyzing the damage from Hurricane Harvey in the Houston area, I found that <a href="https://doi.org/10.1088/1748-9326/aba0fe" target="_blank">Black and Hispanic residents disproportionately experienced flooding</a> in areas beyond FEMA's 100-year flood zones.</p><p>With the majority of flooding from Hurricane Harvey occurring outside of 100-year flood zones, this meant that the overall impact of Harvey was racially unequal too.</p><p>Research into where flooding occurs in Baltimore, Chicago and Phoenix points to some of the potential causes. <a href="https://www.nap.edu/read/25381/chapter/4#16" target="_blank" rel="noopener noreferrer">In Baltimore and Chicago</a>, for example, aging storm and sewer infrastructure, poor construction and insufficient efforts to mitigate flooding are part of the flooding problem in some predominantly Black neighborhoods.</p>
What Can Be Done About It<p>Better accounting for those three reasons could substantively improve risk assessments and help cities prioritize infrastructure improvements and flood mitigation projects in these at-risk neighborhoods.</p><p>For example, First Street Foundation's risk maps account for <a href="https://firststreet.org/flood-lab/research/flood-model-methodology_overview/" target="_blank">climate change</a> and present <a href="https://floodfactor.com/" target="_blank" rel="noopener noreferrer">ratings</a> on a scale from 1 to 10. FEMA, which works with communities to update flood maps, is <a href="https://www.fema.gov/media-library-data/1521054297905-ca85d066dddb84c975b165db653c9049/TMAC_2017_Annual_Report_Final508(v8)_03-12-2018.pdf" target="_blank" rel="noopener noreferrer">exploring rating systems</a>. And the National Academies of Sciences, Engineering and Medicine recently <a href="https://www.nationalacademies.org/news/2019/03/new-report-calls-for-different-approaches-to-predict-and-understand-urban-flooding" target="_blank" rel="noopener noreferrer">called for a new generation of flood maps</a> that takes climate change into account.</p><p>Including recent urbanization in those assessments will matter too, especially in fast-growing cities like Houston, where <a href="https://authors.elsevier.com/a/1boBRyDvMFW6W" target="_blank" rel="noopener noreferrer">386 new square miles</a> of impervious surfaces were created in the last 20 years. That's greater than the land area of New York City. New construction in one area can also <a href="https://scalawagmagazine.org/2018/01/city-in-a-swamp-as-houston-booms-its-flood-problems-are-only-getting-worse/" target="_blank" rel="noopener noreferrer">impact older neighborhoods downhill</a> during a flood, as some Houston communities discovered in Hurricane Harvey.</p><p>Improving risk assessments is needed not just to better prepare communities for major flood events, but also to prevent racial inequalities – in housing and beyond – from <a href="https://www.npr.org/2019/03/05/688786177/how-federal-disaster-money-favors-the-rich" target="_blank" rel="noopener noreferrer">growing</a> after the unequal impacts of disasters.</p>
- Overlooked Flood Risk Endangers Homeowners - EcoWatch ›
- Florida Coastal Flooding Maps: Residents Deny Predicted Risks to ... ›
- Flooding Risk for U.S. Homes: Millions More Are Vulnerable Than ... ›