Three Market-Based Clean Energy Initiatives

Can Green Politics Ever Influence Local Elections?

Three market-based clean energy initiatives
and their possible electoral impact on U.S. politics

by Lawrence E. McCullough, Ph.D.                  
© 2010 Lawrence E. McCullough                                         

— published Aug. 27, 2010 in Hall Institute of Public Policy Newsletter

COMMENTATORS HAVE OBSERVED that one of the few positive aspects of the BP oil spill is a long overdue re-focusing on America’s urgent need to deploy clean energy technology and resources. Because the media has begun to present a greater number of stories on alternative fuel topics, voters will presumably examine the subject more closely in upcoming elections.

Environmental issues have circulated in the U.S. national political debate since the 1970s, and Green Party candidates have appeared on ballots in nearly every state. Current polls indicate that a majority of Americans are deeply concerned about looming environmental and energy challenges.

However, as a dominant political issue capable of influencing the outcome of American elections, the Environment has yet to match the breadth and scope of War, Economy, Crime, Taxation, Reproductive Rights or even The President’s Rumored Religion in commanding widespread voter attention. 

How might this change in the near future? Is it possible that the U.S. economy can successfully transition to a clean energy foundation without a comprehensive, top-down legislative reform effort from Congress?

The true Greening of America may not start in the voting booth but at the hardware store.

Below are three market-based approaches that would “seed and speed” the process at the local, micro-economic level and lay groundwork for far-reaching effects in U.S. energy policy.

1)  Suspend for three years all local and state sales taxes on purchases of clean energy/sustainable products and services.

Experts agree that for sustainability to become an integral part of the average American’s lifestyle — as automatic as popping into the nearest convenience store for milk and a pack of batteries — consumers must feel adequately informed about Green products and able to buy them on a daily basis. The mystery and perceived complexity of Buying Green must be eliminated.

There are presently tens of thousands of Green products that promote sustainability and thousands of American-owned/based companies involved in making and selling them. This growing but still struggling segment of the U.S. economy would receive a tremendous boost if sales taxes on Green products and services were suspended for a trial three-year period, just long enough for the notion of Buying Green to take firm root in consumer consciousness and become a habit instead of a luxury.

With 45 states and District of Columbia utilizing sales tax, the cumulative effect of a nationwide sales tax moratorium would provide a massive, rejuvenating impact throughout the Main Street economy, even if begun as individual state initiatives.

It would provide immediate and ongoing financial incentive for tens of millions of consumers to buy more Green products and services more often. The additional tens of billions of dollars in sales would benefit large and small retailers from WalMart to the corner dollar store, while encouraging manufacturers and service employers throughout the country to confidently commit to developing sustainable sector jobs.

While it is impossible to accurately estimate how much of the nation’s $228.1 billion 2009 state sales tax revenue resulted from Green products and how much future revenue might be lost from a Green sales tax moratorium,[1] the loss would be partially offset when consumers put money saved from Green purchases back into the economy by purchasing non-Green items, thereby generating sales tax from these ancillary purchases and offering additional revenue to retail and wholesale businesses.

Those most concerned about sovereignty of market competition would be pleased:  a national sales tax moratorium would rely on a stable supply-and-demand fulcrum to spur economic growth without direct industry subsidy or “corporate welfare”. 

Clean energy businesses embracing innovation and genuine usefulness would be the winners — as decided by consumers.

2)  Create automatic federal Green tax deductions with Green purchases.

The basic federal tax rebate rewarding clean energy investment should be simple and straightforward:  every Green dollar an individual or business spends equals an equivalent number of Green Points, whether the purchase is energy-efficient HVAC equipment for an office building, a hybrid automobile or a pouch of organic dog food.

Accumulated Green Points translate via direct formula into pro-rated tax deductions on individual and business federal tax returns. Tracking Green Points could eventually be done by means of bank or credit cards. Absent sophisticated accounting software, taxpayers interested in taking advantage of the program would score Green Points the way they tally current deductions — saving and adding receipts.

Even more than re-directed sales tax revenue, federal Green tax deductions would prove valuable to businesses, especially the much-beleaguered financial services sector. Banks could offer special Green Points savings accounts, investment firms special portfolios highlighting clean technology mutual funds — abetting additional recirculation of money through the active market economy. 

Current state and federal tax credits, loan programs and incentives for purchasing clean energy technology should remain in place and would continue to benefit those able to meet their requirements. But a broad-based federal tax deduction system predicated upon everyday Green Purchases would heighten Americans’ awareness of sustainability issues and enable taxpayers to play a significant role in reshaping the economy.

3) Have all U.S. consumer utility companies contribute a percentage of their annual net revenue to a Local Clean Energy Fund.

One more step is needed that would deliver enormous short- and long-term benefits:  institute a Local Clean Energy Fund drawing upon contributions from all power companies servicing a particular locality.

Virtually all of the nation’s nearly 3,300 utility companies are to some degree addressing sustainability by encouraging conservation and clean energy research through grants, weatherization programs, bill assistance, education outreach, etc.

The Local Clean Energy Fund, however, would be paid directly to the community and be administered by its local governing unit. No competitive grants, no sporadic initiatives, no product giveaways — just a steady flow of immediately usable dollars into a dedicated municipal fund implementing public clean energy projects:  solar panels, building retrofits, public transportation, improved walkways and bicycle paths, green job training, whatever makes most the economic sense for a particular locality

The LCEF would stimulate local jobs, civic improvements and increased public visibility for the concept of sustainability and emphasize how utilities play a leading role in crafting energy solutions, not problems.

Increasing numbers of industry executives are beginning to grasp this concept of paying forward. At a recent business lunch in Somerset, New Jersey, chairman and CEO Ralph Izzo of PSE&G, the nation’s 7th-largest public utility, spoke of the urgent need to convert America’s current carbon-based economy to a sustainable, clean-fuel economy. Stated Izzo, “The common theme to greenhouse gas emissions, to national security, to clean air, to economic development, is:  What are we doing to stay competitive in the sustainable-energy economy?”[2]

Some might view the LCEF as a backdoor corporate tax. Rather, it is a shrewd corporate investment strategy. By channeling money straight into community infrastructure development, utility companies bolster the economic health of the communities from which they draw profit today and tomorrow. . . communities in every part of the United States.

Which brings us full circle to the start of this discussion:  when millions of LCEF dollars begin to be allocated within a local community, the heretofore abstract topic of Clean Energy will quickly become an issue of intense interest to voters across the country. 

Voters who will be asking their municipal leaders informed questions about how the town’s “Green money” will be spent to insure maximum community benefit.

Voters whose expanded scope of civic involvement may not result in establishing a formal political party but whose view of government, corporate and individual responsibility for addressing critical energy issues will be greatly expanded. And with that responsibility, an enhanced opinion regarding electoral accountability at all levels.

There is no denying that money is at the heart of contemporary American politics and policy-making. It is also the prime engine of our nation’s economy. The challenge is to utilize the power and leverage of money to transcend the partisan political culture and unfocused corporate vision hamstringing the nation’s transition to a clean energy economy.

Implementing these three proposals would have the potential to put into active play hundreds of billions of dollars touching every economic sector, including foreign trade. Dollars that would allow tens of millions of Americans to build a stable clean energy economy from the ground up. Dollars that would bring renewed value to The American Dollar at home and abroad.

Meanwhile, Mr. Izzo’s prescient question resonates:  “What are we doing to stay competitive in the sustainable-energy economy?”

The best answer will likely be the simplest: follow the money. And make it grow green.

— Lawrence E. McCullough is a clean energy advocate and resident of Woodbridge, New Jersey.

[1] State Government Tax Collections in 2009, U.S. Census Bureau, p. 1.

[2] “PSE&G chief: U.S. falling behind on green technology” by Jared Kaltwasser,, July 30, 2010.