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Analysis: Bipartisan Bill to Spur Building Upgrades Would Cut Energy Costs and Emissions

December 9, 2020
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Washington, DC—A new bill to spur energy-efficiency upgrades in buildings would help save businesses and households a cumulative $15 billion on energy bills and reduce carbon emissions equivalent to those from 22 million cars and light trucks in a year, according to an analysis by the American Council for an Energy-Efficient Economy (ACEEE). The Energy Efficient Qualified Improvement Property (E-QUIP) Act, announced today by U.S. Reps. Brad Schneider (D-IL) and Tom Rice (R-SC), would amend federal tax law to provide accelerated depreciation for key energy efficiency upgrades in commercial and multifamily residential buildings.

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Commercial and residential buildings are responsible for roughly one-third of U.S. greenhouse gas emissions, from both fuel burning on site and the emissions from power plants serving the buildings. But building owners are effectively disincentivized from making efficiency improvements because most such investments are not eligible for the immediate tax write-off available to other business investments under the 2017 tax law. Instead, they are subject to depreciation periods of 15 to 40 years—often far beyond the useful life of the new equipment—making the initial outlay a financial challenge.

The E-QUIP proposal would give building energy investments accelerated, uniform 10-year depreciation if they meet strict energy efficiency criteria. It would apply to heating and cooling equipment, lighting, controls for equipment and lighting (such as smart thermostats and occupancy and daylight sensors), and building shell components (roofs, insulation, and windows) installed through 2025.

“Many building owners want to make energy efficiency investments, but existing law disincentivizes them. This fix will help them upgrade from old equipment to state-of-the-art options that will reduce their energy bills while cutting carbon emissions,” said Steven Nadel, executive director of ACEEE. “Our analysis found that the plan from Representatives Schneider and Rice would spur needed energy efficiency updates.”

ACEEE modeled the economic and environmental impacts from the proposal if enacted, estimating that (in a main impact scenario) it would lead to:

  • 130,000 net additional job-years (more people working for one year)
  • $15 billion energy bill savings (present value)
  • $11 billion added business and federal investment
  • 100 million tons of carbon dioxide emissions avoided.

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