Question

Topic Green Building Finance:

Research and discuss innovative financing options and tax incentives for green building. (Note: Briefly respond your answer in 1-2 paragraphs minimum.)

Answer 1

The idea of green rating of buildings has taken roots. This is in line with the global trend in which the rating tools set benchmarks for green measures for constructing and using buildings to make them sustainable and to reduce their negative impacts on environment.

Benefits of Green Rating

There are several tangible and non-tangible advantages that can be envisaged from the green rating systems adapted for Green Building Projects during their entire life-cycles.:

–              An independent third party evaluation about environment friendliness: It indicates that the MSME is conscious about its duty towards environment and society at large

–              Credit at concessional rate

–              Mitigation of environmental risk:

–              Confidence among value chain partners

–              Self assessment tool: Green Rating is a self-assessment tool that can be used to identify areas of improvement

–              Creating awareness

Innovative Financial Tools to Promote Greening of buildings

Following are some innovative tools that can be used to promote greening of buildings:

Rebates: These can be built into the tax system to give credits to homeowners for adopting specific energy saving measures rather than whole building performance.

Feebates: This new form of credit incentive is currently being tested and is based on a carbon tax or a tax on the carbon footprint of a building or sale certification fees. The feebate rewards homeowners who maintain energy efficient homes or carry out upgrades prior to sale. They pay less or their fees get waived, rebated or tax credited

Green mortgages: Credits based on a home’s energy efficiency are factored into the mortgage, allowing individuals to finance energy-efficient improvements in their property.

Equity finance or external capital: This is used for funding high-risk projects whereby project developers sell a majority of their ownership in the project to entities that have sufficient resources to finance the project.

Third-party financing: Energy Service Companies (ESCOs), by engaging in Energy Performance Contracting (EPC)–sometimes referred to as Energy Savings Performance Contracting (ESPCC) – with building owners, develop, install and monitor projects designed to improve energy efficiency.

Revolving Funds: Loans can be repaid with the cash-flow arising from energy savings. The repaid loans then finance new energy efficiency projects.

White certificate: These certificates, also known as energy efficiency certificates, can enable building owners and even residential landlords to trade their emissions allowances.

Carbon credits: While the building sector offers theoretically great potentials, only around 1 per cent of the certificates have been generated through demand-side energy efficiency measures.