The government will often support industries that it sees as important. This support is provided through tax cuts, grants, and subsidies. Recently, green energy and eco-friendly products have become popular industries for government support because there are three main causes of free market failure that serve to disincentivize clean energy and to offset that, sometimes outside intervention is justifiable. In fact, Obama and many other presidents have already provided millions of dollars in government subsidies in support of green products. There are many different types of subsidies and programs designed to support green energy. It’s important to understand what they are and how they work. By doing so, you will better educate yourself and you may even be able to use some of the government support that is available.
1 – Government Grants
A grant is non-repayable money provided to individuals or businesses. Numerous grants that support the “green” industry are available through the government. The government has provided green energy and eco-friendly businesses with substantial amounts of money through such grants. This money doesn’t have to be repaid and it can often be used in whatever way the business requests, but it has to be invested under the terms of the grant. This means that the grants provide businesses with additional funding so that they can invest in research, manufacturing, or anything else that progresses the business further. Grants are sometimes given to individuals, as well. If you’re interesting in investing in green energy, you may want to see what green energy grants are available to you as an individual investor.
2 – Tax Cuts
Whenever the government provides a tax cut, it’s a way for businesses and individuals to save money. Paying taxes is how we support our government, so tax cuts allow us to keep money for ourselves. The government has recently allowed businesses and individuals to write off certain types of green energy investments on their taxes. Such write-offs mean that you essentially declare these investments as an “expense,” which will be subtracted from your income and reduce the amount of money that you owe in taxes. Tax cuts are common for individuals, but they are used in government subsidies, as well.
3 – Government Subsidies
A government subsidy is a type of support provided to a specific business or sector of businesses. Green product manufacturers and eco-friendly companies have been the recipients of government subsidies for many years. Essentially, the government has provided some type of assistance to these businesses through the use of a subsidy. This is often a tax cut, but it could be via direct funds, as well. The money that is used for these subsidies comes from taxpayers, so we entrust that our government provides these subsidies for good reason. For an industry like green energy, the importance of government subsidies is very apparent. Green energy is expected to be the way of the future and government subsidies help make that a reality.
Government subsidies help aid an industry when it is not progressing fast enough in the free market. Generally, when new technology becomes available like green energy, it can take a considerable period of time before prices decline enough to where consumers find the technology affordable. The free market just doesn’t work as fast as some governments would prefer, so they intervene, helping important technology like green energy until it becomes profitable for businesses quicker than it would through the free market. Government support helps push the industry further along so that the products become affordable to consumers at a faster rate. It also allows businesses to expand and get recognized globally, which sheds good light on the country that the business originated from.
Author Bio: Stevie Clapton works for Roof.net, a company that provides emergency roof repairs.
Image: Investment in green business from Shutterstock