Ohio Tax Energy & Carbon Taxes the Next Value-Added Tax (VAT)? - PDF document

26th Annual Tuesday & Wednesday, January 24‐25, 2017 Hya� Regency Columbus, Columbus, Ohio Workshop Y Ohio Tax Energy & Carbon Taxes … the Next Value-Added Tax (VAT)? Tuesday, January 24, 2017 4:15 p.m. to 5:15 p.m.

Biographical Information Dominick Brook, U.S. Leader – Global Sustainability Tax Services Ernst & Young LLP, 800 Yard Street, Suite 200, Grandview, Ohio 43212 Dominick.Brook@ey.com Office: +1 614-232-7376 Cell: +1 740-707-7955 Dominick Brook is a Senior Manager and leads Ernst & Young LLP’s Global Sustainability Tax Practice in the US. He focuses on analyzing and improving the ROI for sustainability strategies, including renewable energy investments, energy efficiency improvements, recycling initiatives, advanced manufacturing and LEED-certified buildings, in three key areas:  Sustainability related incentives – Working with clients to evaluate their sustainability strategies by taking into account tax impacts and available incentives, Dominick’s team focuses on the identification and implementation of business incentives and tax credits at the federal, state and local level.  Global environmental and energy taxes – Connecting with EY’s global network, Dominick assists clients in managing their environmental and energy tax burden, and identifying potential tax reliefs based on their energy and sustainability strategies.  Global carbon regimes – with the expansion of emission trading scheme and carbon taxes from the EU to China, and California to Korea, Dominick works with clients to analyze the risks associated with these regimes, and potential mitigation strategies. Dominick also has experience with other related federal tax credits and grants, including New Markets Tax Credits, Advanced Energy Manufacturing Tax Credits, and Department of Energy grants. Prior to joining the firm, Dominick led the expansion of economic development services at Ohio University’s Voinovich School for Leadership and Public Affairs. He also served as an Adjunct Instructor of economics during his time at Ohio University. Chadwick I. Smith, Executive Director, Ohio Air Quality Development Authority 50 W. Broad Street, Suite 1718, Columbus, OH 43215 chad.smith@aqda.state.oh.us 614.224.3383 Fax: 614.752.9188 Chadwick Smith serves as the executive director of the Ohio Air Quality Development Authority, a non-regulatory government agency created to help Ohio businesses comply with clean air regulations. Since its creation in 1970, the Authority has provided technical and financial help to hundreds of large and small Ohio businesses, awarding more than $8 billion to finance air quality projects. Smith previously served in various roles for the Ohio Department of Development, worked in the utility industry in Japan and as a meteorologist in the US Navy.

Ohio Tax Conference - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Energy & Carbon Taxes The Next Value-Added Tax (VAT)? Corporate Carbon Forum 2016 Page 1

Non-reliance disclosure ► This presentation is only intended to provide a general outline of the subjects covered and to form the basis for future discussions. It should not be viewed as an opinion, nor should it be used in place of professional advice. Any analysis contained herein is preliminary and is based upon numerous factual assumptions. As such, it should not be regarded as comprehensive, nor should it be used in place of professional advice. ► The information in this presentation is solely for your benefit and may not be relied upon by any other person or entity; we have no responsibility to anyone in respect of the information contained herein. Page 2

Agenda ► Corporate response to climate change ► How can a sustainable business environment be fostered? ► Ohio Air Quality Development Authority Programs ► The carrot: sustainability incentives ► The stick: energy and carbon taxes ► Questions Page 3

Corporate response to climate change Page 4

Corporate sustainability headlines Why ExxonMobil is Starbucks Raises $500 Million Supporting a Carbon Tax With Its First Sustainability Bond Now Bloomberg (16 May 2016) Fortune (10 July 2016) How Dell Saved $39.5 Million, Cut Carbon Pollution via Telecommuting Environmental Leader (17 June 2016) JetBlue Makes Biofuels Deal to Curtail Tesla and SolarCity Agree to $2.6 Greenhouse Gases Billion Deal The New York Times (19 September 2016) The Wall Street Journal (1 August 2016) Page 5

Time Magazine, January 1976 Advertisement was actually pro-coal Called for “national commitment to coal” to end dependence on foreign oil “Its elementary even for an 8 th grader”

Same issue, January 1976 ‘Millions of jobs…,no other energy in large enough quantities, billions ready to invest…” “There is no alternative to natural gas”

Companies using internal price of carbon 517 Already using internal carbon pricing 732 Plan to implement an internal carbon price 25% increase from 2015 Page 8

Drivers of corporate response to climate change Revenue generation Cost reduction Corporate response to climate change Expectations of Government regulation shareholders Page 9

How can a sustainable business environment be fostered? Page 10

Ohio Air Quality Development Authority Page 11

Ohio Air Quality Development Authority (OAQDA) • Since 1970, OAQDA helps large and small Ohio businesses and government agencies invest in cleaner energy and environmental regulatory compliance through loans, grants and tax exempt financing for equipment and construction. • Pre-date the Ohio EPA • Five member board appointed by the Governor • Non-regulatory, financing agency • Issued over $8 billion in bonds since 1970

Project Development and Finance OAQDA provides financing via conduit bonds for a broad range of projects. All OAQDA financing instruments are conduit bonds that: • May pay interest that is exempt or from federal income tax if the bonds qualify under the IRC; or may pay taxable interest • Finance projects that enjoy a 100 percent exemption for the term of the financing from real property, sales and use taxes and assessments • Are sold based on the credit provided by the benefiting party • Need to identify the revenue sources that cover principal and interest payments OAQDA bonds do not represent the faith and credit of the State of Ohio; all repayment responsibility rests with the financed project.

Project Development and Finance Qualifying projects include those that address: •Air contaminants •Solid waste •Ethanol or other bio-fuel facilities •Alternative Fuel infrastructure •Energy efficiency or conservation measures •Various advanced energy technologies, including but not limited to wind, solar, geothermal, biomass •Combined cycle, cogeneration, Conversion of Coal fired plants to natural gas •New natural gas plants

Project Development and Finance OAQDA financing support has assisted projects ranging from $14,000 to $350 million. Some examples include: • $5 million in OAQDA financing of a broad range of energy system retrofits, to be installed at the Ohio Reformatory for Women at Marysville in Union County; • $29 million for Ohio University to install a comprehensive energy efficiency and conservation overhaul of 72 buildings at its main campus in Athens; • $55 million to help Andersons Marathon Ethanol in Darke County acquire, build, install and equip air quality facilities; and • $241 million for FirstEnergy Generation Corporation to refinance bonds previously authorized by OAQDA for air quality facilities at plants in eight Ohio counties.

Clean Air Resource Center (CARC) OAQDA provides financing via conduit bonds for small businesses that are installing equipment to comply with EPA regulations. CARC program provides assistance: • Are based on a credit analysis of the benefiting party • OAQDA pays all fees and closing costs • OAQDA pays 30% payment of principal to lender after equipment has been installed and operational for 6 months

Clean Air Resource Center (CARC) Harden Auto Body of South Euclid utilized financing thru the OAQDA in the amount of $176,500 for the purchase of two new paint booths that will utilize cleaner water-based products. The new booths will help reduce the company’s energy consumption, cut air emissions and increase productivity.

Clean Air Resource Center (CARC) Llanfair Body Shop of Cincinnati utilized financing through OAQDA in the amount of $65,000 for the purchase of a new downdraft paint booth. OAQDA also awarded a grant for closing costs and to buy down the loan principal in the amount of $18,345. The new booth will enable them to better utilize cleaner water- based products, and will also help reduce the company’s energy consumption, cut air emissions and increase their productivity.