State lures firms with carbon tax credit

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CLEVELAND, Tenn. — Tennessee’s unusual commitment to cover the cost of any future carbon tax for green companies that make major investments is being credited for luring two big solar energy developments worth more than $2 billion.

The tax break, which the Bredesen administration quietly passed in the legislature last year, promises that the state will offset increased costs from any future tax on carbon emissions for a select group of companies: green energy supply chain firms spending at least $250 million in the state.

That includes the $1 billion Wacker Chemie plant announced in Bradley County last week, and the $1.2 billion Hemlock Semiconductor plant coming to Clarksville. Both will make polysilicon, a material used to make solar cells.

State Revenue Commissioner Reagan Farr said the credit was enacted to help eliminate uncertainty among investors “worried that or the state would enact a carbon tax that would have to be borne by the company.”

President Barack Obama’s budget moves to address and shift the nation from reliance on foreign oil to green energy. The proposal would begin auctioning off carbon pollution permits in 2012.

With the Tennessee Valley Authority producing three-fifths of its power from coal, investors in the state worry that increased costs could be passed on to them.

Rudolph Staudigl, head of Munich, Germany-based Wacker, said the credit showed that Tennessee officials are serious about developing the green energy sector.

Farr said he and Economic and Community Development Commissioner Matt Kisber came up with the tax credit after Gov. Phil Bredesen asked them to develop a strategy to spur alternative energy projects.

Bredesen rejected other states’ efforts, “like sales tax holidays for fluorescent light bulbs to encourage consumption,” Farr said. “He looked at it as an economic development opportunity…”