The Colorado Senate passed legislation Wednesday to create tax incentives for heat pumps and environmentally-friendly building materials in an attempt to lower the state’s greenhouse gas emissions.

If enacted, Senate Bill 51 would establish a sales tax exemption for low-emission heat pumps and building materials including green concrete, recycled steel and composite wood products. The bill would also create a 10% income tax credit for the purchase of heat pumps.

“A significant portion of our overall emissions come from the built environment,” said bill sponsor Sen. Chris Hansen, D-Denver. “This is a really promising avenue for Colorado to reduce greenhouse gas emissions and to electrify our buildings on the heating, cooling and hot water side.”

Around 70% of Colorado homes are heated by natural gas instead of greener alternatives like electricity, according to state estimates. That is significantly higher than the 47.8% national average. In 2019, heating in residential and commercial buildings accounted for around 10% of Colorado’s greenhouse gas emissions – over 12 million metric tons of carbon dioxide.

By using electricity to draw heat from the air, ground or water, heat pumps can heat and cool buildings while cutting greenhouse gas emissions by one-half, according to state data. If the tax incentives for heat pumps were enacted, the state estimates it would reduce greenhouse gas emissions by over 446,000 metric tons of carbon dioxide in the first 10 years.

“It is an excellent next step in continuing to grow the adoption of electric heat pump equipment in Colorado,” said Alejandra Mejia Cunningham with the Natural Resources Defense Council in support of the proposed bill. “Our homes and businesses are a crucial part of figuring out the climate crisis puzzle.”

Mejia Cunningham said heat pumps last 10 to 20 years and save households money over time, but are often expensive to buy initially. She said the tax incentives would help address this financial barrier.

More than a dozen other organizations have thrown their support behind the bill, including the environmental groups Colorado Communities for Climate Action, the Nature Conservancy and Healthy Air and Water Colorado Action. Only four groups registered in opposition to the bill, including the Colorado Propane Gas Association.

The bill received bipartisan support from the Senate Wednesday, passing in a 27-6 vote. All six senator who voted against the bill are Republicans.

“It is hard for me to support legislation where we have to pass it before we know what’s included,” said Sen. Jerry Sonnenberg, R-Sterling, who opposed the bill. “The provision in the bill that exempts building products that are not yet defined is not good policy. How will those decarbonizing products be determined?”

Under the bill, the sales tax exemption and income tax credit for heat pumps would begin in 2023 and expire in 2033. The sales tax exemption for low-emission building materials would be in effect from 2024 to 2034, to allow the state architect time to determine which specific materials will be included, Hansen said.

The bill will now be sent to the state House of Representatives for consideration in the coming weeks.