Investments for Renewable Energy, Not Loopholes for Big Oil
Investments for Renewable Energy, Not Loopholes for Big Oil
Many of last year’s clean energy initiatives get a second chance in the Renewable Energy and Energy Conservation Tax Act of 2008.
Renewable energy and energy efficiency are key elements in our transformation from a high carbon, oil dependent economy to a sustainable low carbon economy. The Energy Independence and Security Act, P.L. 110-140, enacted late in 2007, includes many important renewable and efficiency measures, including better motor vehicle fuel economy standards and a sustainable biofuels mandate. Yet at the 11th hour, President Bush and Senate conservatives removed a package of additional economic incentives that included extensions of tax credits for wind and solar energy, and for biofuels.
Congressional leaders are not giving up the fight for this critical aspect of energy policy; many of last year’s initiatives are getting a second chance in the Renewable Energy and Energy Conservation Tax Act of 2008, H.R. 5351.
This new bill, which the House may debate and vote on as soon as February 27th, includes the Energy Independence and Security Act’s tax incentives for renewable electricity and fuels, energy-efficient technologies, cleaner cars, and clean coal. Some provisions have been omitted, because a leaner proposal is more likely to secure bipartisan consensus and gain passage.
The price tag for H.R. 5351 comes in at $18.5 billion—$2.5 billion less than the previous bill’s axed tax credits. And this would be largely funded by closing some of the tax loopholes that have been lining Big Oil’s already gold-filled pockets.
One of these revenue-raising measures is eliminating the Internal Revenue Code section 199 deduction, which gives a subsidy for domestic oil and gas production. Its removal would cost Big Oil $1.4 billion annually over the next 10 years—a paltry sum considering that the big five oil companies made a combined profit of $123 billion in 2007 alone. ExxonMobil alone made a profit of over $77,000 per minute last year—more than the annual income of two-thirds of American families.
President Bush said in 2005: “I will tell you with $55 oil we don’t need incentives to oil and gas companies to explore.” Now that oil is nearly $100 per barrel, big oil companies certainly do not need additional tax loopholes to encourage oil exploration.
H.R. 5351 would be a critical investment in the low carbon economy of the future that will also result in the creation of millions of new jobs. It is a critical companion to the Energy Independence and Security Act, and its passage would help a slumping economy. Here are just a few ways that the Renewable Energy and Energy Conservation Tax Act will help:
The new bill includes a production tax credit for wind, geothermal, and other renewables. It allots $250 million more than the previous bill and extends the credit for an additional year to 2011. The bill also renews the investment tax credit for individual home owners and businesses to maintain incentives for solar energy through the end of 2016. Extending these two provisions is essential to the completion of 42,000 megawatts of planned renewable energy projects that are currently in development in 45 states. Without prompt extensions of the tax credits, renewable energy project work stoppages could cost 116,000 jobs.
Renewable electricity projects can generate more jobs than the construction and operation of conventional coal fired power plants. For instance, according to the National Renewable Energy Laboratory, the construction of wind energy facilities in Kansas would create 4,200 construction jobs, and 250 operation and maintenance positions. In contrast, the proposed two coal fired power plants in western Kansas would only require 1,500 construction workers, and 110 employees to run the facility.
Our current transportation system runs on petroleum, which keeps us dependent on oil and produces the second greatest source of greenhouse gas pollution in the nation. The new energy law requires significant improvements in fuel economy.
H.R. 5351 would spur the commercialization of the next generation of cars with the establishment of a $4,000 credit for the purchase of a plug-in hybrid. These cars rely on electricity for the first 20-40 miles before they consume any gasoline. The legislation also eliminates a tax break for the purchase of gas-guzzling SUVs.
In addition to cleaner cars, H.R. 5351 would encourage investments in cleaner fuels. It creates economic incentives to invest in biofuels, including biodiesel and cellulosic ethanol. If produced sustainably, the latter has a net energy balance five times higher than corn-based ethanol and can play a key role in reducing greenhouse gas emissions. H.R. 5351 also includes a new per-gallon tax incentive to encourage increased production of biodiesel.
Buildings are another major source of energy consumption and greenhouse gas emissions. The new bill would establish incentives for the construction of energy-efficient buildings and the retrofitting of existing homes, which would reduce pollution and energy use. Energy conservation bonds would spur investment in efficiency, create jobs, and reduce carbon emissions. In total, these provisions are a $4.5 billion down payment towards the transition to a low carbon economy.
Unfortunately, an important part of the earlier clean energy tax bill is missing from H.R. 5351. The prior bill had tax credits for the construction of energy-efficient homes. Employment of energy-efficient technologies in new buildings is more convenient and often less expensive than retrofitting an existing building. More efficiency will reduce greenhouse gas emissions.
The previous bill had a $2000 tax credit for new homes with annual heating and cooling energy consumption that is at least 50 percent below conventional new homes. Manufactured homes meeting Energy Star criteria or that have energy consumption 30 percent below the model code would be eligible for a $1,000 tax credit.
The inclusion of the incentive for the construction of energy-efficient homes would also be a boon to the market for skilled construction workers who specialize in the construction of such homes, which would help the slumping construction industry. The House should restore this valuable provision in H.R. 5351.
There is broad support for this clean energy tax package. The American Wind Energy Association and Solar Energy Industries Association, representing hundreds of companies, support it. Other companies that support it include Dow, Dupont, Target, and Wal-Mart. H.R. 5351 is also supported by United Steelworkers Union, because passage of the package would protect and create tens of thousands of jobs manufacturing wind turbines and other renewable energy equipment.
The House has already passed similar clean energy tax packages. Once they do so again, it will be time for Senate conservatives to halt their obstruction and take this much-needed step to speed the United States along the path to a clean energy economy.
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Daniel J. Weiss