The Subsidy Tease — Part II

The energy bill passed by Congress last December originally contained a beneficial if temporary set of financial incentives to spur the growth of renewable energy technologies in the United States.

The bill included a renewable energy portfolio standard (RPS) that would require states to acquire part of their electric power from renewable resources. The RPS would have guaranteed a market for these technologies — one of the ways to help a new industry establish a foothold in the economy.

The energy bill also contained an extension of the Production Tax Credit (PTC) — a tax break for emerging renewable energy industries that Congress has a history of approving for only a year or two at a time. (See “The Subsidy Tease — Part I“.)

The PTC and a package of other clean-energy incentives would have been funded by taking back about $12 billion in tax breaks from the oil industry. The trade-off was sensible not only because the oil industry doesn’t need the money, but because in some small symbolic measure, the repeal would have helped level the playing field for those young renewable energy industries trying to compete against oil, gas and coal industries that have been fattened for generations by the nation’s taxpayers.

When the White House yelled “TAX INCREASE” and threatened to veto the energy bill, Congress backed off.

As a result, many of the energy efficiency incentives contained in the Energy Policy Act of 2005 died on December 31 and others will expire in a few months. They include incentives for efficiency in commercial buildings; tax credits for installing efficient furnaces, air conditioners, water heaters, windows and other improvements in existing homes; incentives for manufacturers to make high-efficiency refrigerators, dishwashers and washing machines; the tax credit for residential solar system installation; and a tax credit for plug-in hybrid vehicles.

Because the future of the PTC and investment tax credits for renewables is uncertain, four of America’s trade associations for the renewables industry — including solar, wind, hydro power and geothermal energy — report that sales and new projects already are disappearing.

The head of the Solar Energy Industries Association predicts, for example, that 80 utility-sized solar electric projects, promising hundreds of thousands of construction jobs and more than 20,000 permanent jobs, will not be completed unless the tax credits are extended quickly.

On its face, it would seem that extending and expanding federal incentives for energy efficiency and renewable energy would be good economic stimulus, creating new jobs and new disposable income for Americans as their energy bills went down. The Senate Finance Committee apparently thought so, too. Earlier this month it added the package of clean-energy incentives to the economic stimulus bill designed to help blunt a recession.

Unfortunately, the Committee once again proposed to flirt with the clean energy industries rather than forge a long-term relationship, by extending the PTC for only two more years. In any case, tax incentives for efficiency and renewables didn’t make it into the final bill.

With the price of oil hovering right around $100 a barrel, it has never been more clear that America needs energy efficiency and renewable energy more than the oil industry needs help from American taxpayers. While Congress and the White House pondered ways to head off a recession, Exxon Mobil reported that its sales last year reached $404 billion, the equivalent of nearly $1,300 every second, more than the gross domestic product of 120 countries. Its profits were nearly $41 billion, the highest ever recorded by any company. Chevron reported profits of nearly $19 billion last year; Royal Dutch Shell reported profits of $31 billion, the largest ever for a British company.

Clean energy advocates in Congress say they’ll try again this year to renew a suite of incentives scheduled for expiration. They should move quickly. Randy Swisher, Executive Director of the American Wind Energy Association (AWEA) says the PTC needs to be extended at least eight months before a scheduled expiration date to avoid a slowdown in an industry’s development. That means that Congress must act by May of 2008.

I recommend a few other “shoulds”. Congress should pay for clean-energy incentives by rolling back the unconscionable and unnecessary tax breaks for Big Oil. Congress should extend tax incentives for solar, wind, geothermal and hydro-electricity for 10 years, not two. Congress should emphasize the economic stimulus these tax incentives will produce with new jobs and new disposable income for energy consumers — not a one-time check in the mail, but energy savings month after month. Congress should put these provisions in a separate bill whose fate is not complicated by other issues, and bring the bill to both floors for up-and-down votes.

As the 2008 congressional elections approach, let it be crystal clear which Members favor business as usual over the nation’s economic and environmental health.

— Bill B.

4 Responses to The Subsidy Tease — Part II

  1. David B. Benson says:

    Bill B. wrote … let it be crystal clear which Members favor business as usual over the nation’s economic and environmental health.

    Yes. We all need to help get the word out in our state (senatorial elections) and in our district (as all representatives are up for election).

  2. Paul K says:

    The election is in November, long past when the PTC will lapse. Am I right to infer that PTC is now attached to the senate version of the stimulus package which is “in conference”? If so, political action must be directed at the House of Representatives, especially those members serving on the conference committee.

  3. Paul K says:

    I also think it would be useful to have an itemized list of the subsidies provided to oil companies and to alternatives as well.

  4. Jim Prall says:

    A great organization that tracks the voting record of our congresscritters on environment and climate issues is the League of Conservation Voters at
    They post a “Dirty Dozen” list of the most anti-environmental members, an they raise funds to campaign against them.
    A bill to extend the PTC for wind power–a vital component of one of the real, workable solutions–would certainly figure in their scorecard, and will presumably split on green/brown voting lines. Similarly for a new separate bill for an RPS to support solar PV, micro-hydro, biomass, and other honest sustainable energy sources.
    I’ve been reading up on the solar PV industry, and it’s pretty clear that we can expect some serious gains in price-performance in the next one to two years.
    Meanwhile, to change the congress we desperately need voters across the land to bump up climate change to a high priority on their “issue list” and to send that message to the candidates. The last issue list I saw on the news had the economy, Iraq, and other topics, with no spot in the top five for anything about the environment.