Obama Signs Tax Package With Credits for Biofuels, Car Chargers

By Scott Doggett December 17, 2010

White-House-logo.jpgPresident Obama today signed an $858-billion tax package that extends the ethanol tax credit and retroactively extends the biodiesel tax incentive and the renewable diesel incentive while also continuing to provide a tax credit for those who install electric-vehicle charging stations.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which the House of Representatives passed late Thursday by an almost 2-to-1 margin, will also allow for a number of tax credits for hybrid vehicles, compressed-natural-gas vehicles and diesel vehicles to expire, however.
Ethanol and biodiesel advocates said that the bill, which was largely opposed by Democrats, may save hundreds of thousands of jobs, although it is already further fueling the debate over the environmental benefits of some biofuel production.

Approval means a one-year extension of corn ethanol fuel tax incentives worth about 45 cents per gallon produced. The bill also extends a 54-cent per gallon secondary tariff on imported ethanol, much of which comes from crops that are displacing rainforest in the Brazilian Amazon - the "lungs of the Earth."

Additionally, a 50-cents-a-gallon tax credit for producers of compressed natural gas and liquefied natural gas that's used in vehicles was reinstated after being allowed to expire last year.

The government will also provide tax breaks for those who install natural-gas fueling stations.

Biofuel and natural-gas advocates hailed the bill passage as a way to cut foreign-oil dependence and boost domestic jobs. About 112,000 jobs would be lost if the tax credit for ethanol producers wasn't extended, the Renewable Fuels Association said earlier this year.

Additionally, about 29,000 jobs were lost when the biodiesel tax credit was allowed to expire at the end of 2009, with another 23,000 at risk if that incentive wouldn't have been renewed, senator and biodiesel advocate Chuck Grassley (R-Iowa) said earlier this year.

"This will undoubtedly help kick-start the domestic biodiesel industry, lessen our dependence on foreign oil, and create thousands of new jobs across the country," said Manning Feraci, vice president of federal affairs of the National Biodiesel Board, in a statement today.

In a separate statement today, Richard Kolodziej, president of Natural Gas Vehicles for America, said: "Since natural-gas vehicles reduce the use of foreign oil, reduce greenhouse gases and reduce air pollution, this legislation will help achieve all three of these national goals."

Some lawmakers pushed for more biofuel incentives, but were rebuffed. Representatives Peter Welch (D-Vermont) and Earl Blumenauer (D-Oregon) lobbied for an amendment that would have cut the ethanol tax credit by 20 percent to 36 cents a gallon in order to provide $1 billion toward a clean-energy manufacturing tax credit.

The bill passage has already stirred opposition from those who say some biofuel production - mostly corn ethanol - does more harm than good. Numerous scientists and groups oppose corn ethanol, because it raises crop prices and does enormous environmental damage, not to mention the burden it places on U.S. taxpayers.

Others have noted that the ethanol industry is mature and that the money would be better spent on alternative fuels that show promise that have yet to receive government support and don't have nasty side effects.

Environmentalists, advocates for the grocery and meat industries, and some public-policy experts were particularly vocal with their opposition because of what they see as a governmental subsidy that will boost food prices.

"With predictions of another food-price crisis on the horizon in 2011, Congress should be re-evaluating the costs and benefits of converting food to fuel, instead of approving a $6 billion giveaway to the biofuel industry," said Marie Brill, senior policy analyst with ActionBid USA, in a statement.

Added J. Patrick Boyle, CEO of the American Meat Institute, in a separate statement: "Corn-based ethanol is not a long term, sustainable solution to end our dependence on foreign oil. What it is, however, is grossly irresponsible fiscal, food and energy policy."

In addition to the biofuel credits, buyers of battery-electric and plug-in hybrid cars and trucks in 2011 will get a $7,500 credit on battery-electric and plug-in-hybrid vehicles such as the Nissan Leaf and Chevrolet Volt, as well as write down some of the cost of purchasing and installing charging stations for the vehicles.

The newly approved measure includes a one-year extension of the charging station credit, enabling residential buyers to claim up to $1,000 for home-installed stations. Businesses can receive a credit of up to $30,000 for installation of chargers on commercial properties.

Other alt-fuel vehicle buyers won't be so fortunate, as five-year-old tax incentives on about 20 hybrid, CNG and diesel vehicles will expire. That means a $4,000 tax credit for the CNG-powered Honda Civic GX, the $2,200 credit for many of GM's Chevrolet and GMC hybrid SUVs, the $1,550 tax break for some of BMW's hybrid SUVs and the $650 credit for many of the Volkswagen and Audi turbodiesels will no longer be available beginning next month.

(Tax breaks for better-selling cars such the Toyota Prius hybrid, Ford Escape Hybrid and Honda Insight hybrid already had expired because their unit sales have exceeded federal quotas for how many cars from a single manufacturer can qualify for the credit).

Whether that means hybrid credits are gone for good is anyone's guess, as continued lawmaker support may enable new incentives to be passed in 2011, IHS Automotive analysts told Green Car Advisor. Regardless, hybrid sales from Hyundai and Kia, both of which are set to start early next year, may benefit, according to the analysts.

By a 4-to-1 margin, the Senate on Wednesday passed the bill, which also extended George W. Bush-era tax breaks for the wealthy as well as extended unemployment benefits for the poor. 

(Contributor Danny King prepared this piece. A flaw in our new publishing system automatically gives writer's credit to the posting editor. We hope to have this fixed soon.)

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