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Sustainable Energy Coalition Ways and Means
Committee Testimony -- 6/13/01
TESTIMONY OF
HOWARD GELLER, FORMER EXECUTIVE DIRECTOR THE AMERICAN COUNCIL FOR AN
ENERGY-EFFICIENT ECONOMY (ACEEE) ON BEHALF OF THE SUSTAINABLE ENERGY
COALITION
BEFORE THE WAYS AND MEANS
COMMITTEE SUBCOMMITTEE ON SELECT REVENUE MEASURES U.S. HOUSE OF
REPRESENTATIVES
HEARING ON THE EFFECT
OF FEDERAL TAX LAWS ON PRODUCTION, SUPPLY, AND CONSERVATION OF
ENERGY
JUNE 13,
2001
ACEEE is a non-profit
organization dedicated to increasing energy efficiency as a means
for both promoting economic prosperity and protecting the
environment. I am testifying today on behalf of the
Sustainable Energy Coalition, a coalition of
over 30 national
business, environmental, consumer, and energy
policy
organizations. I appreciate the opportunity to appear before
the Subcommittee.
The Sustainable
Energy Coalition supports a broad array of tax
credits for
innovative energy efficiency and renewable energy technologies.
Adopting tax credits for these technologies will
stimulate
technological innovation and reduce future consumption
of fossil
fuels, thereby providing a number of benefits including:
-
saving
consumers and businesses money;
-
reducing the
costs and risks that U.S. manufacturers confront when considering
introducing innovative new energy technologies; reducing the risk
of power shortages and improve the reliability of our overtaxed
electric systems;
-
reducing
future oil and natural gas imports;
-
reducing air
pollution of all types since burning fossil fuels is the main
source of most air pollution;
-
lowering U.S.
greenhouse gas emissions and slowing the rate of global warming.
Many new energy
efficiency and renewable energy technologies including photovoltaic
power systems, bioenergy systems, advanced wind turbine
technologies, fuel cell power systems, hybrid and fuel cell
vehicles, super-efficient refrigerators and clothes washers, and
super-efficient new buildings have been commercialized in recent
years or are nearing commercialization. But these technologies may
never get manufactured on a large scale or widely used due to their
initial high cost, market uncertainty, lack of consumer awareness,
and other barriers.
Tax incentives
can help manufacturers justify mass production and marketing for
innovative energy efficiency and renewable energy technologies. Tax
credits also help buyers (or manufacturers) offset the relatively
high first cost premium for the new technologies, thereby helping to
build sales and market share. Once the new technologies become
widely available and produced on a significant scale, costs should
decline and the tax
credits can be phased out.
The Sustainable
Energy Coalition supports providing tax incentives for a limited
time period (typically for five years) for the energy efficiency and
renewable energy technologies listed below. With regard to the
energy efficiency measures, a key element in designing the credits
is for only highly efficient products to be eligible. If the
eligibility level is set too low, there will be many so-called "free
riders" (i.e., individuals who would purchase the measure without
the tax credit), and the cost to the Treasury will be high and
incremental energy savings low. The renewable energy credits,
with a few exceptions, are based on the amount of electricity
generated. This provides manufacturers with an incentive to improve
the performance and reduce the cost of their renewable energy
technologies.
Here is a summary of
our "clean energy" tax incentives recommendations (items are listed
in alphabetical order, not indicative of any priority for the
Coalition as a whole):
Energy
Efficiency
Provisions
Appliances.
We
support a tax credit of $50-100 for manufacturers of highly
efficient clothes washers and refrigerators (with a cap on the total
credit per manufacturer). This will lead to a new generation of
superefficient appliances, thereby saving energy and water. This
proposal has been introduced by Sens. Allard, Lincoln, and Grassley
in the Senate (S. 686) and Reps. Nussle and Tanner (H.R. 1316) in
the House. It is strongly supported by the appliance
industry.
Building
Equipment.
We support a 20% investment tax credit with caps
for innovative building technologies including very efficient
furnaces, stationary fuel cell power systems, gas-fired heat pumps,
and electric heat pump water heaters. This proposal is included in
the Bingaman-Daschle bill. Also, Rep. Nancy Johnson has introduced a
version of the stationary fuel cell tax credit (H.R. 1275) which the
Coalition supports.
Combined
Heat and Power.
We support either a 10% investment tax
credit or seven-year depreciation period for combined heat and power
(CHP) systems with an overall efficiency of at least 60-70%
depending on system size. This proposal has strong industry
support and is included in the Murkowski-Lott energy bill (S. 389),
the Bingaman-Daschle energy bill (H.R. 596), as well as a bills
targeted to CHP promotion introduced by Rep. Wilson (H.R. 1045) and
Rep. Quinn (H.R. 1945) in the
House.
Commercial
Buildings.
We support a tax deduction of $2.25 per square
foot for investments in commercial buildings and multifamily
residences that achieve a 50% or greater reduction in heating and
cooling costs compared to buildings meeting current model energy
codes. This proposal is included in legislation sponsored by Sen.
Bob Smith (S. 207) and Reps. Cunningham and others (H.R.
778).
Hybrid Electric, Battery
Electric, and Fuel Cell Vehicles.
Tax credits of up
to $5,000 for hybrid electric vehicles, up to $6,000 for battery
electric vehicles, and $8,000 for fuel cell vehicles will help jump
start introduction and purchase of these innovative, fuel-efficient
technologies. The incentives should be based primarily on energy
performance and provide both fuel savings and lower emissions. This
proposal is included in the CLEAR Act, S. 760, introduced Sens.
Hatch, Rockefeller, and Jeffords, and the companion bill (H.R. 1864)
introduced by Rep. Camp.
New
Homes.
A tax credit of up to $2,000 for highly
efficient new homes will stimulate efficiency and help lower housing
costs for American families. Versions of this proposal have been
introduced by Sen. Bob Smith (S. 207) and Rep. Bill Thomas and
others in the last session of Congress. Variants are included in
both the Murkowski-Lott (S. 389) and Bingaman-Daschle (S. 596)
energy bills.
Renewable Energy
Provisions
Renewable Energy
Electricity Production (Section 45).
We support extending
the existing credits for electricity generated
from windpower and
closed loop biomass for five years. Also, this production
credit should be expanded to include electricity produced by open
loop biomass (i.e., agricultural and forestry residues but excluding
municipal solid waste), geothermal energy,
and incremental
hydropower. The same credit should be provided to closed loop
biomass co-fired with coal, and a smaller credit (one cent per kWh)
should be provided for electricity from open loop biomass co-fired
with coal. These provisions (in part or full) are included in the
Murkowski bill, Bingaman-Daschle bill, Grassley bill (S. 530), Reid
bill (S. 249), Dorgan bill (S. 94), Collins bill (S. 188), Filner
bill (HR. 269), Foley bill (HR 876), Herger-Matsui bill (HR 1657),
and Dunn bill (HR 1677).
Residential
Solar Energy Systems.
We support a 15% investment tax
credit capped at $2,000 for residential solar electric and water
heating systems. In this case, an investment credit is
preferable to a production credit due to the relatively high cost of
smaller scale solar technologies at this time. This proposal has
been introduced by Sen. Allard (S. 465) and Rep. Hayworth (HR
2076). It also is included in the Murkowski-Lott
bill.
Small-scale Wind
Turbines.
We support a 30% investment tax credit for
small (75 kW and below) windpower systems. These are used in
commercial and farm applications and are relatively costly compared
to large wind turbines (500 kW and up). This proposal is included in
the Bingaman-Daschle bill.
As noted
above, virtually all of these tax credits have been introduced in
the Congress with bipartisan support. Some have numerous
co-sponsors already. And a number of the credits, specifically
for hybrid and fuel cell vehicles, combined heat and power systems,
and renewable energy technologies, are included in President Bush's
energy plan. The Administration estimates that these provisions will
cost the Treasury about $7 billion over 10 years. We estimate
that our full set of recommendations would
cost the Treasury
around $10-14 billion over 10 years. This is
relatively
modest considering the scope and importance of our
energy
problems.
In summary, The Sustainable
Energy Coalition urges the Ways and Means Committee and the Congress
to make adoption of tax credits for innovative energy efficiency and
renewable energy
technologies a top priority. By enacting
tax credits on a broad set of energy efficiency and renewable energy
technologies, the Congress can pave the way to a cleaner, more
secure, and more affordable energy
future.
That concludes my testimony.
Thank you again for the opportunity to testify today.
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