Thursday, 11 Oct 2001

BERKELEY, Calif.

It’s late in the afternoon and I just got into the office after spending most of the day flying back to California from D.C. The trip was uneventful, although during a stopover in Denver I had time to return a phone call to a colleague who is working to secure state tax credits for people who purchase cleaner, more fuel-efficient cars and trucks. I was interested in comparing notes with him because the Union of Concerned Scientists is working to pass similar tax credits at the federal level.

Under the terms of these tax credits, if you went out and bought a Toyota Prius or some other hybrid electric vehicle, you would be able to take a deduction on the taxes you pay to the federal government at the end of the year. The size of the deduction would depend on the relative fuel efficiency of your car, as well as what kinds of advanced technology it used. Also, the vehicle would have to emit below-average quantities of smog-forming pollutants.

The goal of the federal tax credit bill, the CLEAR ACT, is to help build a market for clean and fuel-efficient vehicles. As demand for these vehicles increases, prices will drop and it will become easier for automakers to meet higher fuel economy standards. Tax credits help jumpstart the market by encouraging purchase of clean, efficient vehicles, and reward the people who buy such vehicles. These people benefit twice: once from the tax credits themselves, which mitigate the higher prices of greener cars, and again because they pay for far less gasoline.

The tax credit bill, which was introduced into the Senate as Senate Bill 760 and may be included in the Senate energy bill, was created by a unique coalition that included three automakers (Ford, Honda, and Toyota), multiple trade organizations, several environmental groups (including UCS), and some key senators from both parties. It took a lot of bargaining to get the bill into a form that all these stakeholders could accept, but the end result is a strong bill that carries a lot of political weight.

My work on the CLEAR ACT initially involved participating in technical discussions on how to define a hybrid electric vehicle and how the money should be apportioned to hybrids with different characteristics. Now our main task is to make sure that special interests do not dilute or gut the bill; we do not want to see taxpayers’ money wasted on vehicles that do not meaningfully reduce fuel consumption and air pollution.

Some states already have a version of tax credits for battery electric vehicles or hybrid electric vehicles or both. Consumers in these states can take advantage of these tax credits by purchasing one of the two hybrid vehicles that are available today, the Honda Insight and the Toyota Prius. Next year, Honda will introduce a hybrid version of their Civic, and Ford will market a hybrid version of their Escape SUV, so if we succeed in our efforts to get the CLEAR ACT passed, conscientious consumers will have more options for how to benefit.