Muckraker: Grist on Politics

The Senate today overwhelmingly approved a massive tax package that mashes together incentives for renewable energy with support for traditional energy sources less beloved by environmental groups.

The Energy Improvement and Extension Act of 2008, sponsored by Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa), would extend the investment tax credit for solar energy for eight years. It would extend the production tax credit (PTC) for wind for one year, and the PTC for solar, biomass, and hydropower for two years. The residential energy-efficient property credit would be extended through 2016, and the definition of the systems that qualify for that credit would be expanded to include small wind investment and geothermal heat pumps.

The bill also includes provisions for carbon capture and sequestration, oil shale, tar sands, and coal-to-liquid fuels, which enviros are much less happy about.

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This was the ninth time the Senate attempted to pass a package to extend tax breaks for energy investments, though the House has passed it multiple times now. Moderate House Democrats wanted to see the measures entirely paid for by taking away tax breaks for other industries like oil or hedge funds. Republicans largely rejected that, which in the past prevented the extensions from passing in the Senate.

Valued at more than $100 billion and touching on a wide range of tax issues beyond energy credits, the overall tax bill would pay for the renewable extensions by freezing a tax break for oil and gas companies at the current rate and tightening the rules on the taxes that oil and gas companies pay on income earned overseas.

Majority Leader Harry Reid (D-Nev.) urged House members not to change the legislation when they take it up. Any changes to the package that the Senate negotiated would cause the demise of the compromise, Reid worried.

“If the House doesn’t pass this, the full responsibility of it not passing is theirs,” said Reid on the Senate floor Tuesday. “It’s not ours.”

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The Bush administration issued a statement today voicing support for the Baucus-Grassley proposal, though the White House made clear that the president isn’t particularly fond of the fact that it pays for the extensions by freezing tax breaks for the oil industry. No threat was made to veto the legislation, however.

“The Administration supports tax incentives for renewable energy and has proposed replacing the current complicated mix of temporary incentives with a comprehensive unified approach that is carbon-weighted, is technology-neutral, and provides long-term certainty,” said a statement from the Office of Management and Budget. “The Administration believes this approach would be preferable to the provisions included in the Senate amendments. “

Representatives from the renewables sector cheered the approval of the tax extensions. “I applaud the Senate for reaching a bipartisan consensus to extend the solar tax credits, which are critical to the growth of the solar market in the U.S.,” said Solar Energy Industries Association President Rhone Resch in a statement today. “Extension of the solar investment tax credit has been more than two years in the making and is a major victory for the solar industry and for consumers facing higher energy prices in the U.S.”

The reaction from green groups was more mixed. The National Wildlife Federation issued a statement last week objecting to the incentives for oil shale, tar sands, and coal-to-liquid production. “[T]he increased global warming pollution and destruction of important wildlife habitat that would result from the oil shale, tar sands, and CTL provisions in H.R.6049 outweigh the benefits of [the bill’s] clean energy incentives,” wrote NWF President Larry Schweiger in a letter to senators.

Environment America Executive Director Margie Alt issued a statement after the passage today praising the provisions for renewables, but urging the House to strip the package of support for less-desirable energy sources.

“[W]hile we invest in solar, wind, geothermal, and plug-in hybrids, we must guard against investing in dirty technologies that might sound good but in fact will take us backwards and down the wrong path,” said Alt. “Dirty fuels and technologies, including liquid coal, tar sands and oil shale, would generate more global-warming pollution than gasoline, use scarce water resources in the arid West, and despoil acres of our precious environment in the process. Before passing it, the U.S. House of Representatives should strip these wrong-headed provisions from any final bill.”