This post is by ClimateProgress guest blogger Bill Becker, executive director of the Presidential Climate Action Project.


sandia-engineThe 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.

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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 installations; and a tax credit for plug-in hybrid vehicles.

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

For example, the head of the Solar Energy Industries Association predicts 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 the surface, 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, ExxonMobil 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 of Congress favor business as usual over the nation’s economic and environmental health.

This post was created for, a project of the Center for American Progress Action Fund.

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