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US Senate panel advances energy tax credit overhaul bill, GOP releases counter-offer for Biden
27 May 2021IHS Markit Energy Expert
The US Senate Finance Committee on 27 May advanced legislation
to revamp clean energy tax credits to make them technology-neutral,
though Republican members voted solidly against the measure over
proposals to eliminate billions of dollars in long-standing tax
breaks for fossil fuel production.
In a 14-14 vote, the committee deadlocked on the Clean Energy
for America Act to eliminate existing sector-specific tax
credits.
Despite the tie, Senator Ron Wyden, Democrat-Oregon, who also
authored the bill, said he would exercise his powers as the
committee chairman under special US Senate rules to move the
legislation to the chamber floor agenda.
During a lengthy debate, Republicans expressed qualified support
for technology-neutral tax credits as a good concept for ending
inequity in government support for clean energy technologies.
However, they demanded federal aid be curtailed for more mature
renewable technologies, such as wind and solar, saying they no
longer needed the help. They also said scrapping tax breaks for
fossil fuel production would cost thousands of jobs.
Partisan battling
There also was partisan battling over Wyden's plan to expand tax
credits for purchasers of electric vehicles (EVs), with GOP
senators contending that would largely benefit a small number of
wealthy Americans who can afford still-pricey EVs. However,
Democratic and GOP members unanimously agreed to ban automakers
based in China from qualifying for federal EV subsidies.
Overall, Wyden's legislation would overhaul the US energy tax
credit system by consolidating more than 40 current ad hoc tax
credits into three technology-neutral categories: clean
electricity, clean transportation, and energy efficiency.
Supporters of the plan said this would provide huge encouragement
for zero-emission power generation, energy storage, transmission
lines, EVs, and energy efficiency.
The Senate bill is seen as a potential legislative vehicle for
President Joe Biden's infrastructure proposal, which includes
multiple proposals to increase tax credits for low-carbon energy
technologies such as hydrogen, and grid modernization efforts.
Noting that the US federal tax code does not yet reflect the
urgency of combating the existential threat posed by climate
change, Carper said in a 27 May statement following the vote, "The
energy tax measures added on to the Clean Energy for America
Act and passed by the Finance Committee today will cut carbon
emissions, create high-paying jobs and help the US lead the world
in clean energy innovation."
The White House and senior Republican senators have been
negotiating on the infrastructure legislation, with the Biden
administration recently offering to meet GOP spending concerns by
lowering the cost of his plan to $1.7 trillion from a prior $2.2
trillion.
Counter-offer
GOP senators, led by Shelley Moore Capito of West Virginia, released a $928-billion
counter-offer a day after the committee action that would be paid
for by repurposing funds in the American Rescue Plan, which
Democrats pushed through the US Congress in March without
Republican support.
Right at the outset, Capito emphasized that their proposal is
"sticking to the core physical infrastructure" because that is
"what American people think of when they think of infrastructure,
and that is certainly what we do to."
Capito made it clear that the proposal zeroes out EV vouchers:
"We don't think there's a place for that."
White House Press Secretary Jen Psaki termed the counter-offer
"encouraging" and said Biden looks forward to engaging with
Republicans, but expressed concern that "their plan still provides
no substantial new funds for critical job-creating needs, such as
fixing our veterans' hospitals, building modern rail systems,
repairing our transit systems, removing dangerous lead pipes, and
powering America's leadership in a job-creating clean energy
economy, among other things."
Meanwhile, Wyden's bill still is far less expensive than the
White House's pared-down infrastructure proposal, according to
analysis by Congress' Joint Committee on Taxation released 26 May.
The committee said the bill overall would cut US tax revenue by
$215.5 billion between fiscal years 2022 and 2030. Incentives for
clean electricity would make up the lion's share of that impact,
reducing tax revenue by about $154 billion, while those for clean
transportation would cost about $47.1 billion, with EV incentives
costing about $21 billion.
The analysis said eliminating fossil fuel tax incentives would
boost federal tax revenue by about $24.5 billion through fiscal
year 2030.
Wyden said his legislation would address concerns that current
clean energy tax credits are arbitrary and unfair.
"These tax breaks have stacked up over the decades like dusty
old papers on the messiest desk in the office," he said during the
debate. "The system is anti-competitive and anti-innovation."
"It puts the government in the role of picking winners and
losers by giving some fuels and technologies big, permanent tax
breaks while others have short-term, temporary extensions," he
said, adding: "It has survived in this form for one reason only:
Congress has long found it easier to pile on so-called 'tax
extenders' than clean things up once and for all."
Middle ground?
Significantly, Senator Mike Crapo of Idaho, who is the
committee's ranking Republican, said he supports the idea of
technology-neutral tax credits. "There at least appears to be
consensus that energy tax credits should be market-based," he
said.
"Senator Wyden and I agree, and I think there is bipartisan
support for modifying energy tax provisions in the code … and there
is broad bipartisan support for the concept of a technology-neutral
approach for investments in our clean energy sectors. There is also
bipartisan agreement that Congress should not continue to pick
energy tax winners and losers through the annual tax extenders
process," Crapo said.
But Crapo has called for such credits to go to early-stage
technologies that need federal aid, with government support phasing
out as they garner additional market share.
Republicans also said Wyden's plan to kill subsidies for coal,
oil, and natural gas would have devastating economic consequences
for fossil fuel-producing states.
"[T]his proposal could result in job losses and negatively
impact states for members on both sides of the aisle," Crapo said.
"Most, if not all, of the members on my side of the dais cannot
support a bill that eliminates all provisions related to fossil
fuels and essentially prevents bipartisan technologies, like carbon
capture, from qualifying."
In action before the vote on final passage, the committee
rejected several amendments from Republicans largely aimed at
curbing the expansion of EV credits. However, the panel voted 26-0
to accept an amendment from Senator John Cornyn, Republican-Texas,
to bar Chinese-produced EVs from qualifying for tax credits, with
Democrats and Republicans agreeing that those companies already
receive enough handouts from the Chinese government.
--Original reporting by Ellen Meyers for The Energy Daily,
with contribution by Amena Saiyid.