Well, it ain't everything we wanted, but it ain't everything we feared. The comprehensive energy bill, which, overall, is another dud, is in its final throws (the conference report is being voted on by the House today, and the Senate should be taking it up in the next couple of days). But it seems that Senator Hatch, the CLEAR ACT sponsor and an energy bill conferee, fought hard to make the advanced vehicle tax incentives something that would lead to, well, advanced vehicles. If and when it passes into law, we'll throw the language up on our hybrid incentives list. Here's our research director David Friedman's (aka DJF) take on what's in there:
Hybrid Vehicle Tax Credits and the Energy Bill
Summary: For a limited time, quality hybrids like the Honda Civic Hybrid, Toyota Prius or Ford Escape Hybrid will qualify for tax credits in the range of $1,700-$3,000, though a sales volume limitation will radically reduce the potential benefits for consumers who chose popular models or models from companies at the hybrid forefront. There are some dark marks in addition to the sales volume limitation: heavier light duty vehicles only have to reach Bin 8, a gas guzzler credit. The bill includes credits for diesels, but at least the lighter ones will be forced to Bin 5 to get any credit.
At its core, the vehicle tax credit package sends the right signal to consumers and embodies the basic principles brought to the CLEAR ACT coalition years ago by UCS and other groups: tax credits must be tied to vehicle fuel economy performance and must have minimum pollution criteria to protect public health and make the best use of taxpayer dollars. Senator Hatch deserves high praise for maintaining these principles intact through a difficult conference process.
- Generous, performance-based tax credits for hybrids and fuel cell vehicles of all shapes and sizes. Doubling fuel economy will get you $1,600 ($400 less than the CLEAR ACT, a 20% cut)... a 25% improvement gets you $400 ($100 less than CLEAR, a 20% cut) plus any gas guzzler credit (see below)
- Solid emissions backstop (bin 5) for cars and lighter trucks--this is the required average for cars and lighter trucks by 2007 all new vehicles by 2009--and a weaker backstop for heavier light trucks (bin 8)
- Hybrids over 14,000 pounds also get credits based on fuel economy improvements
- Hybrid credits become available Jan 1, 2006, right after the existing tax deduction is eliminated
- Hybrid credits available through December 31, 2009
- Credits are phased out for each company after they reach 60,000 hybrids... credits are available for an additional 1.25 years after this trigger point, but at 100% for only one additional quarter and then at only 50% and then 25% of the base value. Toyota will hit this trigger within 6 months, Honda within 2 years. Ford will hit it within 2.5-3 years and so will be minimally impacted. GM may see no restriction from the cap. This radically reduces the credit for popular models and products from companies that have been at the hybrid forefront.
- Diesels get the same credit under the same conditions and for an extra year (through December 31, 2010). While their pollution potential is kept in check for lighter vehicles, worldwide sales of diesels dwarfs those of hybrids (representing about 50% of sales in Europe) eliminating any reason for tax benefits. This part of the package represents a significant departure from the CLEAR ACT. The positive part of this is that if VW wants tax credits for their diesel cars, they will have to get to bin 5, something they likely were not planning on. The same holds true for the Jeep Liberty diesel.
- A "gas guzzler" credit (called a "conservation" credit in the bill) was included in place of the technology credit. If you "save" 1,200 gallons of gasoline over 120,000 miles you get an extra $250. If you "save" 3,000 gallons, you get an extra $1,000. The problem with this is that it will provide extra money for vehicles that start off with the lowest fuel economy before hybridization, potentially distorting the market and encouraging people to upsize and thereby lose much or all of the fuel economy benefit of hybridizing.
- The base definition for hybrids starts at 4% peak power and does not require a minimum fuel economy improvement, so half-hearted hybrids will qualify for the "gas guzzler" credit.
***Overall, the Union of Concerned Scientists urges Congress to reject the energy bill conference report because it that ignores our oil dependence, fails to promote renewable energy, disregards global warming, and even raises the risk of nuclear terrorism.***
Oh, and thanks to all of you who took the HybridAction on the CLEAR ACT--you helped make this step forward possible.
Posted by: ScottN