If Congress wants to support a strong American workforce and boost the economy, federal clean energy and vehicle tax incentives are the way to go—consumer savings, and a cleaner, healthier environment will follow for red and blue states alike.
That’s why they have drawn strong bipartisan support in Congress year after year.
Yet, these popular tax incentives for solar and wind energy production and electric vehicle purchases may be threatened by the congressional Republicans’ drive to provide large tax cuts to corporations and the wealthy.
The Senate is seeking to finalize a budget blueprint this week, which clears the way for Republicans to pass a tax cuts with a simple majority, rather than the 60-vote threshold that is normal in the Senate. And these job-creating tax credits may be on the chopping block.
Lawmakers will have to make up for a lot of lost revenue from the corporate tax cuts they are considering, and it is feared, clean energy and clean vehicle incentives could be sacrificed well-before the established timeline for phase-down of the credits, even though they have been—and remain—critical to the celebrated growth of clean energy jobs and industry.
If the Production Tax Credit for wind energy or the Investment Tax Credit for solar energy were to be eliminated, it would break an agreement from 2015 to extend and phase down the solar and wind tax credits in return for lifting a longstanding ban on U.S. crude oil exports. As with any broken promise, it undermines the prospect for future bipartisan cooperation.
The incentives are urgently needed, perhaps now more than ever, as the Trump administration recklessly acts to roll back federal initiatives designed to combat dangerous climate change, including moving to repeal the Clean Power Plan to limit carbon pollution from power plants. A recent NRDC report underscored the importance of the tax credits if we are to meet our climate goals.
Will members of Congress vote against their own states?
Lawmakers would be hurting their own states by eliminating the incentives.
The tax credits have been cost-effective way to provide the much-needed market certainty sought by investors and developers to expand the clean energy industry, an increasingly important growth sector of the U.S. economy.
Clean energy today employs over three million Americans—which is more workers than the coal, gas and oil industries. The jobs can be found in every state, with California, Massachusetts, Texas, Nevada, Florida, New York, Arizona and North Carolina leading the way on solar and Texas, Iowa, Oklahoma, Colorado, and Kansas leading the way on wind.
The solar and wind tax credit extensions are projected to generate 220,000 jobs and add nearly $23 billion to the U.S. economy this year, alone, according to an NRDC study.
The credits remain critically needed to help level the playing field between a still developing clean energy industry and the long-established fossil fuel industry. Fossil fuels have benefitted from federal subsidies for decades; many of the fossil fuel subsidies are written into the federal tax code and don’t sunset as the clean energy provisions do.
Under the 2015 bipartisan agreement, the investment tax credit for solar energy (first established in an energy bill signed by President George W. Bush) is being gradually phased out until it expires for residential projects after 2021. For utility-scale and commercial projects, credits are gradually reduced to 10 percent of investment costs after 2021 and then will remain at that level.
The production tax credit for wind energy (authored by Republican Sen. Chuck Grassley of Iowa) are being gradually phased out and will expire at the end of 2019.
The tax credit for electric vehicles is available to purchasers, but phases out for each manufacturer once it sells 200,000 EVs. The electric vehicle tax credit also passed with bipartisan support, in 2008.
The incentives not only help spur the development of clean energy, but they lead to technological improvements and lower power costs for businesses and consumers.
They have generated economic, health and environmental benefits far in excess of their costs.
Eliminating the tax incentives would stifle a promising source of job growth and put U.S. companies at a disadvantage in competing against China and other countries in the growing international clean energy market.
What should the future hold?
Utilizing the tax code has long been a successful and effective way to drive technology innovation and adoption at an exceptionally low cost to taxpayers. Congress should look at the success of the clean energy tax incentives and consider ways to replicate the achievements, not retreat from them.
Now is the time to ramp up incentives for clean energy technologies even beyond the existing credits, to catalyze technologies like offshore wind, energy storage and even energy efficiency. Senator Wyden’s Clean Energy for America Act doubles down on clean energy technologies to transition away from the polluting technologies of the past and represents a great place to kick-start a real national energy conversation.
Federal and state policymakers should seize the tremendous economic development opportunity that clean energy represents. Any debate over tax policy should take into account the significant job, health, and environmental benefits the clean energy incentives provide before handing out additional tax cuts to the rich.