Thursday, November 29, 2007

Federal Energy Bill Negotiations Continue; Fate of Renewable Energy Provisions Uncertain

The Wall Street Journal reported late last week that chances for a comprehensive federal energy bill are improving (subscription required). Congressional negotiations over the compromise legislation continue, with renewed interest in federal fuel economy standards sparked by rising oil prices. According to the WSJ report: "lawmakers are moving toward adopting separate fuel-economy standards for cars and sport-utility vehicles as part of an accelerated effort to get a sweeping energy bill passed this year." The Detroit Free Press provided more details of the potential compromise on CAFE standards yesterday.

According to sources close to the negotiation, the Senate's renewable fuels provision may also be included in the comprehensive bill, although the final package is likely to be less aggressive than the Senate's mandate for 36 billion gallons of biofuels by 2022.

Unfortunately, the fate of other key renewable energy provisions is still uncertain. President Bush opposes the renewable energy tax provisions in the House bill because those provisions are funded by repealing more than $15 billion in subsidies for the oil and gas industry. The Federal Renewable Portfolio Standard (RPS) provision in the House bill also faces stiff opposition from the utility industry and from President Bush. Speaker Pelosi has expressed her continued support for these two critical portions of the House bill but both provisions may be sacrificed in the final bill to gain 60 votes in the Senate. There are indications that House and Senate leaders may try to move these provisions into a separate legislative package, which would effectively kill both proposals.

It would be unfortunate if congressional leaders abandoned these progressive renewable energy provisions now. A recent report (pdf) from the Government Accountability Office (GAO) emphasizes the current imbalance in federal support for different energy sources. Between 2002 and 2007, the fossil fuel industry received $13.7 billion in direct federal subsidies, while renewable energy sources received less than $2.8 billion. No surprise there. And that's just direct subsidies over the past five years; consider the myriad indirect subsidies over the long term, and you can bet that the divide is exponentially greater. The tax provisions in the House bill would go a long way towards reversing this divide at a critical time in the development of our domestic renewable energy sector. With the costs of generating renewable energy falling, and public interest in alternative energy sources rising, this is the time to focus our resources on advancing the industry. Unfortunately looks like the current energy bill compromise will only further perpetuate the historical imbalance in federal support for different energy sources; if current production and investment tax credits for renewable resources aren't extended it will actually be a dramatic step backward for the renewable energy industry.

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