IB10128
Alternative Fuels and Advanced Technology Vehicles: Issues in Congress
February 17, 2004

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Summary:

Alternative fuels and advanced technology vehicles are seen by proponents as integral to improving urban air quality, decreasing dependence on foreign oil, and reducing emissions of greenhouse gases. However, major barriers -- especially economics -- currently prevent the widespread use of these fuels and technologies. Because of these barriers, and the potential benefits, there is continued congressional interest in providing incentives and other support for their development and commercialization. In the 108th Congress, alternative fuels and advanced technology vehicles have received a good deal of attention, especially in the debate over omnibus energy legislation (H.R. 6). Major topics have included tax incentives for alternative fuel production; the future of ethanol and the fuel additive MTBE, including the establishment of a renewable fuels standard (RFS); and research and development of hydrogen fuel and fuel cells. Other topics have included government vehicle purchase requirements; tax credits for vehicle purchases; promotion of biodiesel fuel; and incentives for hybrid electric vehicles. The omnibus energy bill contains many provisions relevant to alternative fuels and advanced technology vehicles. Among its provisions, the bill would extend and expand existing tax incentives for the purchase of alternative fuel and advanced vehicles; authorize R&D funding for hydrogen fuel and fuel cells; require that gasoline contain ethanol or other renewable fuel; ban the use of the fuel additive MTBE; and expand tax incentives for the production of ethanol and biodiesel. On November 17, 2003, the conference committee on H.R. 6 issued its report (H.Rept. 108-375). The House approved the report on November 18. However, on November 21, 2003, a cloture motion on the bill failed in the Senate. On February 12, 2004, S. 2095 was introduced in the Senate. A modified version of H.R. 6, this bill will likely see floor action the week of February 23. If action were to stall on the energy bill, there have been suggestions that some of the alternative fuels provisions from the bill -- especially those related to ethanol and MTBE -- could be inserted into a highway reauthorization bill. The current authorization for federal highway and transit programs is set to expire at the end of February 2004. Among other provisions, it provides tax incentives for ethanol and other alternative fuels, and it authorizes grant funding for municipalities to purchase alternative fuel and advanced technology buses and other vehicles. On February 12, 2004, the Senate passed its highway reauthorization bill. Among other provisions, S. 1072 would reauthorize existing programs for alternative fuel buses and other transit projects. Also, it would modify the existing tax incentives for ethanol-blended fuel.