IB10128
Alternative Fuels and Advanced Technology Vehicles: Issues in Congress
July 20, 2004

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National Council for Science and the Environment

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 Ñ especially economics Ñ 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, among others). 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 (a modified version of the H.R. 6 conference bill) was introduced in the Senate. It is unclear when S. 2095 will see floor action. Further, on June 15, 2004, H.R. 4503 was passed in the House. This bill is identical to the H.R. 6 conference report. Press reports indicate that the House could debate H.R. 4503 as early as mid-June.

Because of concerns over the energy bill, there have been suggestions that some of the alternative fuels provisions from the bill Ñ especially those related to ethanol and MTBE Ñ could be inserted into other bills, including the highway reauthorization bill.

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 tax incentives for ethanol-blended fuel. On April 2 the House passed its version (H.R. 3550), which also would modify the ethanol tax incentives. The conference on H.R. 3550 convened in June.

On April 8, 2004, tax provisions from the energy bill were inserted into the Foreign Sales Corporation (FSC) bill (S. 1637), which passed the Senate May 11. However, the House version (H.R. 4520), which passed June 17, does not contain these provisions. The conference on H.R. 4520 convened in July.