Pursue Many Routes to Clean Energy

Posted March 2, 2007 at 12:28pm

It is hard to believe, but a documentary about science featuring a former politician was one of the most acclaimed films of 2006. While Al Gore’s Oscar win last week may not land him future roles alongside Robert DeNiro, it certainly affirmed what many of us already knew: People are eager to learn more about the environment and climate change and are ready for a new direction.

As the film makes clear, global warming is no longer a theory, it is a disconcerting fact. According to the Pew Center for Global Climate Change, this past decade was the hottest of the past 150 years and 2005 was the hottest year on record. What has caused this global warming? A report from the National Academy of Science found that “greenhouse gases are accumulating in Earth’s atmosphere as a result of human activities, causing surface air temperatures and subsurface ocean temperatures to rise.” So, essentially, it is us.

Many already have reached that conclusion and are searching for solutions. Businesses have joined with environmental groups to announce initiatives to combat global warming. These initiatives include voluntary emission reductions and more efficient products and technologies. Clearly, Congress has a key role to play in this initiative as well.

In his State of the Union address, President Bush urged Congress to work with him to reduce the dependence on gasoline and increase the supply of alternative fuels. Last week, the House Ways and Means Committee held the first in a series of hearings on energy and tax policy. Chairman Charlie Rangel (D-N.Y.), in announcing these hearings, said, “The Federal government needs a better understanding of what contributes to global warming so that we may play a significant role in preventing further damage.” While the initial hearing focused on a scientific discussion of global warming, further hearings — including in the subcommittee on select revenue measures, which I chair — will target specific tax incentives to address the issue.

Our tax code already provides a number of tax incentives for businesses and individuals to promote energy efficiency. The Energy Policy Act of 2005 created and expanded a number of these incentives, although many were only temporary. Though most of the recent discussion and resulting tax incentives have focused on renewable and alternative fuels, the code also provides incentives to create more efficient and cleaner use of traditional energy sources.

The role of these tax incentives is primarily to encourage behavior that would not otherwise occur. This is especially true with regard to many alternative energy sources because it may be more expensive currently to produce energy from these sources than traditional, nonrenewable fuels. Over time, however, it is expected they will become economically viable and no longer will need the tax boost. One good example of this is the production tax credit for wind energy and other renewable technologies. Through the use of a tax credit, we have reduced the cost of production and helped the industry establish a presence here in the United States. As a result, wind energy has become one of the fastest-growing energy sources in the U.S. and around the world. This tax credit has encouraged innovation in other forms as well. Take biomass, for example. This is truly a case where one man’s trash becomes another man’s treasure. Companies are using cutting-edge technology to convert biomass sources such as agricultural waste, forest-related sources and solid wood waste into energy. These are referred to as “open-loop” biomass sources, while “closed-loop” biomass, another eligible energy source for tax credits, refers to similar organic material that is specifically grown for fuel.

It is this kind of innovation that will be critical to reducing the effects of global warming. Even if you do not own a farm or a forest, you can incorporate energy efficiency into your daily life and take advantage of available tax incentives. For example, business owners can access energy-efficient commercial building incentives, including a 30 percent credit for solar or fuel-cell power plants or a deduction for energy-efficient property installed in buildings that meet or exceed certain industry standards for saving energy. Builders can realize tax savings if they build energy-efficient homes, and homeowners can access tax savings when they upgrade their existing homes, including a credit for energy-efficient windows, roofs, and heating and cooling equipment improvements. Incentives also are available for the purchase of vehicles powered by hybrid energy, fuel cells or alternative energy (compressed or liquefied natural gas, hydrogen, etc.).

The role of Congress today is not to decide which of these technologies is most deserving of support. It is important that we pursue a diversity of approaches as we search for long-term solutions to global warming. Certain renewable or alternative energy sources that are inexpensive and available in one area of the country, such as solar, wind or water, may not be in another region. In fact, the next generation technology that completely reduces our dependence on fossil fuels could be right around the corner. We must continue to provide tax incentives for research and experimentation in order to encourage and enable such discoveries. In addition to supporting research, Congress must also make longer-term commitments to existing alternative energy sources. Failure to do so could result in a lack of investment and ultimately the failure of many of these promising technologies.

So is America ready to “go green”? Judging by the success of Al Gore’s message and the following gained by his film, I’d say it is all a matter of timing. The convenient truth is that it is time for this Congress to come up with an action plan to complement the initiatives of the business community and environmental advocates. I invite you to join our effort at the Ways and Means Committee.

Rep. Richard Neal (D-Mass.) is chairman of the Ways and Means subcommittee on select revenue measures.