Technology-neutral energy tax reform bill introduced

By Anna Simet | May 04, 2017

On the heels of the U.S. House and Senate passing a $1 trillion Omnibus spending bill that includes a biomass rider directing federal agencies to treat forest biomass energy as carbon neutral, Sen. Ron Wyden, D-Ore., has introduced legislation that would even further level the playing field for biomass-derived power, heat and liquid fuels.

The Clean Energy for America Act proposes technology-neutral tax strategies for long-term growth and development of next-generation energy sources. The bill overview states that there are currently over 44 different energy tax incentives in effect, more than half of which are short-term and don’t effectively stimulate investment, and some of which provide “different subsidies to different technologies with no discernable policy rationale.”

Moving away from this strategy and lapsing tax credits, the bill proposes a simpler set of long-term, performance-based, technology neutral energy tax incentives that promote clean energy.

For clean electricity, the bill proposes a technology-neutral tax credit that is based on the premise that the cleaner the facility, the larger the credit, and all kinds of resources would qualify, including all renewables, and fossil fuels. The incentive would be available as either a production tax credit of up to 2.3 cents per kilowatt-hour, or an investment tax credit of up to 30 percent.

For transportation fuel, the bill proposes a tax credit for domestically produced fuel, with cleaner fuels receiving larger credits. This credit would also be open to all resources, providing a production tax credit of up to $1 per gallon.

The bill also proposes incentives for energy conservation, a performance-based tax credit for energy efficient homes and tax deductions for energy efficient commercial buildings, with larger incentives going to larger energy conservers.

The incentives would be long-term, but phased out once greenhouse gas emissions have been reduced by 35 percent. According to the bill summary, almost all existing renewable energy tax incentives are consolidated into these three provisions, with appropriate transition relief.

“Beyond supplying power to the grid, biomass power supports the forest products economy and promotes healthy forests,” said Bob Cleaves, president and CEO of the Biomass Power Association. “For too long, biomass power has been on an unlevel playing field, competing in a market where power prices are unnaturally low due to highly subsidized energy technologies.

Cleaves said the technology-neutral tax plan is a “fair and innovative approach to incentivizing renewable energy,” that would allow biomass power producers to participate fully alongside other carbon neutral technologies, giving biomass power producers the credit they deserve for the considerable carbon benefits they provide.

 “Congress just today officially acknowledged the carbon neutrality of biomass power,” Cleaves added. “We are grateful for the many Congressional initiatives recognizing the environmental benefits of biomass. We look forward to working with Senator Wyden and the Senate Finance Committee to advance this renewable energy tax reform proposal.”

Patrick Serfass, executive director of the American Biogas Council, said that the legislation provides a path for the development of renewable energy by removing the barrier of pegging incentives to a type of technology.  “This will create an environment where the biogas industry can thrive and many others,” he said. We appreciate Sen. Wyden's elegant solution to this challenge."