Senate Extends Renewable Energy Breaks

Image has not been found. URL: /wp-content/uploads/2008/09/ensign.jpgSen. John Ensign (R-Nev.) (WDCpix)

The Senate on Thursday voted overwhelmingly to extend tax credits to businesses and consumers investing in renewable energies and equipment. The move has environmentalists and green industries cheering. But some lawmakers and economists fear that the provision, which was attached to legislation addressing the mortgage crisis, could stall the larger package.

In addition, the multi-billion-dollar tax credit amendment is unfunded, leading to concerns that it won’t survive a trip through the House, where leaders have been reluctant to stray from pay-as-you-go budget rules.

Illustration by: Matt Mahurin

The issue highlights the struggle to pass legislation in a Congress where margins are thin and partisanship is king. The atmosphere has forced a game in which lawmakers view rare must-pass legislation, like the mortgage bill, as their only chance to move other proposals. In the case of the clean energy provision, it has also forced the upper chamber to weigh between losing a system of encouraging energy efficiency and adding substantially to budget deficits.

Sen. Jeff F. Bingaman (D-N.M.), chairman of the Energy and Natural Resources Committee, supported the policy — with reservations. “[B]ecause the extensions are not paid for, I did not cast my vote enthusiastically,” he said, “There is no justification, other than politics, not to offset this amendment.”

The amendment, sponsored by Sen. John E. Ensign (R-Nev.) and Maria E. Cantwell (D-Wash.), would provide a one-year extension for existing tax credits encouraging businesses to invest in renewable energies like wind and solar power. The extension would also apply to tax breaks for homeowners who install more energy-efficient furnaces, windows and insulation. Similarly, homebuilders would continue to receive tax credits for building more energy-efficient structures, while appliance makers would maintain incentives to produce energy-saving gadgets. Without congressional action, the tax credits would expire at the end of the year.

Early estimates put the 10-year cost of the Ensign-Cantwell provision at roughly $6 billion.

Similar bills have failed to make it through the Senate several times in the last year because they would have offset the cost by eliminating subsidies to oil and gas companies — a non-starter for the White House and most Republicans. To get around that obstacle, Senate sponsors chose a simple solution: They provided no offsets.

The Senate vote was 88 to 8, indicating that earlier opposition was never an issue of investing in green energies, but one of scaling back the substantial tax breaks enjoyed by the oil industry. With the price of gas hitting a record high $3.36 a gallon last week, Republicans have been adamant about keeping those benefits in place.

“Considering our energy situation,” said Ensign spokesman Tory Mazzola, “now is not the time to raise taxes.”

But for housing experts eying congressional efforts to address the mortgage crisis, the vehicle remains a concern. Economists at the Center for Budget and Policy Priorities said Friday that it makes little sense to include the energy tax credits in a bill supposedly designed to ease the pain of the housing mess.

“They don’t belong in this bill,” said Aviva Aron-Dine, a CBPP policy analyst, “and they certainly don’t belong in this bill without offsets.”

But for environmentalists, the urgency surrounding global warming and rising energy costs trumps long-term budget concerns. “Ideally we would like to see offsets,” said David Jenkins, government affairs director at Republicans for Environmental Protection. “But in terms of our energy system, we just can’t afford to have these investments dry up. The extension, even if it’s not offset, is the lesser of two evils.”