Senate Tax Bill a Major Step Backwards for the Environment

From Natural Resources Defense Committee Switchboard:

Jim Presswood’s Blog

Posted December 13, 2010

The tax bill agreed to last Thursday by Senators Harry Reid and Mitch McConnell contains an energy package that would cause substantial environmental harm.  The offending provisions are the tax credits for corn ethanol and liquid coal.  While the bill contains several critically needed clean energy incentives, their environmental benefit is outweighed by the harm that would result from the ethanol and liquid coal incentives.  NRDC is therefore opposing the bill.  Here’s our analysis of the key provisions and what’s still missing.

Liquid Coal

The bill extends a 50 cent per gallon tax credit for liquid coal transportation fuels – fuels produced by liquefying coal.  This provision must be stripped from the bill.  Congress should not be doing anything to help a liquid coal industry get off the ground.  The production and use of liquid coal fuels releases more than twice the carbon pollution as conventional fuels.  Even if some of the carbon pollution from the production process is captured and disposed, the fuel might still result in more pollution than conventional fuels.  There are also the severe environmental impacts from coal mining, which include habitat loss, groundwater contamination and mountaintop removal.

The bill extends the tax credit provided by Sections 6426 and 6427 of the federal tax code.  While fuels qualifying for the credit have to come from production facilities that capture and dispose of 75% of their carbon pollution, that’s not enough to bring emissions down to parity with conventional fuels.  Moreover, this incentive is intended to commercialize a fundamentally flawed technology.  Once commercialized, there is little evidence that the next generation of plants will perform any carbon and capture at all.  Our liquid coal fact sheet provides more information about the problems of liquid coal.

Corn Ethanol

The bill includes a one-year extension of the Section 40 corn ethanol tax credit.  The corn ethanol lobby went into this year demanding a 5 year extension of this credit (officially called the volumetric ethanol excise tax credit or VEETC).  The Senate and President Obama have seen fit to say no and only offer a one-year extension.  This will save tax payers $25 billion. But this is still a huge waste of tax payer dollars. Ending the tax credit now would save an additional $6 billion. Reducing the tax credit by 20% would save $1.25 billion.  Saying no to 5 years is a start, but Congress should go further and end this wasteful, environmentally harmful handout.  Sending 70cents of every renewable energy dollar to oil companies to use ethanol defies common sense. It is time to invest in new fuels and clean energy sources that provide long-term energy security and clean up the air and water that we all need..

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One Response to “Senate Tax Bill a Major Step Backwards for the Environment”

  1. Karen Says:

    THe problem with corn ethanol is that producing a lot of it from corn itself would ALSO raise the cost of food as a side effect.

    Money should be put into developing production methods for biofuels ( and there are other possibilities besides ethanol) that impact the food supply negatively, directly or indirectly, not to oil companies who have a vested interest in seeing that oil stays the primary source as long as possible.

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