Automobile

Senate panel to advance EV, clean energy tax credits

WASHINGTON — The Senate Finance Committee can advance a $259.5 billion package of clean energy tax credits that includes $31.6 billion in consumer incentives for EVs and would end tax breaks used by the fossil fuel industry.

The legislation would overhaul the current menu of energy tax breaks, consolidating credits for renewable energy sources and offering incentives to any energy source that has no carbon emissions. The legislation provides tax credits for electricity production and investments, tax breaks for energy efficient homes and buildings and incentives for transportation, including EVs and clean fuels.

The legislation received a 14-14 party-line vote in the evenly divided Senate Finance Committee on Wednesday. Despite the even split, Democrats can advance the bill to the Senate floor under chamber rules.

Finance Committee Chairman Ron Wyden, an Oregon Democrat, said his proposal would prune the existing “hodgepodge” of energy tax benefits to emphasize no-carbon energy. The plan would also eliminate or scale back $24.5 billion worth of tax breaks benefiting oil, gas and coal. Last-minute expansions to the bill increased the total cost by roughly $45 billion, including an additional $10 billion for EVs.

The extension of the EV tax credit would be a boon to motorists looking to buy from Tesla Inc. and General Motors, whose offerings are no longer eligible for the credit under current law, and Ford Motor Co., which said Wednesday it plans to boost spending on electric models by $30 billion in the coming years.

Car buyers could claim credits of as much as $12,500 for cars assembled in the U.S. at plants where workers are represented by unions. The credit only applies to vehicles where the suggested retail price is $80,000 or less, which would exclude buyers of some higher-end Tesla models from qualifying.

Wyden’s version of the credit would start to phase out once at least half of new cars sold are electric or fuel cell. The plan also includes incentives for electric commercial vehicles.

The legislation is one of the first bills related to President Joe Biden’s larger $4 trillion economic agenda to advance out of a congressional committee. The bill on its own probably won’t receive a vote in the full Senate, but elements are likely to be incorporated into an economic package that Democrats hope to pass later this year.

Republicans object

The legislation has faced significant opposition from Senate Republicans, who have said the tax breaks are too costly and criticized the decision to wind down breaks for fossil fuels. James Lankford, an Oklahoma Republican, said EVs already are gaining in popularity and that consumers don’t need taxpayer-financed subsidies to purchase them.

“Why are we paying them a bonus to buy what they are already going to buy?” Lankford said.

Wyden’s bill takes a slightly different approach than Biden’s clean energy proposals in the American Jobs Plan, though the two approaches have significant overlap in the types of energy investment they would prioritize, including grid improvements, energy storage and charging stations for electric cars.

All energy sources — including renewables and fossil fuels — qualify, but they have to have zero or net negative carbon emissions. The plan would also create a production tax credit of up to 2.5 cents per kilowatt hour or an investment tax credit of as much as 30 percent for those energy sources.

The $2.25 trillion infrastructure plan Biden unveiled in March would extend existing tax credits for wind energy, solar power and energy storage. Wyden’s plan takes a different approach by replacing all the tax credits for each specific energy type with a technology-neutral tax incentive that would benefit low emitters.

The committee voted unanimously to accept an amendment from Senator John Cornyn, a Texas Republican, that would ensure that EVs produced in China were not eligible for the tax credit. The panel also adopted an amendment that would prohibit the importation of solar cells, wind turbines, or energy storage equipment that was manufactured using forced labor or child labor.

Wyden says his plan would provide for long-term investments that are critical to meeting the country’s energy efficiency goals. Biden has said he wants to reach a 100 percent clean electricity standard by 2035.

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