Congress Tackles Clean Energy Tax Incentives

Scott Boos at the Alliance for American Manufacturing has published an analysis of Congressional efforts to boost domestic clean energy technology and producton…

Yesterday, the House Ways and Means Committee held a hearing to “examine the effectiveness of current energy tax policy.” The focus of the hearing was on how the U.S. could contend with China and European countries that are racing ahead in the competition to build manufacturing capacity for clean energy industries, such as wind, solar, and batteries.

Dr. Joseph Romm at the Center for American Progress testified that China is a leading manufacturer of photovoltaic cells, second only to Japan, and it was set to be the world’s leading manufacturer of wind turbines by the end of 2009. He also highlighted a March study by the Pew Charitable Trusts, that found that China was outspending the U.S. in clean energy by $34.6 billion to $18.6 billion in 2009.

Mr. Matt Rogers, Senior Advisor to the Secretary of Energy, testified that the U.S. has a relatively small share of manufacturing capacity for clean energy goods:

“In 2008, the U.S. had 16% of global wind manufacturing capacity (5.4 gigawatts (GW) in the U.S. out of 33 GW worldwide), 6% of global solar manufacturing capacity (0.5 GW out of 9 GW worldwide), and less than 1% of global battery manufacturing capacity.”

Mr. Rogers and Treasury Assistant Secretary for Tax Policy Michael Mundaca testified that progress is being made due to clean energy investments made in the Recovery Act, but that more funding would be needed to fully realize our potential for job creation.

For example, the $2.3 billion in so-called 48c tax credits for investments in advanced energy manufacturing facilities are supporting 183 projects in 43 states. However, the program was oversubscribed by a 3:1 ratio. The President has proposed an additional $5 billion for 48c tax credits to support at least $15 billion in total capital investments.

The risk of inaction was highlighted by Committee Chairman Sandy Levin:

“We have to make certain this demand is satisfied with goods produced in the U.S. If we are not aggressive about expanding our green manufacturing capacity, these manufacturing jobs will be created overseas and the United States will become more reliant on products that are produced outside of our borders.”

Yet, while billions of dollars are being invested to create demand for clean energy manufactured goods, the Alliance for American Manufacturing believes that simply throwing money at the issue is not enough. Strong domestic content requirements are needed to maximize job creation associated with incentives for clean energy production. Americans have been frustrated to learn that our efforts have resulted in the creation of manufacturing jobs in China and elsewhere.

West Texas Wind Farm. In October 2009, a consortium of American and Chinese companies announced a deal to build a $1.5 billion, 36,000-acre wind farm in west Texas, relying solely on imported Chinese turbines. Company officials said they planned to collect $450 million in taxpayer support to subsidize the project that is estimated to create dozens of permanent jobs in the U.S. and thousands of manufacturing jobs in China.

BP solar. In March 2010, BP announced the closure of its solar panel manufacturing facility in Frederick, MD. It intends to shift production to China and India to gain access to cheap labor. BP recently applied for taxpayer financial assistance for a proposed 32 megawatt solar-power generation plant on land belonging to the Energy Department’s Brookhaven National Laboratory in New York.

Without properly designed tax and investment incentives for clean energy generation, loan guarantees for nuclear reactor construction, and other federal supports, our efforts to rejuvenate our manufacturing base could be unseated by subsidized imports from countries seeking to capitalize on new demand for clean energy products in the United States, such as wind turbines and solar panels.

Congress should continue to enact and enforce strong domestic sourcing requirements for all federal infrastructure investments, including instances when taxpayer dollars are used to incentivize or support renewable energy production.

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