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Congress, not Technology, is Deciding the Alt-fuel Market

December 16, 2010

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By not including a provision in its $858 billion tax bill, Congress is ending a five-year-old tax credit of up to $4,000 for hybrid-electric, clean diesel vehicles and natural gas vehicles. It is possible Congress could try to restore the credit next year, but it's dead for now. While the most popular hybrid vehicles from Toyota, Honda and Ford are ineligible for the credit, 20 vehicles, including 14 hybrids, 5 clean diesel models and the Honda Civic that runs on natural gas will be affected.

Hybrids may very well be "maturing technology" not in need of a subsidy at this time. But natural gas technologies are just coming into their own. Killing subsidies for natural gas vehicles, including compressed natural gas (CNG) and liquefied petroleum gas (LPG, or autogas) would be a bummer for companies interested in greening their fleets with worthy new models such as GM's new Chevy Express and GMC Savana vans with factory-installed CNG systems, or Roush CleanTech's advanced LPG systems for Ford F-series trucks and E-Series vans.

Meanwhile, Congress voted to extend the 45 cents-per-gallon ethanol tax credit through 2011.

The credit goes to fuel blenders to add ethanol to their mix, which includes large oil and gas companies such as Shell, who count it against income tax owed to the United States. And of course the all-powerful farm lobby benefits as well. The cost to American taxpayers will be at least $5 billion in 2011. The measure still needs to pass the House.

While using ethanol fuel is certainly a way to cut our dependence on foreign oil, in the last few years we've done the math on corn-based ethanol's environmental benefits and it doesn't add up.

There is promising research into non-food cellulosic and algae-based ethanol as a fuel source, but at this time, it's just that-research. Congress might well have channeled the ethanol credit into research instead of a subsidy on existing corn-based fuel. 

How do you feel? Should Congress have let the hybrid, diesel and CNG tax credit die while keeping the ethanol fuel credit?


  1. 1. Tom [ December 23, 2010 @ 07:22AM ]

    No, the emphasis should be on natural gas. We are sitting on an ocean of it, and a tax credit is needed to help it become viable. I purchased a CNG truck this year, and saw the cost of a "gallon" of CNG increase by 50% when the fuel tax credit expired. This pretty much wiped out the savings I was getting, but not the CNG hassles. With CNG you have higher costs if systems fail, difficulty in finding refueling stations, and poorer fuel economy and performance. When a gallon of CNG cost 1/3 that of gasoline, it was all worth it, but now, with a cost closer to 2/3 of gasoline it won't be. My truck is duel fuel, and if the CNG conversion fails, I won't fix it, without the tax credit it isn't worth the bother. It would be nice if I were willing to make an economic sacrifice for the environment, but the reality is, I bought the vehicle for the cost savings, and that is the way it will be for most other customers. The tax credit doesn't have to be permanent, once the infrastructure is in place with wider adoption, the savings will be there because of the abundance of natural gas.

  2. 2. MaggieMI [ January 03, 2011 @ 06:57AM ]

    It's a shame that the rest of the alt. fuels didn't get their benefits along with ethanol. I disagree that the enviro benefits of ethanol fuel don't measure up - research done at the DOE Nat'l Labs and other sources show a positive impact when compared with petroleum fuels. Also - public policy can ensure that any and all alternative fuels are produced and used in an environmentally beneficial manner.


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Chris Brown

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Executive Editor

Chris is the executive editor of Business Fleet Magazine and Auto Rental News. He covers all aspects of the fleet world.


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