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Wednesday, April 10, 2013

Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

Brent D. Yacobucci
Section Research Manager

Alternative fuels and advanced technology vehicles are seen by proponents as integral to improving urban air quality, decreasing dependence on foreign oil, and reducing emissions of greenhouse gases. However, major barriers—especially economics—currently prevent the widespread use of these fuels and technologies. Because of these barriers, and the potential benefits, there is continued congressional interest in providing incentives and other support for their development and commercialization.

Key tax incentives for the use of biofuels, for the expansion of alternative fuel infrastructure, and for the purchase of certain electric vehicles expired at the end of 2011, along with an added duty on certain ethanol imports. Some of these incentives were extended through the end of 2013 although the main tax credit for conventional ethanol—the Volumetric Ethanol Excise Tax Credit (VEETC)—was not extended.

While tax incentives for these fuels have expired or are set to expire at the end of 2013, a mandate to use biofuels in transportation that was expanded by the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140) is set to increase yearly through 2022. In 2012, the RFS required the use of 15.2 billion gallons of ethanol and other biofuels in transportation fuel. Within that mandate, the RFS required the use of 2.0 billion gallons of advanced biofuels, including 8.65 million gallons of cellulosic biofuels (although only about 20,000 gallons of cellulosic fuel were actually registered in the program). For 2013, the RFS mandate is 16.55 billion gallons, including a proposed 14 million gallons of cellulosic fuel. At the end of each year, covered entities must submit credits (called Renewable Identification Numbers, or RINs) equal to their obligations for that year. Cases of fraud in the market for biodiesel RINs has led to criminal prosecutions and the development of quality-assurance guidelines from EPA. Further, recent volatility in the spot market for ethanol RINs has raised additional concerns about implementation of the RFS.

In January 2011, EPA finalized a partial waiver petition from Growth Energy to allow blends of up to 15% ethanol in gasoline (E15): before then ethanol content in all gasoline was limited to 10% (E10). EPA approved the use of E15 in model year 2001 and later passenger cars and light trucks, but prohibited its use in all other applications (e.g., motorcycles, heavy trucks, nonroad engines). Allowing higher blends of ethanol under the Clean Air Act removes one component of the “blend wall,” which limits the total amount of ethanol that can be blended in gasoline nationwide; other blend wall components include vehicle and pump certification and warranties, and state and local fire codes and other laws.

Attention has also focused on government-backed loans for the development and deployment of new energy technologies. One such program, the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, has been controversial as some critics question whether other existing policies, such as stricter vehicle fuel economy standards, already promote the same technologies.

Other potential issues before Congress include how much the federal government should support the expansion of natural gas vehicles and the infrastructure to fuel them, and how much the government should support the deployment of plug-in electric vehicles.

Date of Report: April 4, 2013
Number of Pages: 20
Order Number: R40168
Price: $29.95

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