Alternative Fuel and Advanced Vehicle Technology Incentives: A Summary of Federal Programs

Lynn J. Cunningham
Information Research Specialist

Beth A. Roberts
Information Research Specialist

Bill Canis
Specialist in Industrial Organization and Business

Brent D. Yacobucci
Section Research Manager

A wide array of federal incentives supports the development and deployment of alternatives to conventional fuels and engines in transportation. These incentives include tax deductions and credits for vehicle purchases and the installation of refueling systems, federal grants for conversion of older vehicles to newer technologies, mandates for the use of biofuels, and incentives for manufacturers to produce alternative fuel vehicles. The current array of incentives for alternative fuels and related technologies does not reflect a single, comprehensive strategy, but rather an aggregative approach to a range of discreet public policy issues, including goals of reducing petroleum consumption and import dependence, improving environmental quality, expanding domestic manufacturing, and promoting agriculture and rural development.

Current federal programs are administered by five key agencies: Department of the Treasury, Department of Energy, Department of Transportation, Environmental Protection Agency, and the U.S. Department of Agriculture. The incentives and programs described in this report are organized by the responsible agency.

• Treasury (through the Internal Revenue Service, IRS) administers tax credits and deductions for alternative fuel and advanced technology vehicle purchases, expansion of alternative fuel refueling infrastructure, and incentives for the production and/or distribution of alternative fuels. Many of these incentives have expired in recent years although some were extended by the American Taxpayer Relief Act of 2012 (P.L. 112-240). 
• DOE (mainly through the Office of Energy Efficiency and Renewable Energy, EERE) administers research and development (R&D) programs for advanced fuels and transportation technology, grant programs to deploy alternative fuels and vehicles, and a loan program to promote domestic manufacturing of highefficiency vehicles. 
• DOT (mainly through the Federal Highway Administration, FHWA, and Federal Transit Administration, FTA) administers grant programs to deploy “clean fuel” buses and other alternative fuel vehicles. DOT (through the National Highway Traffic Safety Administration, NHTSA) also administers federal Corporate Average Fuel Economy (CAFE) standards, which include incentives for production of alternative fuel vehicles. 
• EPA (mainly through the Office of Transportation and Air Quality, OTAQ) administers the Renewable Fuel Standard, which mandates the use of biofuels in transportation. EPA also administers grant programs to replace older diesel engines with newer technology. 
• USDA (mainly through the Rural Business-Cooperative Service, RBS) administers grant, loan, and loan guarantee programs to expand agricultural production of biofuel feedstocks, conduct R&D on biofuels and bioenergy, and establish and expand facilities to produce biofuels, bioenergy, and bioproducts. .

Date of Report: January 10, 2013
Number of Pages: 42
Order Number: R42566
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U.S. Wind Turbine Manufacturing: Federal Support for an Emerging Industry

Michaela D. Platzer
Specialist in Industrial Organization and Business

Increasing U.S. energy supply diversity has been the goal of many Presidents and Congresses. This commitment has been prompted by concerns about national security, the environment, and the U.S. balance of payments. Investments in new energy sources also have been seen as a way to expand domestic manufacturing. For all of these reasons, the federal government has a variety of policies to promote wind power.

Expanding the use of wind energy requires installation of wind turbines. These are complex machines composed of some 8,000 components, created from basic industrial materials such as steel, aluminum, concrete, and fiberglass. Major components in a wind turbine include the rotor blades, a nacelle and controls (the heart and brain of a wind turbine), a tower, and other parts such as large bearings, transformers, gearboxes, and generators. Turbine manufacturing involves an extensive supply chain. Until recently, Europe has been the hub for turbine production, supported by national renewable energy deployment policies in countries such as Denmark, Germany, and Spain. However, support for renewable energy including wind power has begun to wane across Europe as governments there reduce or remove some subsidies. Competitive wind turbine manufacturing sectors are also located in India and Japan and are emerging in China and South Korea.

U.S. and foreign manufacturers have expanded their capacity in the United States to assemble and produce wind turbines and components. About 470 U.S. manufacturing facilities produced wind turbines and components in 2011, up from as few as 30 in 2004. An estimated 30,000 U.S. workers were employed in the manufacturing of wind turbines in 2011. Because turbine blades, towers, and certain other components are large and difficult to transport, manufacturing clusters have developed in certain states, notably Colorado, Iowa, and Texas, which offer proximity to the best locations for wind energy production. The U.S. wind turbine manufacturing industry also depends on imports, with the majority coming from European countries, where the technical ability to produce large wind turbines was developed. Although turbine manufacturers’ supply chains are global, recent investments are estimated to have raised the share of parts manufactured in the United States to 67% in 2011, up from 35% in 2005-2006.

The outlook for wind turbine manufacturing in the United States is more uncertain now than in recent years. For the past two decades, a variety of federal laws and state policies have encouraged both wind energy production and the use of U.S.-made equipment to generate that energy. A continuing challenge for the industry is uncertainty about one main federal policy tool in the deployment of wind power, the production tax credit (PTC), which Congress has extended eight times and let lapse on four occasions. Most recently, the PTC expired at the end of 2012, but a few days later, Congress extended it through year-end 2013. At least a dozen wind turbine manufacturers announced layoffs or hiring freezes at U.S. facilities in 2012, citing concern about the PTC’s future as one reason. Other factors affecting the health of the U.S. wind industry are intense price competition from natural gas, an oversupply in wind turbines, and softening demand for renewable electricity. .


Date of Report: January 9, 2013
Number of Pages: 38
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Keeping America’s Pipelines Safe and Secure: Key Issues for Congress

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Nearly half a million miles of pipeline transporting natural gas, oil, and other hazardous liquids crisscross the United States. While an efficient and fundamentally safe means of transport, many pipelines carry materials with the potential to cause public injury and environmental damage. The nation’s pipeline networks are also widespread and vulnerable to accidents and terrorist attack. Recent pipeline accidents in Marshall, MI, San Bruno, CA, Allentown, PA, and Laurel, MT, have heightened congressional concern about pipeline risks and drawn criticism from the National Transportation Safety Board (NTSB). Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. Nonetheless, while many stakeholders agree that federal pipeline safety programs have been on the right track, the spate of recent pipeline incidents suggest there continues to be significant room for improvement. Likewise, the threat of terrorist attacks, especially cyberattacks on pipeline control systems, remains a concern.

The federal pipeline safety program is authorized through the fiscal year ending September 30, 2015, under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (P.L. 112- 90), which was signed by President Obama on January 3, 2012. The act contains a broad range of provisions addressing pipeline safety and security. Among the most significant are provisions that could increase the number of federal pipeline safety inspectors, require automatic shutoff valves for transmission pipelines, mandate verification of maximum allowable operating pressure for gas transmission pipelines, increase civil penalties for pipeline safety violations, and mandate reviews of diluted bitumen pipeline regulation.

Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. Nonetheless, the NTSB has identified improvement of federal pipeline safety oversight as a “top ten” priority for 2013. The leading pipeline industry associations have concurred. Whether renewed efforts by industry, combined with additional oversight by federal agencies, will further enhance the safety and security of U.S. pipelines remains to be seen.

As Congress oversees the federal pipeline safety program and the federal role in pipeline security, key issues of focus may be pipeline agency staff resources, automatic pipeline shutoff valves, penalties for safety violations, safety regulations for oil sands crudes, and the possible need for pipeline security regulations, among other concerns. In addition to these specific issues, Congress may assess how the various elements of U.S. pipeline safety and security activity fit together in the nation’s overall strategy to protect transportation infrastructure. Pipeline safety and security necessarily involve many groups: federal agencies, oil and gas pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an oversight challenge for Congress.


Date of Report: January 9, 2013
Number of Pages: 38
Order Number: R41536
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Energy Efficiency: A Compendium

The energy crises of the 1970s spurred the federal government, and some state governments, to mount a variety of energy policies to address concerns about oil import dependence, high energy prices, and overall energy security. Since then, additional economic and environmental concerns—especially international competitiveness, air pollution, and climate change—have also driven policy proposals to support efficiency.

As the nation seeks to reduce imported energy and to increase production from “clean” domestic sources, there may continue to be interest in additional federal spending, tax incentives, and regulatory measures to further help overcome market barriers to efficiency measures. Also, any future efforts to create a cap and trade program for greenhouse gas emissions could include auctions of emission credits to generate revenue that could, in part, be used to fund energy efficiency initiatives.

Although energy efficiency measures may often be less costly than new supply, market barriers often prevent measures from being implemented. For example, because home builders do not expect to pay the energy bills, they tend to design building shell features and choose energy-using equipment based on “first cost” rather than “life cycle” cost. As a result, new homes may lack operationally cost effective end-use energy efficiency measures (e.g. thermal windows and a high efficiency furnace). Also, electric utility companies were designed to make profits by selling ever-greater amounts of electricity, instead of providing incentives to customers to reduce demand by improving energy efficiency. To address such barriers, an array of funding, tax incentives, and regulations (primarily equipment efficiency standards) have been enacted to encourage energy efficiency improvements.


Date of Report: January 16, 2013
Number of Pages: 151
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Energy from Shale: The Controversy: A Compendium

For decision-makers considering climate change legislation, an assortment of policy instruments is available; studies suggest that a combination could be most effective in achieving various climate policy objectives. Current policy attention has focused on “cap and trade” strategies to reduce greenhouse gas emissions, with additional policy tools aimed at promoting the technology development considered necessary to slow climate change significantly.

In parallel, growing attention is being given to supporting adaptations to expected future changes, as well as to strategies to gain effective international engagement in reducing greenhouse gas. One significant obstacle to consensus is concern about the potential costs of abating greenhouse gas emissions, since deep reductions would require extraordinary changes in energy use and technologies. Studies suggest that efficiently designed programs could moderate the costs of reducing greenhouse gas emissions; technically and politically, though, an “efficiently designed” program may not be realistic.

Policy options can ease the adjustments required and modify the distribution of costs—or potential wealth embodied in distribution of emission allowances—across specific sectors or populations. A core challenge of policy design, then, is balancing the climate effectiveness of a policy, the economic costs, and its distributional effects.

Date of Report: January 15, 2013
Number of Pages: 277
Order Number: C12035
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