Mr. President, as the success of the Cash for Clunkers Program that we are working to extend today makes clear, there is substantial interest among consumers in upgrading the fuel efficiency of their vehicles. In fact, maybe the most…
Mr. President, as the success of the Cash for Clunkers Program that we are working to extend today makes clear, there is substantial interest among consumers in upgrading the fuel efficiency of their vehicles. In fact, maybe the most surprising thing about the program thus far has been the higher-than-expected appetite by consumers for the most fuel-efficient vehicles.
It is an encouraging sign, but it remains surprising because it is extraordinarily difficult for a consumer to take into account the real benefits, or costs, of fuel economy. The value of fuel efficiency depends on the unknowable fact of what the price of gasoline is likely to be in future years as well as requiring a calculation to make and apples-to-apples comparison of the costs of ownership at different efficiency levels. This explains why study after study demonstrates that consumers don't fully account for the fuel costs of ownership when they make buying decisions. Decisions that many people regretted making only a few years earlier as gas prices climbed near $4 per gallon last fall.
This isn't only a problem for consumers. Improving the fuel economy of a vehicle requires significant engineering and new technologies, often adding hundreds or thousands to the manufacturer price of a vehicle; costs consumers have proved unwilling to bear. Faced with this reality, and the uncertainty of recovering their costs from consumers who are unsure of the value of fuel efficiency, car makers have generally thought it is in their best business interests to meet the fuel economy requirements of CAFE but go no further. Even when manufacturers want to go further than the CAFE requirements and produce more efficient vehicles, they are faced with giving up a cost advantage to their competitors by putting on expensive new technologies. For this reason, and to attempt to take into account the very real costs in oil and climate insecurity by our undervaluation of efficiency, Congress has put in a series of incentives for specific technologies such as hybrids, electric-drive, and hydrogen fuel cell vehicles. We have also recently made significant investments in battery manufacturing and vehicle electrification to try and close the significant gap with our global competitors in these technologies.
Although I support those investments to increase our competitiveness in the clean energy technology manufacturing race, unless the domestic marketplace will support them over the long term, they simply won't be enough. I believe the best path to both support our climate and energy goals and enhance our economic competitiveness is to create a set of clear, technology-neutral incentives that can achieve our goals and then let the market and consumers sort out the best technologies.
The Efficient Vehicle Leadership Act of 2009 that I am introducing today with Senators Snowe, Kerry, and Lugar provides a long-term pathway forward that will allow consumers to afford the most fuel efficient vehicles and a clear signal to the manufacturers that they can succeed in the marketplace by incorporating the most advanced fuel efficiency technologies into their new offerings. The bill would provide for fuel performance rebates that would decrease the cost of efficient cars and pay for it by assessing a fuel performance fee to manufacturers for inefficient vehicles to pay for the program.
The rebates and fees would be calculated based on how much more or
less fuel-efficient a vehicle is relative to the CAFE standard. The CAFE standard is based on the size, or ``footprint''--the interior dimensions of the four wheels of the motor vehicle, so each vehicle would compete with other vehicles of a similar size. The CAFE standard itself becomes more stringent over time, based on the ``maximum feasible'' fuel efficiency as determined by NHTSA, so the incentives are recast yearly against a higher target. Calculating the rebates and fees based on the CAFE standard allows them to net out, making the overall system revenue neutral and providing a continuing incentive each subsequent year. Thus, the purchasers of fuel efficiency laggards for each size pay to make the most fuel-efficient equivalent vehicles more affordable. The rebate amount must appear on the fuel efficiency sticker and consumers can choose if they want to receive their rebate directly in their tax returns or they can transfer the credit to dealer, as long as the dealer certifies they have given the rebate to the consumer at the point of purchase.
In sum, this bill provides a long-term structure for the automotive sector that provides certainty to manufacturers that the technologies that they must employ to meet the new fuel efficiency requirements will be valued by consumers and, beyond that, rewards and incentivizes innovation in vehicle efficiency to go beyond the CAFE requirements. The technological acumen of the auto industry will be harnessed, with no net impact on safety or comfort, and without distorting the marketplace. Consumers would benefit for years to come from a smaller hit on their wallet at the pump. The United States would benefit overall as we began to curb our appetite for oil.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.
Mr. President, I rise today to introduce the Expanding Industrial Energy Efficiency Incentives Act of 2009. I am pleased to be joined by my Finance Committee colleague, Senator Snowe, in introducing the Act, which creates the first direct tax-based incentives for industrial energy efficiency. As such, the Act helps our industrial sector adopt advanced energy technologies and processes, enabling American industry to reduce fuel dependency, cut costs, reduce greenhouse gas emissions, add jobs, and enhance global competitiveness.
Even though the industrial sector represents 32 percent of our domestic energy consumption, there are currently no significant tax credits that directly promote industrial energy efficiency. But as a recent study by McKinsey & Company found, the industrial sector represents the largest potential for end-use energy efficiency in the U.S. and could save $47 billion per year on energy costs through efficiency improvements. The time to make this investment is now.
The act creates incentives in the three critical areas: water reuse, advanced motors, and CFC chillers. It also enhances incentives for combined heat and power systems. Energy efficiency organizations estimate that these incentives together will save over 92 terawatt hours of energy--the equivalent of four months' worth of total U.S. energy consumption.
First, the act adds a new investment tax credit for reuse, recycling, and/or efficiency measures related to process, sanitary, and cooling water, as well as for blowdown from cooling towers and steam systems used by utility-scale thermo-electric generators. The U.S. currently reuses only 6 percent of its water, and there is significant potential for gains in this area. The industrial sector, which is responsible for 45 percent of domestic freshwater withdrawals, is an ideal place to introduce transformative water reuse and water saving technologies. Approximately 3 percent of U.S. electricity use is for pumping, treating and transporting water. The ``water-watts connection'' is well-recognized. For instance, the California Energy Commission estimates that 95 percent of the energy savings of proposed energy- efficiency programs could be achieved through water-efficiency programs, at 58 percent of the cost. Water conservation is therefore a cost-effective way to achieve significant energy savings.
Second, the bill establishes a $120-per-horsepower tax credit for efficient motor systems with adjustable speed capability. On average, motors account for 65 percent of an industrial energy user's electricity use, a percentage that is even higher in certain industries, such as water supply, mining, and oil and gas extraction. In fact, industrial motors are expected to be responsible for 7 percent of total global carbon emissions by 2020.
New advances in power electronics and controls over the past five years have advanced the potential for new smart motor technologies to provide a significant energy savings potential if these new motors are placed widely into service. By reducing the initial design and added component costs, this new credit will accelerate the adoption of advanced motor technologies into higher volume production, helping to make the technology available economy-wide.
Third, the bill adds a new incentive for replacing CFC chillers. Large water-cooled chillers are the engines of air-conditioning systems for almost all large buildings. The bill establishes a credit of $150 per ton, plus an additional incentive of $100 for each ton downsized during replacement. The incentive extends only to pre-1993, post-1980 water-cooled chillers that use the refrigerants CFC-11 and CFC-12. While chillers that use CFC-11 and CFC-12 refrigerants have been banned for new installations because their refrigerant breakdown products attack the ozone layer, some 30,000 chillers that still use these refrigerants remain in both public and private facilities across the country. Replacing these obsolete systems would allow for the recovery of 37 million pounds of ozone depleting CFCs--or 64 million metric tons of carbon dioxide equivalents. Additionally, the improvement in new chiller efficiency that would be achieved by replacing these old systems would save 17.2 million metric tons of carbon dioxide from reduced electricity consumption--the equivalent of taking 3.3 million cars off the road.
While CFC chiller replacement is cost-effective over the long-term, the high up-front costs mean that many building owners do not make these investments. This moderate tax incentive improves the economics and reduces the up-front cost, substantially increasing the number of systems replaced.
Collaterally, but just as significantly, this bill is a jobs bill. For instance, if all CFC chillers are replaced, we expect that approximately 10,500 American jobs can be directly created or preserved in the manufacturing, removal and installation of new chillers. Additional jobs will be created by the engineering services required to take advantage of these incentives, adding up to a potential 60,000 jobs.
Finally, the bill improves the combined heat and power incentive, which was enacted last October as part of the tax extenders package. The package added a 10 percent investment tax credit for combined heat and power systems. The expansion of the combined heat and power tax credit would increase the credit's applicability from the first 15 megawatts to the first 25 megawatts of system capacity and remove the overall system size cap of 50 megawatts, allowing a greater number
of combined heat and power projects to be financially viable and move forward. A recent Department of Energy study estimates that ramping up total U.S. combined heat and power to account for twenty percent of electricity capacity, a percentage that is within our reach, would eliminate over sixty percent of the expected increase in carbon dioxide emissions from today to 2030--the equivalent of taking more than half of current passenger vehicles in the U.S. off the road.
Together, these four industrial energy efficiency incentives capture a large portion of the energy efficiency potential in the industrial sector. These incentives will catalyze the deployment of new technologies that will decrease carbon emissions and protect our natural resources, all while saving money on energy costs and creating jobs.
I look forward to working with Senator Snowe to see these provisions enacted into law.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.
Mr. President, addressing our Nation's dependence on imported oil and our greenhouse gas emissions will require policies that extend across the economy, as well as policies that are more narrowly tailored to specific sectors. Today, I rise with my colleague from Maine, Senator Snowe, to offer a bill that would enhance energy security and reduce greenhouse gas emissions associated with heating our nation's homes and buildings. Our bill, the Cleaner, Secure and Affordable Thermal Energy Act, creates significant incentives for consumers, businesses, and tax-exempt entities that now rely on heating oil to convert to energy-efficient natural gas or biomass heating systems.
Across the country, and particularly in the Northeast and Midwest, many homes and buildings still derive heat from oil-burning furnaces. According to the Energy Information Administration, in 2007, our Nation consumed nearly 160 million barrels of oil for heating fuel. This use of heating oil continues despite the existence of widely available alternatives that are cleaner, more secure, and more affordable.
On April 22, I held a hearing in the Energy and Natural Resources Committee on the Energy Efficiency Resource Standards. The Committee heard from several witnesses about the advantages of and efforts to convert residential, business, and public users from fuel oil to natural gas and biomass heating systems. For each household that converts from fuel oil to a natural gas heating system, we avoid 2.1 metric tons of greenhouse gas emissions. For each commercial building, we avoid 9.9 metric tons, and for each industrial facility, we avoid as much as 2,984 metric tons. These emission reductions are even more significant for conversions to heating systems that are fired by biomass resources.
Besides being cleaner, natural gas and biomass are far more secure resources. Ninety-eight percent of domestically consumed natural gas is produced in North America, and domestic reserves of natural gas are estimated at 100 years based on current consumption.
Finally, since the price of natural gas and biomass is lower and less volatile than the price oil, converting offers significant short- and long-term cost savings to consumers. For instance, while the average annual cost of using fuel oil for home heating averages $1,734, the average annual cost of operating a natural gas furnace is $1,004.
But significant up-front costs prevent many families and businesses from converting their heating systems.
The Cleaner, Secure and Affordable Thermal Energy Act will make these conversions more affordable for American families, businesses, and tax- exempt entities.
First, for residential consumers, the Act establishes a 30 percent tax credit for costs associated with converting from a fuel oil to natural gas or biomass heating system. The credit is capped at $3,500, $4,000 in the case of biomass stoves. To qualify, the replacement equipment must be energy efficient; a natural gas boiler must have an AFUE rating of at least 85 percent, a replacement natural gas furnace must have an AFUE rating of at least 92 percent, and a replacement biomass appliance must have a thermal efficiency rating of more than 75 percent.
For business taxpayers, the act authorizes bonus depreciation for property installed before 2012. This would enable business taxpayers to expense--that is, immediately write-off--half of the cost of qualifying property, and depreciate the remaining balance over the typical cost- recovery period.
Many of the Nation's heating oil systems are used by public entities, particularly school systems. To help public entities finance their conversions to natural gas and biomass heating, the Act adds conversion programs as an activity eligible for Qualified Energy Conservation Bonds.
Finally, to encourage expansion of natural gas service capabilities, the act includes a two-year extension of the 15-year depreciation schedule created for distribution facilities under the Energy Policy Act of 2005.
The act would move us significantly in the direction of a low-carbon economy while enhancing energy security and reducing heating costs. I look forward to working with Senator Snowe to enacting our bill into law.