The Senate Finance Committee will meet today to consider an ambitious clean energy tax overhaul proposal that could be incorporated into a broader infrastructure bill should one materialize. The bill, if enacted, would consolidate 40 energy tax incentive provisions into three groups of emissions-based, technology neutral provisions, and eliminate a number of fossil-fuel related provisions, among other things.
Under current law, there are a plethora of temporary incentives for alternative fuels and fuel mixtures (including the biodiesel tax credit). The Senate Finance Committee proposal would create a technology-neutral incentive for the domestic production of clean fuels, with the incentive level dependent upon the lifecycle carbon emissions of a given fuel. Fuels may qualify for the credit if the fuel's lifecycle emissions are at least 25 percent less than the current U.S. nationwide average. Zero and net-negative emission fuels may qualify for the maximum incentive of $1.00/gallon.
Although the proposal contains some elements that are conceptually attractive, and is an important part of the ongoing discussion around clean energy tax policy, it is unlikely to be enacted in its current form.
The House counterpart to this proposal, known as the "GREEN Act," is simpler in that it retains the technology-specific tax incentives applicable to green technologies (including a multi-year phasedown of the biodiesel tax credit beginning in 2023).
Democrats are expected to enact some type of green energy tax package at some point this year or next. The House and Senate versions described above will form the starting point of the bicameral negotiations.
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