After years of debate, the energy bill finally passed Congress, and much of what it offers goes to big oil and gas companies, as well as the nuclear industry. But what does it mean to consumers? Host Jeff Young talks with Daniel Friedman, of the Union of Concerned Scientists, about what the average buyer could gain from the nation's new energy policy.
YOUNG: From the Jennifer and Ted Stanley studio in Somerville, Massachusetts, it's Living on Earth. I'm Jeff Young, sitting in for Steve Curwood.
YOUNG: Well it took nearly five years of trying, but President George W. Bush now has one of his top legislative desires, an energy bill to sign. The President says it will set the country on a course to meet growing energy demand. Critics call it a big industry give away that will do little to reduce our dependence on oil, or lower gas prices. With nearly 15 billion in tax breaks, there’s no doubt energy companies will benefit, but what about energy consumers? What’s in it for you? David Friedman has gone through the energy bill looking for perks for the consumer. He directs research for the Clean Vehicles Program at the Union of Concerned Scientists. Mr. Friedman, welcome to Living on Earth.
FRIEDMAN: Hi, thank you very much.
YOUNG: Well, let’s start with cars. What’s in this for average Joe or average Jane who’s out on the car lot looking for a new car?
FRIEDMAN: Well, if you are in the market for a new car, especially a high fuel economy car, Congress has provided tax credits for new hybrid electric vehicles. These credits are going to range from anywhere from $250 all the way up to $3,400 all depending on the fuel economy improvement of that vehicle.
YOUNG: Now a tax credit is better than a tax deduction, right?
FRIEDMAN: A tax credit is much better than a tax deduction. It’s worth what it says at face value so if you qualify for a high fuel economy vehicle that gets a $3000 tax credit, that’s $3000 off the sticker price of the car. This is replacing a tax deduction that’s currently on the books for hybrids. This year that tax deduction is about $2000, but because it’s a deduction it’s only worth about $4 to 600 in your pocket depending on your tax bracket.
YOUNG: Now you know what they say, the large print giveth, the small print taketh away. Is there fine print here we need to be on the lookout for, some kind of a limit on how many of these can be taken advantage of or something along those lines?
FRIEDMAN: Well, that’s absolutely true. There is a limit that Congress did put on the hybrid vehicle tax credits where automakers can only sell about 60,000 of the hybrids per manufacturer before they start phasing out. Sadly what this does is it rewards automakers who are late to the party. Companies like Honda and Toyota and Ford, who are selling tens of thousands of these hybrids already, they’re going to hit the cap within six months to two years. Whereas companies like General Motors and Daimler Chrysler who haven’t even put any real hybrids on the road yet are still going to be getting these credits, well into 2009. That means you could walk into a showroom and get more money back for a GM hybrid that gets lower fuel economy than a great Toyota Prius, for example.
YOUNG: Hmm. Any idea why it was put together that way?
FRIEDMAN: Well, it seems like a mix of a couple of things. Part of it I think is good old honest attempts to protect GM and Daimler Chrysler and to try to give them a little bit of a benefit to compete against what’s happened with Toyota and Honda. On the other side, I think that Congress just decided they didn’t want to spend as much money on this which is really too bad. This is the government rewarding consumers for taking the patriotic step of buying higher fuel economy vehicles. At the same time there is more than twice as many tax breaks going to an oil industry that is currently reaping record profits from your and my pocketbooks.
YOUNG: I’m switching gears slightly, pardon the pun, but if I want to improve the fuel efficiency of my home by let’s say, better, more fuel efficient appliances, what’s in there for me?
FRIEDMAN: Well, if you’re interested in more fuel efficient appliances which you should be even without a tax credit because they’re going to save you money on your electricity and natural gas bill, you can get a credit of $100 to $175 for things like high-efficiency dishwashers, clothes washers, refrigerators, and other items that meet minimum efficiency standards.
YOUNG: And is there incentive for better insulation and things like that?
FRIEDMAN: There are incentives to effectively upgrade your home to create more energy savings when it comes to things like putting in insulation, better windows, more efficient furnaces and hot water heaters. There you can get a ten percent tax credit with a limit of $50 to $300 depending on the item and then an overall cap of $500 on top of that.
YOUNG: Now is that really that big a deal? Because I mean, it seems to me that most newer homes are already pretty well-insulated and you know the construction codes have changed to encourage the stuff all along the line. Was that really that big a step forward?
FRIEDMAN: Well, it’s definitely an important step forward because construction codes have changed over time and that means the older houses that are on the market have too little insulation, windows that let too much heat in and too much heat out and boilers and hot water heaters that just waste a lot of energy, so this is an important signal from the government that you’ve got to upgrade your appliances, you’ve got to upgrade your home, but sadly it’s only a two-year credit.
YOUNG: Now if someone wants to go solar, what’s the incentive there?
FRIEDMAN: Well, there’s an incentive to put on solar hot water heaters or solar panels that can generate electricity on the roof of your house. These are great ways to actually even see your electric meter turning backwards during a nice hot summer as the solar panel generates your own electricity. Here you can get a tax credit of 30 percent off the cost of the solar hot water heater or solar panel up to about $2000. Again, that’s only limited to two years.
YOUNG: Well, these sound, these sound pretty good, what do you see in here that is not good for consumers?
FRIEDMAN: Well, two of the big things that are not good for consumers are the fact that Congress basically ignored two really important opportunities to save consumers tens of billions of dollars every year. The country really is going to see no relief from oil dependence, no relief from high gas prices because Congress decided not to improve the fuel economy of our cars and trucks. If we had just taken conventional technology and required automakers to improve fuel economy from today’s 24 to 40 miles per gallon, consumers could be saving 80 billion dollars a year by 2020 on gas bills.
YOUNG: So stacking this up from the consumer's perspective, how does this bill compare to say past energy policies or other incentives and credits that were already in place?
FRIEDMAN: Well, this energy bill moves the ball forward a little bit for consumers, but we still got a lot farther to go. Even on the electricity side, consumers could have been saving nearly 30 billion dollars a year, that’s over $200 a household in 2020 if it required more renewable electricity, so it’s a small step, but overall the package is a move in the wrong direction. It increases our dependence on oil and increases our reliance on fossil fueled electricity.
YOUNG: David Friedman is research director of the Clean Vehicles Program at the Union of Concerned Scientists. Thanks very much for talking with us today.
FRIEDMAN: Thanks for having me on.
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