White House jumps into fight over energy subsidies

President Trump’s chief economic adviser Larry Kudlow has put the administration on record opposing tax credits for electric cars and renewable energy.

The statement drew the White House into a long-running and contentious fight over the role of government in promoting environmentally friendly cars and energy.

“As a matter of our policy, we want to end all of those subsidies,” Kudlow said Monday, according to Reuters. “And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth.” 

Kudlow appeared to be referring to federal tax credits for electric cars and wind and solar energy.

{mosads}Support for the tax incentives generally falls along party lines, with Democrats united in backing them and most Republicans in opposition.

But observers say the White House’s call to end the credits is likely to fall on deaf ears in Congress and that there is little appetite among lawmakers to roll them back.

House Democrats, set to take their chamber’s majority next month, are particularly unlikely to be amenable to repealing incentives for clean energy.

“Congress made a pretty clear commitment to, in a smart way, phasing down those tax credits,” Dylan Reed, head of congressional affairs at clean-energy group Advanced Energy Economy, said of the tax credits for wind and solar energy.

“And if you look at the tax reform discussions from last year, the House started to talk about that a little, but it didn’t make it through.”

Some of Kudlow’s remarks appeared to presume that Trump could repeal the tax credits himself. The credits, though, were put into place by Congress and would require congressional action to amend or repeal.

Kudlow’s comments came up largely thanks to General Motors’ announcement last week that it is cutting more than 14,000 jobs and closing five plants, four of which are in the United States.

GM benefits from the electric vehicle tax credit, which goes to buyers of its Chevrolet Volt and Chevrolet Bolt. Trump, angered by GM’s announcement, threatened last week to revoke the credit for GM.

Electric car buyers get up to $7,500 from the federal government. The credit starts to decrease and phase out when each company sells 200,000 cars — a level that GM and some other companies are close to.

For renewables, companies that generate wind power get a federal production tax credit (PTC) based on the power they produce, and solar power companies get an investment tax credit (ITC) for a percentage of the money they spend on equipment.

The renewable credits have long been targeted by Republicans. In 2015, warring factions made a deal to extend them while also gradually phasing them out. The wind credit starts to ratchet down in 2021, and the solar credit decreases in 2020, with both soon reaching zero.

The 2015 agreement was the end of a hard-fought battle between renewable energy interests who wanted to maintain federal government support for clean energy — backed by Democrats — and the oil industry, which in return got an end to the federal ban on exporting crude oil.

Consulting firm M.J. Bradley & Associates estimated at the time that the extension and phase-out of the credits would increase renewable energy installations by 225 percent through 2020, when measured by gigawatt capacity.

The most significant recent opportunity to end the wind and solar credits was in the negotiations for the 2017 GOP tax bill. But despite discussions about it, the final bill didn’t touch those credits.

“I think the best prospects for repealing these credits was during the tax reform debate, and as we saw, that was not included,” said Timothy Fox, vice president of research firm ClearView Energy Partners.

Fox said it was unlikely lawmakers would act on Kudlow’s calls.

“Changes to current law require an act of Congress, and I’m not convinced that the GOP members on Capitol Hill are interested in revisiting the PTC and ITC in the remainder of this year,” he said. “And if you look to next year, I think the Democratic House is unlikely to take up such a proposal.”

In the Senate as well, some Republicans such as Sen. Chuck Grassley (R-Iowa), who will hold the Finance gavel, have been strong supporters of renewables.

Kudlow’s comments also sparked some confusion among industry groups.

“We saw the reports but it’s unclear what is being proposed and for when,” Abigail Ross Hopper, president of the Solar Energy Industries Association, told The Hill.

“Halting the ITC would require an act of Congress and there is strong bipartisan support for the solar credits. We’ll wait to hear more specifics, but the ITC has created hundreds of thousands of jobs and tens of billions of dollars in economic activity.”

As for electric vehicles, debate in Congress has largely focused on expanding the tax credit, not repealing it.

GM and Tesla Inc. are both close to reaching the 200,000-car threshold in which their credits would phase down. They and other companies have pushed for lawmakers to lift the cap.

The Electric Credit Access Ready at Sale (CARS) Act of 2018, from a group of Senate Democrats led by Sen. Jeff Merkley (D-Ore.), would lift the cap completely, keep it in place through 2028 and make it available when the car is sold, so the dollar value would just come off the list price.

On the Republican side, Sen. Dean Heller (Nev.), who lost reelection last year, has a bill to lift the credit’s cap, but eliminate it in 2022.

Sen. John Barrasso (R-Wyo.) has a bill to repeal the credit and impose a new tax on electric vehicle owners, in the name of paying for infrastructure.

None of the options was put into a major tax policy extender proposal released last month by House Republicans, though that bill hasn’t passed.

Reed said supporting electric vehicles would align with Trump’s priorities in boosting domestic manufacturing.

“The U.S. is a world leader when it comes to electric vehicle manufacturing, whether that be Tesla in Nevada or GM or Proterra in South Carolina,” he said.

“The president has made clear that he wants to see manufacturing jobs in the United States, and the electric vehicle industry is actually one of the places where we’re a world leader.”

The complicated debate makes it unlikely lawmakers will back the administration’s calls to repeal the car and energy credits.

Fox agreed the administration would find little enthusiasm in Congress for repealing the credits, but was now in the debate. He suggested the White House might seek a tradeoff, such as extending electric car credits in return for nixing wind and solar incentives.

“They might be saying ‘we want to close these down,’ but the longer-term implication is whether or not the Trump administration could later support an extension of the EV credit,” he said.