Key Alternative Fuel and Fuel Economy Legislation
Key alternative fuel and fuel economy legislation date back to the Clean Air Act of 1970 (as amended in 1990), which created initiatives to reduce mobile sources of pollutants. In 1988, federal laws established vehicle manufacturer incentives in the form of Corporate Average Fuel Economy (or CAFE) credits (Alternative Motor Fuels Act). The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and the Transportation Equity Act for the 21st Century (TEA-21) of 1998 laid the foundation for the highway construction and safety programs. In 1992, the Energy Policy Act of 1992 established regulations requiring federal, state, and alternative fuel provider fleets to build an inventory of alternative fuel vehicles. Subsequently, Congress passed the Energy Policy Act in 2005, which emphasized the use of alternative fuels and the development of supporting infrastructure.
Surface transportation acts include the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), the Transportation Equity Act for the 21st Century (TEA-21) of 1998, and the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), enacted in 2005. Each of these acts authorizes funds for highway construction, highway safety, and public transportation programs.
The Energy Independence and Security Act of 2007 introduced provisions to increase the supply of renewable fuel sources and raise CAFE standards to reach 35 miles per gallon by 2020. The Emergency Economic Stabilization Act enacted the Energy Improvement and Extension Act of 2008, and the American Recovery and Reinvestment Act of 2009 appropriated nearly $800 billion towards the creation of jobs, economic growth, tax relief, improvements in education and healthcare, infrastructure modernization, and investments in energy independence and renewable energy technologies. This section summarizes these laws.
American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act (ARRA) of 2009 (Public Law 111-5) was signed into law by President Obama on February 17, 2009. ARRA appropriates nearly $800 billion towards the creation of jobs, economic growth, tax relief, improvements in education and healthcare, infrastructure modernization, and investments in energy independence and renewable energy technologies. ARRA supports a variety of alternative fuel and advanced vehicle technologies through grant programs, tax credits, research and development, fleet funding, and other measures. Below is a summary of the provisions relevant to the Clean Cities portfolio areas (alternative fuels, advanced vehicles, idle reduction, and fuel economy):
Division A, Title IV
Energy and Water Development, provides $2.5 billion for U.S. Department of Energy research, development, and deployment projects through the Office of Energy Efficiency and Renewable Energy, including $800 million for projects related to biomass.
Energy and Water Development, provides $3.2 billion toward the Energy Efficiency and Conservation Block Grant Program, as authorized by the Energy Independence and Security Act of 2007. These grants will be awarded to states, local governments, and tribal governments for energy efficiency improvements, primarily in the transportation and building sectors.
Energy and Water Development, provides $2 billion toward grants for the manufacturing of advanced battery systems and electric vehicle components. These funds are intended to support domestic manufacturing of advanced lithium ion batteries and hybrid electric systems and components.
Energy and Water Development, provides $300 million toward competitive grants for alternative fuels and advanced vehicle projects, as authorized by Section 721 of the Energy Policy Act (EPAct) of 2005. The grants will be awarded to state governments, local governments and metropolitan transportation authorities, in partnership with an active designated Clean Cities Coalition.
Energy and Water Development, provides $400 million to support vehicle electrification efforts.
Energy and Water Development, provides $6 billion towards the Loan Guarantee Program, which was authorized by Section 1705 of EPAct 2005. A $10 million portion of these funds will support the administrative expenses of the Advanced Technology Vehicles Manufacturing Loan Program.
Division A, Title V
Financial Services and General Government, provides $3 billion for the acquisition of more fuel-efficient vehicles for the federal fleet by September 30, 2011. The funds are intended to increase the fuel efficiency and reduce emissions of the federal fleet while stimulating the market for advanced technology vehicles such as hybrid electric, battery electric, and commercially available plug-in hybrid vehicles.
Division A, Title VII
Interior, Environment, and Related Agencies, provides $300 million to retrofit diesel vehicle fleets with cleaner burning engines in support of the Diesel Emission Reduction Act. Grants will be administered by the U.S. Environmental Protection Agency via the National Clean Diesel Campaign for eligible state, local government, and non-profit fleets. Private sector applicants may also apply in partnership with one of these groups.
Division B, Part III
Energy Conservation Incentives, Section 1123, amends the alternative fueling infrastructure tax credit for qualified equipment placed into service on or after January 1, 2009, increasing the maximum credit to 50% of the cost not to exceed $50,000.
Division B, Part V
Plug-in Electric Drive Motor Vehicles, Section 1141-1144, modifies the qualified plug-in electric drive motor vehicle tax credit. Now, the tax credit will be phased out for each manufacturer after 200,000 qualified plug-in electric drive vehicles have been sold by that manufacturer for use in the U.S., rather than phasing out the credit once the total number of qualified vehicles sold by all manufacturers reaches 250,000. Additionally, a 10% tax credit for qualified low-speed electric vehicles, electric motorcycles, three-wheeled electric vehicles, and electric vehicle conversions has been added.
Division B, Part VII - Rules Relating to Ownership Changes, Subtitle D - Manufacturing Recovery Provisions, Section 1302, creates a 30% tax credit to encourage investment in advanced energy property manufacturing facilities. The credit applies to qualified projects that establish, re-equip, or expand facilities that manufacture: components for the production of renewable energy; energy storage systems for use with electric or hybrid electric motor vehicles; new qualified plug-in electric drive motor vehicles or components that are designed specifically for use in such vehicles; advanced battery technology; and other next-generation renewable energy technologies. Eligible projects must be certified by the U.S. Department of Treasury.
The full text of ARRA (P.L. 111-5) is available via the Government Printing Office Web site (PDF 1 MB). Download Adobe Reader.
Energy Improvement and Extension Act of 2008
The Energy Improvement and Extension Act of 2008 is Division B of the Emergency Economic Stabilization Act (PL 110-343), signed into law by then President Bush on October 3, 2008. Title II of Division B of the law applies to the Clean Cities portfolio areas (alternative fuels, advanced vehicles, idle reduction, etc.). Below is a summary of the relevant provisions:
Section 202 amends the existing biodiesel mixture and agri-biodiesel production tax credits by:
- extending the tax credits for one year through December 31, 2009;
- allowing all biodiesel, regardless of feedstock, to qualify for the $1.00 per gallon mixture incentive (with the exception of co-processed renewable diesel); and
- adding camelina as a qualified feedstock for agri-biodiesel production.
Section 204 amends the expiration date for the existing alternative fuel excise tax credit from September 30, 2009, to December 31, 2009.
Section 205 creates a new tax credit for qualified plug-in hybrid electric vehicles (PHEVs) purchased between December 31, 2008, and December 31, 2014. The credit amount is determined based on vehicle weight and battery capacity. A phase-out period will be initiated once 250,000 qualified PHEVs are sold in the U.S.
Section 206 exempts qualified idle reduction devices from the retail excise tax imposed on heavy-duty trucks.
Section 207 amends the existing alternative fuel infrastructure tax credit by:
- extending the incentive for one year through December 31, 2010; and
- adding electricity to the list of qualified alternative fuels.
The Emergency Economic Stabilization Act can be viewed on the Government Printing Office Web site. The Energy Improvement and Extension Act of 2008 begins on page 43, and Title II - Transportation and Domestic Fuel Security Provisions begins on page 68.
Energy Independence and Security Act of 2007
(Enacted December 19, 2007)
The Energy Independence and Security Act (EISA) of 2007 aims to improve vehicle fuel economy and help reduce U.S. dependence on petroleum. EISA includes provisions to increase the supply of renewable alternative fuel sources by setting a mandatory Renewable Fuel Standard, which requires transportation fuel sold in the U.S. to be a minimum of 36 billion gallons of renewable fuels by 2022 including advanced and cellulosic biofuels as well as biomass-based diesel. In addition, the law requires the Corporate Average Fuel Economy (CAFE) standard for passenger cars and light trucks to reach 35 miles per gallon by the year 2020. In addition, EISA includes grant programs to encourage the development of cellulosic biofuels and plug-in hybrid electric vehicles and other emerging electric technologies, and the inclusion of electric drive vehicles under EPAct 1992. The law is projected to reduce greenhouse gas emissions by 9% by 2030. For more information, see the EISA summary table. For the full text, see the EISA link.
Energy Policy Act of 2005
(Enacted August 8, 2005)
The Energy Policy Act (EPAct) of 2005 called for the development of grant programs, demonstration and testing initiatives, and tax incentives that promote the production and use of alternative fuels and advanced vehicles. EPAct 2005 also amended existing regulations, including fuel economy testing procedures and EPAct 1992 requirements for federal and state and alternative fuel provider fleets. For more information, see the EPAct 2005 summary table. For the full text, read EPAct 2005 (PDF 3.2 MB). Download Adobe Reader.
Energy Policy Act of 1992
(Enacted October 24, 1992)
The Energy Policy Act (EPAct 1992) of 1992 aims to reduce U.S. dependence on imported petroleum and improve air quality by addressing all aspects of energy supply and demand, including alternative fuels, renewable energy, and energy efficiency. EPAct 1992 encourages the use of alternative fuels through voluntary and regulatory activities and approaches carried out by the U.S. Department of Energy (DOE). Voluntary activities are implemented through Clean Cities, and EPAct 1992 regulations require that link federal and state and alternative fuel provider fleets build an inventory of alternative fuel vehicles. EPAct 1992 also defines "alternative fuels" as methanol, ethanol, and other alcohols; blends of 85% or more of alcohol with gasoline (E85); natural gas and liquid fuels domestically produced from natural gas; liquefied petroleum gas; hydrogen; electricity; biodiesel (B100); coal-derived liquid fuels; fuels, other than alcohol, derived from biological materials; and P-Series fuels, which were added to the definition in 1999. Under EPAct 1992, DOE has the authority to add more alternative fuels to the list of authorized alternative fuels if certain criteria are met. For more information, visit the EPAct Web site. For the full text, read EPAct 1992 (PDF 22 MB). Download Adobe Reader.
Clean Air Act Amendments
The Clean Air Act Amendments (CAAA) of 1990 amended the original Clean Air Act (CAA) of 1970. The CAAA of 1990 created several initiatives to reduce mobile source pollutants, thereby pursuing one of the original goals of CAA. CAAA establishes standards and procedures for reducing human and environmental exposure to a range of pollutants generated by industry and transportation. Each state is required to develop a state implementation plan that explains how it will carry out initiatives outlined by CAAA. The U.S. Environmental Protection Agency (EPA) assists states by providing scientific research, expert studies, engineering designs and funding to support clean air programs. For more information, visit EPA's Plain English Guide to the Clean Air Act.
Surface Transportation Acts (ISTEA, TEA-21, SAFETEA-LU)
The national surface transportation acts authorize funds for highway construction, and highway safety and public transportation programs. The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and the Transportation Equity Act for the 21st Century (TEA-21) of 1998 laid the foundation for the highway program. ISTEA established the Congestion Mitigation and Air Quality (CMAQ) Improvement Program, which provides funding for projects and programs in air quality non-attainment and maintenance areas to reduce transportation-related emissions. TEA-21 continued the CMAQ program and established the Clean Fuels Grant Program, which allows transit systems to apply for and receive grants to purchase or lease clean fuel buses, related equipment or facilities, and use biodiesel. The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) was enacted in 2005. SAFETEA-LU continued and amended several programs established under ISTEA and TEA-21, such as CMAQ and the Clean Fuels Grant Program. SAFETEA-LU also established additional programs and incentives related to alternative fuels, advanced vehicles, and fuel efficiency, including the Alternative Fuel Excise Tax Credit, the High Occupancy Vehicle (HOV) Lane Exemption, and the Idle Reduction Facilities Regulation in Interstate Rights-of-Way program.
Alternative Motor Fuels Act
(Enacted October 14, 1988)
The Alternative Motor Fuels Act (AMFA) created vehicle manufacturer incentives in the form of Corporate Average Fuel Economy (CAFE) credits for the production of motor vehicles capable of operating on certain alternative fuels (electricity, liquid petroleum gasoline, and biodiesel are not included). AMFA also directed the U.S. Department of Transportation, in consultation with the U.S. Environmental Protection Agency and the U.S. Department of Energy (DOE), to conduct a study and submit a report to Congress evaluating the success of the policy decision to offer CAFE credit calculation incentives for dual-fuel vehicles. The report, Effects of the Alternative Motor Fuels Act CAFE Incentives Policy, was submitted to Congress in March 2002. The AMFA fuel economy provisions were extended by the Automotive Fuel Economy Manufacturing Incentives for Alternative Fueled Vehicles Rule of 2004.
AMFA required that an alternative fuels education and data resource center be created. As a result, the Alternative Fuels and Advanced Vehicles Data Center was established in 1991 at DOE's National Renewable Energy Laboratory.