Senate deadlocked on clean-energy tax credits

For the fourth time this summer, Democrats have failed to push through vital renewable energy legislation

By Ben Whitford

No pot of gold at the end of the clean energy rainbow

Researchers say that situation will only worsen if the credits are ultimately allowed to expire; a study by Navigant Consulting suggests that without federal aid, the clean-energy sector could slough more than 116,000 jobs and lose $19 billion in new investments in the next year alone. And this isn’t just baseless doom-mongering: the last time that renewable-energy credits were allowed to lapse, back in 2003, the sector shrank by 77 percent in a single year.

To make matters worse, the Senate is dragging its heels precisely as America’s renewable-energy sector is enjoying its best-ever year. In 2007, the US wind-power market grew 45 percent, providing more than a third of the country’s new energy production and enough juice to power 5 million homes. Solar energy, though a far smaller slice of the energy pie, is also thriving; the market has expanded by an average of 40 percent each year since the start of the decade. With one in every 11 dollars spent by US venture capitalists now going to the energy sector - a twelvefold increase since 2000 - and conventional fuel prices still climbing, the industry looks likely to keep on growing for years to come.

Analysts say that could pay big dividends: with the US set to pass Germany as the world’s largest wind-power market by the end of 2009, European energy giants are already looking to establish manufacturing bases in the US, potentially bringing hundreds of jobs to economically distressed rural areas. Homegrown companies are also looking to cash in, with new companies springing up to meet the demand for solar-grade silicon and wind-turbine parts; and with the International Energy Agency calling for investment in renewable energy totaling $16 trillion by 2030, America’s clean-energy companies hope to find a lucrative worldwide market for their technologies.

Despite the stakes, senators have so far proven unable to thrash out an agreement about how best to meet the credits’ estimated $8.3 billion price-tag. Democrats, especially fiscally minded Blue Dog centrists, want to offset the tax credit, increasing other taxes in order to ensure the budget stays balanced. Republicans say that no offsetting is needed, and that they’ll oppose any legislation that’s tied to a de facto tax hike.

In response, Senate majority leader Harry Reid, D-Nev., and Finance chair Max Baucus, D-Mont., cobbled together a “compromise solution” - Beltway-speak for a bill that contains something to annoy everyone - that offset about half of the bill’s total price-tag by tightening tax loopholes and delaying tax breaks for multinational companies. In an attempt to further sweeten the deal, Reid and Baucus stirred in measures to bail out the Highway Trust Fund, which has reported a sudden drop in funds corresponding to a drop in driving, and to send cash to flood-stricken Midwestern states; they even tried to buy off wavering GOP senators by offering them the chance to vote on an off-shore drilling amendment in exchange for their support.

In the end, though, the back-room bargaining backfired: by linking the extender bill to off-shore drilling, Democrats made it a pawn in an increasingly partisan battle over spiraling gas prices. Republicans accused Democrats of “changing the subject”, threatened to prevent even a preliminary vote on the tax-credit extensions unless they received significant concessions on drilling and oil speculation, and - their nerve strengthened by a White House pledge to veto the tax credits - ultimately shot down the bill with only a handful of defections.

There’s now little chance of lawmakers reaching a consensus before the five-week summer recess, but Democratic leaders are already pledging to reintroduce a tax-credit “extender bill” when the Senate reconvenes in mid-September. “I’ll keep fighting for these priorities and working to find a way forward,” said Sen. Baucus in a written statement after the vote. “I hope senators will answer the call in September, and work together for jobs, energy, and American families.”

Industry insiders welcome that sentiment, but say they aren’t holding their breath. “We’re optimists, but also realists,” says Blanton. “By the time they come back, there will only be two months until the general election - they won’t have much time to do anything.” Unfortunately for clean-energy true believers, it looks like lawmakers may already have blown their best chance to keep renewable energy tax credits on the books.

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