Congress Should Extend Clean Energy Tax Credit
Note: This is a guest post from Phyllis Cuttino, director of Pew’s Clean Energy Program.
In 2011, for the first time in several years, the United States led the world by investing more than $48 billion in clean energy. The clean energy sector represents one of the fastest-growing industries globally, with investment increasing more than 600 percent between 2004 and 2011 (excluding research and development).
We’re in danger of losing our place at the top, however. To maintain our lead amid fierce international competition and to continue to attract private capital, there must be policy certainty. While other nations have national policies to encourage the adoption of clean energy, we rely on a patchwork of state policies and cyclical federal tax incentives, one of the most important of which is to end in a year.
The production tax credit (PTC) is an effective tool to keep electricity prices low and encourage the development of proven clean energy projects. While not large — about 2.2 cents per kilowatt hour — it gives American businesses the certainty they need to continue to invest, build and deploy. But it’s set to expire at the end of 2013. Uncertainty about whether Congress will act to extend the PTC has already resulted in a sharp drop in investments in wind energy production, threatening the livelihoods of the more than 78,000 people nationwide who are in wind-supported jobs.
When Congress has allowed the PTC to expire in the past, wind installations declined by 73 to 93 percent. According to a December 2011 study by Navigant, a global consulting firm known for its expertise in energy issues, 37,000 wind-supported jobs would be lost if the PTC was not extended before 2013. Congress should enact a multiyear extension of this incentive, which provides certainty to the industry and would ensure the continued growth of renewable energy industries. Our country leads the world in clean energy venture capital investment, but without such strong policy commitments to clean energy as the PTC, it will be challenging to scale up new innovations. If demand for these modern technologies is not created in the United States, development of the clean energy industry will suffer.
There is no lack of political support. Karl Rove, who was a senior advisor to President George W. Bush, raised eyebrows recently when he joined with Robert Gibbs, who served as President Barack Obama’s press secretary, to publicly support congressional action to extend financial incentives for development of wind energy. In endorsing the policy, Rove said, “My hope is that after the election, people say, look, let’s start making some priorities, and find some things that we can agree on, and maybe one of them is the production tax credit.” If political party operatives such as Rove and Gibbs, Republican and Democratic governors, and the Sierra Club can agree to extend this policy, Washington lawmakers from both sides of the aisle would be able to do so as well.
Policy matters. Nations that have strong policy commitments to clean energy already reap the economic rewards. If the United States is to effectively compete in the global clean energy race, Congress should extend the PTC.