ȱ
•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱ
Ž‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
›Ž—ȱǯȱŠŒ˜‹žŒŒ’ȱ
™ŽŒ’Š•’œȱ’—ȱ—Ž›¢ȱŠ—ȱ—Ÿ’›˜—–Ž—Š•ȱ˜•’Œ¢ȱ
Ž‹›žŠ›¢ȱŗřǰȱŘŖŖşȱ
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŝȬśŝŖŖȱ
   ǯŒ›œǯ˜Ÿȱ
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Pr
epared for Members and Committees of Congress

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
ž––Š›¢ȱ
Alternative fuels and advanced technology vehicles are seen by proponents as integral to
improving urban air quality, decreasing dependence on foreign oil, and reducing emissions of
greenhouse gases. However, major barriers—especially economics—currently prevent the
widespread use of these fuels and technologies. Because of these barriers, and the potential
benefits, there is continued congressional interest in providing incentives and other support for
their development and commercialization.
Alternative fuels and advanced technology vehicles have been addressed early in the 111th
Congress, as both the House and Senate versions of the American Recovery and Reinvestment
Act of 2009 (H.R. 1) contained provisions supporting their development and deployment. While
some of these provisions were removed in conference, the final version still contains provisions
for tax incentives, federal grants and loans, and other federal support for alternative fuels and
advanced vehicles.
The 111th Congress is likely to further discuss alternative fuels and advanced technology vehicles
as it addresses other key topics. These include their role in any federal policy to address climate
change, and their role in federal energy policy. The 111th Congress may also play an oversight
role in the development of major regulations: the Environmental Protection Agency’s
implementation of the renewable fuel standard enacted in 2005, and expanded in 2007; the
Department of Transportation’s implementation of new fuel economy standards enacted in 2007;
and the Department of Agriculture’s implementation of a new Farm Bill enacted in 2008.
In the 110th Congress, alternative fuels and advanced technology vehicles received a good deal of
attention, especially in discussions over U.S. energy security. In his January 24, 2007, State of the
Union Address, President Bush called for the increased use of renewable and alternative motor
fuels to 35 billion gallons annually by 2017. U.S. consumption was roughly five billion gallons in
2006. Therefore, such an initiative would mean a seven-fold increase in the use of these fuels
over 11 years. On December 19, 2007, President Bush signed the Energy Independence and
Security Act of 2007 (EISA, P.L. 110-140). EISA requires an increase in renewable fuel
consumption to 9.0 billion gallons in 2008 and 36 billion gallons in 2022. Further within the 36-
billion-gallon requirement, by 2022 the law mandates the use of 21 billion gallons of “advanced
biofuels,” defined as fuel derived from renewable biomass other than corn starch, with 50% lower
lifecycle greenhouse gas emissions compared to petroleum fuels. The 110th Congress also enacted
the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill, P.L. 110-246)—which
expanded and extended incentives for biofuels—as well as the Emergency Economic
Stabilization Act of 2008 (EESA, P.L. 110-343)—which modified existing fuel tax credits, and
established a tax credit for the purchase of plug-in vehicles.
This report supersedes CRS Report RL33564, Alternative Fuels and Advanced Technology
Vehicles: Issues in Congress
, by Brent D. Yacobucci.

˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
˜—Ž—œȱ
Introduction ..................................................................................................................................... 1
Most Recent Developments............................................................................................................. 1
Background and Analysis ................................................................................................................ 2
Congressional Interest ............................................................................................................... 2
Legislative Background ...................................................................................................... 2
Current Issues ..................................................................................................................... 4
Fuel Tax Incentives ................................................................................................................... 5
Ethanol and MTBE ................................................................................................................... 5
Cellulosic Biofuels .................................................................................................................... 7
Ethanol Imports......................................................................................................................... 8
Vehicle Purchase Requirements ................................................................................................ 9
Vehicle Purchase Tax Incentives ............................................................................................. 10
Biodiesel...................................................................................................................................11
Hydrogen and Fuel Cells......................................................................................................... 12
Hybrid Vehicles....................................................................................................................... 13
Alternative Fuel and Advanced Vehicle Technology Provisions in the American Recovery
and Reinvestment Act of 2009 ................................................................................................... 14
For Additional Reading ................................................................................................................. 16

Š‹•Žœȱ
Table 1. Comparison of Alternative Fuel and Advanced Vehicle Technology Provisions in
H.R. 1 ......................................................................................................................................... 14

˜—ŠŒœȱ
Author Contact Information .......................................................................................................... 17

˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
—›˜žŒ’˜—ȱ
High levels of oil imports and high crude oil and gasoline prices in recent years have led to
increased interest in the U.S. fuel supply. Recent congressional interest has focused on
alternatives to petroleum, ways to improve the efficiency of the U.S. transportation sector, and
ways to improve the stability and security of the petroleum supply and refining sectors.1 From
spring 2006 to summer 2008, high global oil prices (spurred by high demand) and refinery
constraints in the domestic gasoline supply pushed U.S. gasoline pump prices to historic highs.
Historically, a problem in maintaining interest in alternative fuels and vehicles has been the
volatility in oil and gasoline prices. Interest tends to rise as prices rise, and decline as prices dip.
Arguably, statutory policies can counterbalance dips in public interest in periods of mixed market
signals as seen recently. In fall 2006 and winter 2007, gasoline prices eased somewhat; and since
summer 2008, petroleum and gasoline prices have fallen dramatically.
Along with fuel prices and supply, environmental concerns, especially poor air quality and
concerns over the potential effects of climate change, have further raised interest in the
development of alternatives to petroleum, as well as ways to use petroleum more efficiently.
Key components of federal policies to reduce petroleum consumption include the promotion of
alternatives to petroleum fuels and the promotion of more efficient vehicles. This report provides
an overview of current issues surrounding alternative fuels2 and advanced technology vehicles3—
issues discussed in further detail in other CRS reports referred to in each section.
˜œȱŽŒŽ—ȱŽŸŽ•˜™–Ž—œȱ
On February 12, 2009, House and Senate conferees filed their report on the American Recovery
and Reinvestment Act of 2009 (ARRA, H.R. 1, H.Rept. 111-16). Among other provisions, ARRA
modifies tax credits for alternative fuel infrastructure and plug-in vehicles, expands funding for
grants to states, localities, and other entities to replace older diesel engines with cleaner diesel
engines or alternative fuel engines, and establishes grants for battery manufacturers and
component suppliers to develop advanced vehicle batteries and system components.
On October 3, 2008, President Bush signed the Emergency Economic Stabilization Act (EESA,
P.L. 110-343). Among other provisions, EESA modified and extended key tax credits for biofuels
and other alternative fuels. In addition, EESA established a tax credit for the purchase of plug-in
electric vehicles.4 On June 18, 2008, President Bush signed the Food, Conservation, and Energy

1 For more information on petroleum supply and prices, see CRS Report RL32530, World Oil Demand and its Effect on
Oil Prices
, by Robert Pirog. For more information on legislative proposals to help mitigate high gasoline prices, see
CRS Report RL33521, Gasoline Prices: Causes of Volatility and Congressional Response, by Carl E. Behrens and
Carol Glover.
2 Alternative fuels are fuels produced from sources other than petroleum, including natural gas, coal-derived fuels,
agriculture-based ethanol and biodiesel, and hydrogen.
3 Advanced technology vehicles are vehicles that use technologies other than (or in addition to) an internal combustion
engine, including electric vehicles, fuel cell vehicles, and hybrids.
4 Tax credits were established in 2005 (by the Energy Policy Act of 2005—P.L. 109-58) for the purchase of hybrid,
lean-burn, alternative fuel, and fuel cell vehicles.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
Act of 2008—the 2008 “Farm Bill” (P.L. 110-246). Among other provisions, the Farm Bill
modified existing biofuels tax credits; most notably, the Farm Bill lowers (starting in 2009) the
tax credit for ethanol produced from corn and other conventional feedstocks, and establishes a
credit for the production of advanced biofuels produced from cellulosic matter (such as trees and
perennial grasses).
On December 19, 2007, President Bush signed the Energy Independence and Security Act of
2007 (EISA, P.L. 110-140).5 EISA requires an increase in renewable fuel consumption to 9.0
billion gallons in 2008 and 36 billion gallons in 2022. Further, within the 36-billion-gallon
requirement, the new law mandates the use of 21 billion gallons of “advanced biofuels,” defined
as fuel derived from renewable biomass other than corn starch, with 50% lower lifecycle
greenhouse gas emissions compared to petroleum fuels.
ŠŒ”›˜ž—ȱŠ—ȱ—Š•¢œ’œȱ
˜—›Žœœ’˜—Š•ȱ —Ž›Žœȱ
Ž’œ•Š’ŸŽȱŠŒ”›˜ž—ȱ
A combination of issues—the oil crises of the 1970s, the rise in awareness of environmental
issues, concerns over energy security, increasing vehicle emissions, and high gasoline prices—
have spurred interest in moving the United States away from petroleum fuels for transportation
and toward alternative fuels and advanced vehicle technologies.6
‘Žȱ—Ž›¢ȱ˜•’Œ¢ȱŒȱ˜ȱŗşşŘȱ
The 102nd Congress passed the Energy Policy Act of 1992 (EPAct 1992, P.L. 102-486). Among
other provisions, this law requires the purchase of alternative fuel vehicles by federal agencies,
state governments, and alternative fuel providers.7 Under EPAct 1992, a certain percentage—
which varies by the type of fleet (i.e., federal, state, or fuel provider)—of new passenger vehicles
must be capable of operating on alternative fuels, including ethanol, methanol, natural gas, or
propane. EPAct 1992 established a tax credit for the purchase of electric vehicles, as well as tax
deductions for the purchase of alternative fuel and hybrid vehicles.
‘Žȱ—Ž›¢ȱ˜•’Œ¢ȱŒȱ˜ȱŘŖŖśȱ
There was little congressional action on energy policy through the late 1990s. In light of high fuel
prices in the early 2000s, continued growth in domestic and global petroleum demand, and other

5 For more information on EISA, see CRS Report RL34294, Energy Independence and Security Act of 2007: A
Summary of Major Provisions
, by Fred Sissine.
6 For background on alternative fuels, including legislative history, see CRS Report RL30758, Alternative
Transportation Fuels and Vehicles: Energy, Environment, and Development Issues
, by Brent D. Yacobucci. For
background on advanced vehicle technologies, seeCRS Report RL30484, Advanced Vehicle Technologies: Energy,
Environment, and Development Issues
, by Brent D. Yacobucci.
7 Alternative fuel providers are businesses that sell or distribute alternative fuels.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Řȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
energy policy concerns, Congress began working on comprehensive energy legislation in 2001. In
the 107th Congress, an energy bill stalled in conference. The 108th Congress continued the debate
over energy legislation. The conference report (H.Rept. 108-375) included provisions on vehicle
tax credits, amendments to vehicle purchase requirements under the Energy Policy Act of 1992, a
requirement that gasoline contain ethanol or other renewable fuels, and tax credits for ethanol and
biodiesel fuels. However, this bill also stalled. Many of these topics were addressed in the 109th
Congress by the Energy Policy Act of 2005 (EPAct 2005, P.L. 109-58), which was signed by
President Bush on August 8, 2005.
‘Žȱ—Ž›¢ȱ —Ž™Ž—Ž—ŒŽȱŠ—ȱŽŒž›’¢ȱŒȱ˜ȱŘŖŖśȱ
Continued pressure on energy prices and concerns over energy security after passage of EPAct
2005 led to continued discussion of energy policy in the 110th Congress. On December 19, 2007,
President Bush signed the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140).
Among other provisions, EISA expanded the renewable fuel mandate in EPAct 2005, and
significantly tightened federal fuel economy (CAFE) standards.
‘ŽȱŘŖŖŞȱŠ›–ȱ’••ȱ
Biofuels—fuels produced from renewable organic matter, especially agricultural products and
wastes, are seen by proponents as a key strategy for increasing energy security, promoting
environmental quality, and raising farm incomes. Therefore, recent Farm Bills, especially the
2002 and 2008 Farm Bills (P.L. 107-171 and P.L. 110-246, respectively), have included titles to
promote biofuels and other farm-based energy supplies. The 2002 Farm Bill established programs
to promote the development of biofuels and biorefineries; the 2008 Farm Bill expanded on these
programs, and expanded existing biofuels tax credits to promote the development of cellulosic
fuels—fuels produced from woody or fibrous materials such as perennial grasses, fast-growing
trees, and agricultural and municipal wastes.
‘Žȱ–Ž›’ŒŠ—ȱŽŒ˜ŸŽ›¢ȱŠ—ȱŽ’—ŸŽœ–Ž—ȱŒȱ˜ȱŘŖŖşȱ
The American Recovery and Reinvestment Act of 2009 (H.R. 1), reported by House and Senate
conferees February 12, 2009, includes several key provisions supporting alternative fuels and
advanced technology vehicles. These include tax credits for the purchase of small electric
vehicles, grants to states, localities, and other entities to replace older diesel engines with new,
clean diesel or alternative fuel engines, and grants to battery manufacturers and part suppliers to
develop batteries and system components for advanced vehicles (e.g., hybrids, plug-in electric
vehicles). A provisions contained in the Senate version to expand U.S. Department of Agriculture
(USDA) biorefinery grants was dropped by the Conference Committee. For a more detailed
comparison of the House, Senate, and Conference versions of the bill, see Table 1.
‘Ž›ȱŽ’œ•Š’˜—ȱ
Other laws affecting alternative fuel and advanced technology vehicles include the Energy Policy
and Conservation Act (P.L. 94-163), which established fuel economy standards for passenger cars
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
řȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
and light trucks;8 the 1990 Amendments to the Clean Air Act (P.L. 101-549), which require cities
with significant air quality problems to promote low emission vehicles; highway authorization
bills, including P.L. 109-59 and P.L. 105-178, which established and reaffirmed tax incentives for
ethanol and other fuels; and numerous laws that authorize federal research and development on
alternative fuels, advanced technologies, and enabling infrastructure, such as alternative fuel
pumps. The Emergency Economic Stabilization Act of 2008 (P.L. 110-343) modified and
extended key tax incentives for biodiesel and other alterative fuels.
ž››Ž—ȱ œœžŽœȱ
Recent events have renewed interest in alternative fuels and advanced vehicles. For example,
high pump prices for gasoline and diesel fuel through summer 2008 have raised concerns over
fuel conservation and energy security, including U.S. dependency on oil imports. In light of this,
there is growing interest in more efficient vehicles or vehicles that abandon the use of petroleum
altogether. This is especially true as the rapid growth in the sales of light trucks—these include
sport utility vehicles (SUVs), mini-vans, and pickups, which tend to have lower fuel economy
than passenger cars—through the mid-2000s has lowered the overall fuel economy of the new
vehicle fleet. EISA requires an increase in fuel economy from passenger cars and light trucks to
35 miles per gallon (mpg) combined in 2020 from roughly 24 mpg today.
Ongoing technological developments in hybrid vehicles, ethanol fuel, fuel cells, and hydrogen
fuel have raised key policy questions. These questions include whether more generous tax
incentives for hybrid and/or fuel cell vehicles should be established, the costs and environmental
impacts associated with production of ethanol or hydrogen as major transportation fuels, and
whether research and development funds should be focused on such potentially high-risk
technologies as fuel cells or on near-term technologies, such as hybrids.
Gasoline prices have spiked and the gasoline supply system has faced disruptions several times in
recent years, driven by various factors, including:
• Hurricanes along the Gulf Coast in the fall of 2005;
• High crude prices, issues with refining capacity, and concerns about ethanol
supply in spring 2006;
• Historic high crude oil and gasoline prices returned to historic highs in 2007 and
2008.
These price surges and supply disruptions raised congressional interest in alternatives to
petroleum. Coupled with concerns over the environmental impact of petroleum and other fossil
fuels, congressional interest in alternatives remains strong, even though oil and gasoline prices
declined during the second half of 2008.

8 For more information on fuel economy standards, see CRS Report RL33413, Automobile and Light Truck Fuel
Economy: The CAFE Standards
, by Brent D. Yacobucci and Robert Bamberger.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Śȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
žŽ•ȱŠ¡ȱ —ŒŽ—’ŸŽœȱ
There are three key tax incentives for alternative fuels: (1) a tax credit for conventional ethanol of
$0.45 per gallon,9 (2) a tax credit for biodiesel and renewable diesel of $1.00 per gallon,10 and (3)
a credit of $0.50 per gallon for the retail sale of alternative fuels other than ethanol and biodiesel
(e.g., LPG). In addition, there are tax credits for small ethanol and biodiesel producers ($0.10 per
gallon), and a tax credit for the production of cellulosic biofuels (up to $1.01 per gallon,
depending on the fuel).11
There is ongoing interest in tax incentives for the production and purchase of alternative fuels.
Supporters of this approach argue that the market favors conventional fuels, and that the
widespread infrastructure and nearly ubiquitous use of conventional fuels in automobiles makes it
difficult for alternative fuels to compete without economic incentives. The American Jobs
Creation Act of 2004 (P.L. 108-357) replaced a previous excise tax exemption for ethanol-
blended fuels with a tax credit. The credit was valued at $0.51 per gallon in 2008 and is expected
to be reduced to $0.45 per gall for 2009.
In addition to the credit for ethanol-blended gasoline, there has been interest in promoting
biodiesel fuel. P.L. 108-357, and subsequent amendments, provides a tax credit of $1.00 per
gallon for the sale and use of biodiesel. P.L. 109-58 expanded the credit to include “renewable
diesel,” which is produced from a different process than biodiesel and results in a fuel with
somewhat different chemical characteristics. In recent guidance on the tax credit, the Internal
Revenue Service ruled that renewable diesel includes synthetic diesel fuel produced from
vegetable oils at petroleum refineries.12 Most biodiesel producers are small plants, and many
biodiesel producers are concerned that this decision could lead to a shift away from biodiesel
production to renewable diesel production at large refineries. The Emergency Economic
Stabilization Act of 2008 (EESA) included the following language amending the renewable diesel
tax credit: “such term does not include any fuel derived from coprocessing biomass with a
feedstock which is not biomass.”13 Presumably, this provision is intended to limit the production
of renewable diesel eligible for the tax credit at petroleum refineries. EESA also extended the
biodiesel and renewable diesel credits through the end of 2009.
‘Š—˜•ȱŠ—ȱȱ
Outside of tax incentives, ethanol has been of key interest in recent Congresses, especially in its
role as an alternative to gasoline and to MTBE (methyl tertiary butyl ether).14 MTBE and ethanol

9 Through 2008, the tax credit was valued at $0.51 per gallon. The 2008 Farm Bill lowered the credit to $0.45 per
gallon in the first year after U.S. ethanol supply exceeds 7.5 billion gallons. Through October 2008, annual U.S.
ethanol consumption had already exceeded 7.8 billion gallons: Renewable Fuels Association, The Industry - Statistics,
2008 Monthly U.S. Fuel Ethanol Production/Demand, Washington, DC, http://www.ethanolrfa.org/industry/statistics/.
10 Through 2008, the credit for biodiesel produced from recycled materials was $0.50 per gallon. EESA eliminated the
distinction between biodiesel fuels produced from different feedstocks.
11 For more information on tax and non-tax incentives for ethanol and biodiesel, see CRS Report R40110, Biofuels
Incentives: A Summary of Federal Programs
, by Brent D. Yacobucci.
12 U.S. Internal Revenue Service, Notice 2007-37: Renewable Diesel, April 23, 2007.
13 P.L. P.L. 110-343, Division B, Sec. 202.
14 For additional background on the MTBE issue, see CRS Report RL32787, MTBE in Gasoline: Clean Air and
Drinking Water Issues
, by James E. McCarthy and Mary Tiemann. For information on ethanol, see CRS Report
(continued...)
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
śȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
were used (among other purposes) to meet previous Clean Air Act requirements that reformulated
gasoline (RFG), sold in the nation’s worst ozone nonattainment areas, contain oxygen to improve
combustion. Under the RFG program, areas with “severe” or “extreme” ozone pollution (90
counties with a combined population of 64.8 million15) must use reformulated gas; areas with less
severe ozone pollution may opt into the program as well, and many have. In all, portions of 17
states and the District of Columbia use RFG, and about 30% of the gasoline sold in the United
States is RFG, according to the Environmental Protection Agency (EPA).16
Before amendment by the Energy Policy Act of 2005, the Clean Air Act required that RFG
contain at least 2% oxygen by weight.17 Refiners met this requirement by adding a number of
ethers or alcohols, any of which contains oxygen and other elements. Until about 2003, the most
commonly used oxygenate was MTBE because it was cheaper and easier to use than competing
oxygenates. In 1999, 87% of RFG contained MTBE, a number reduced to about 46% in 2004,
according to EPA. MTBE has also been used since the late 1970s in non-reformulated gasoline as
an octane enhancer, at lower concentrations. As a result, gasoline with MTBE has been used
throughout the United States, whether or not an area has been subject to RFG requirements.
MTBE contamination creates taste and odor problems in water at very low concentrations, and
some animal studies indicate MTBE may pose a cancer risk to humans. MTBE leaks, generally
from underground gasoline storage tanks, have been implicated in numerous incidents of ground
water contamination. For these reasons, 25 states have taken steps to ban or limit its use,
according to the Renewable Fuels Association.18 The most significant of the bans (in California
and New York) took effect at the end of 2003, leading many to suggest that Congress revisit the
issue to modify the oxygenate requirement and set more uniform national requirements regarding
MTBE and its potential replacements, principally ethanol.
Support for eliminating the oxygenate requirement on a nationwide basis was widespread among
states, the petroleum industry, and some environmental groups. In general, these stakeholders
concluded that gasoline can meet the same low-emission performance standards as RFG without
the use of oxygenates. But agricultural interests presented a potential obstacle to enacting
legislation to remove the oxygen requirement. According to USDA, roughly 20% of the nation’s
corn crop was used in 2006/2007 to produce the competing oxygenate, ethanol.19 If MTBE use
were reduced or phased out, but the oxygen requirement remained in effect, ethanol use would
have soared, increasing demand for corn. Conversely, if the oxygen requirement were repealed,
not only would MTBE use decline, but so, likely, would demand for ethanol. Thus, some
Members of Congress and governors from corn-growing states took a keen interest in MTBE
legislation and related oxygenate requirements.

(...continued)
RL33290, Fuel Ethanol: Background and Public Policy Issues, by Brent D. Yacobucci.
15 As classified under the old 1-hour ozone standard that was replaced with a new, 8-hour standard in 2004.
16 U.S. Environmental Protection Agency (EPA), Office of Transportation Air Quality (OTAQ), Staff White Paper:
Study of Unique Gasoline Blends (“Boutique Fuels”), Effects on Fuel Supply and Distribution and Potential
Improvements, October 2001.
17 In the case of MTBE, this equates to roughly 11% by volume.
18 Renewable Fuels Association, “New Jersey Bans MTBE,” Ethanol Report, Issue #226, July 15, 2005.
19 USDA estimates the in 2008/2009, that percentage will increase to 34%. U.S. Department of Agriculture, Economic
Research Service, Feed Outlook, January 14, 2009.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Ŝȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
To help promote the market for ethanol if the oxygen standard were eliminated, a renewable fuel
standard (RFS) was suggested. This would require that all gasoline contain ethanol or other
renewable fuel. This concept was supported by agricultural interests, the oil industry, and some
environmental groups. Opponents included states that do not produce ethanol, due to fears that
the mandate could raise gasoline prices.
The Energy Policy Act of 2005 (P.L. 109-58) contains numerous MTBE and ethanol provisions. It
repealed the Clean Air Act requirement to use MTBE or other oxygenates. In place of this
requirement, the law established a renewable fuel standard. Under the RFS, annual gasoline
supply was required to contain 7.5 billion gallons of ethanol or other renewable fuel by 2012. To
prevent “backsliding” on air quality, the law requires that reductions in emissions of toxic
substances achieved by RFG be maintained, and it authorizes funds for MTBE cleanup.20 The
Energy Independence and Security Act of 2007 (P.L. 110-140) expanded this mandate, requiring
the use of 9.0 billion gallons of renewable fuels in transportation fuel21 in 2008, and 36 billion
gallons in 2022.
Ž••ž•˜œ’Œȱ’˜žŽ•œŘŘȱ
Ethanol, the most significant biofuel in the United States, is usually produced from corn.
However, corn is a key animal feed, and is also used for human consumption. Further, corn is a
resource-intensive crop, requiring significant use of chemical fertilizers and generally grown on
prime farmland. There is growing interest in developing biofuels that require less energy to
produce and have a smaller environmental footprint.
Biofuels produced from cellulosic materials such as fast-growing trees, prairie grasses, or
agricultural wastes are seen as a potential strategy for reducing the environmental impact of
biofuels while expanding the United States’ ability to displace petroleum fuels. The potential
supply of these feedstocks is abundant, which is why it is expected that future expansion of the
U.S. biofuels industry will be in this area.
However, breaking down cellulose and converting it into fuel requires complex chemical
processing. Starches (such as corn) and sugars (such as cane sugar) are easily fermented into
alcohol, while cellulose must be broken down into sugars or starches through enzymatic or
thermochemical processes before fermentation. Alternatively, biomass can be converted into
synthesis gas,23 which can then be used to produce fuels. Regardless of the pathway, processing
cellulose into fuels is currently prohibitively expensive relative to other conventional and
alternative fuel options. Therefore, R&D has focused on lowering the costs of enzymatic and
other processing techniques.

20 For a detailed comparison of the renewable fuels legislation, see CRS Report RL32865, Renewable Fuels and
MTBE: A Comparison of Provisions in the Energy Policy Act of 2005 (P.L. 109-58 and H.R. 6)
, by Brent D.
Yacobucci, Mary Tiemann, and James E. McCarthy.
21 While the original mandate in P.L. 109-58 covered only gasoline, the expanded mandate applies to all transportation
fuels.
22 For more information on cellulosic biofuels, see CRS Report RL34738, Cellulosic Biofuels: Analysis of Policy Issues
for Congress
, by Tom Capehart.
23 A mixture of hydrogen and carbon monoxide that can be used to produce a variety of chemicals and fuels.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŝȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
Further, questions remain about the feasibility of these fuels, as well as the ultimate
environmental footprint—many of the proposed feedstocks have never been grown on a large
scale. Therefore, R&D is also focused on increasing the yield of potential biofuel crops,
developing harvesting techniques, and finding ways to limit the environmental impact of
dedicated energy crops.
The Energy Policy Act of 2005 included provisions to promote the development of cellulosic
biofuels. These include an authorization for increased research and development funding at the
Department of Energy; grants, loans, and loan guarantees for the development of cellulosic
biofuels; per-gallon incentives for the first 1 billion gallons of domestic production;24 and a
mandate that gasoline contain at least 250 million gallons of cellulosic ethanol annually starting
in 2013.
On December 20, 2006, President Bush signed the Tax Relief and Health Care Act of 2006 (P.L.
109-432). Among other provisions, this tax law established a 50% depreciation allowance for
cellulosic ethanol plants placed in service before January 1, 2013, subject to certain limitations.
The Energy Independence and Security Act of 2007 expanded the renewable fuel mandate in
EPAct 2005, and established specific requirements for “advanced biofuels”—defined as fuels
produced from feedstocks other than corn starch, and with 50% lower lifecycle greenhouse gas
emissions than petroleum fuels. Of the 36 billion gallons of renewable fuel required in 2022, 21
billion gallons must be advanced biofuels; within that mandate, there are specific carve-outs for
cellulosic biofuels and biomass-based diesel fuels.
‘Š—˜•ȱ –™˜›œȱ
Corn growers and ethanol producers are supportive of the renewable fuel standard because of its
implications for higher corn and ethanol prices. However, concern over ethanol imports is
growing among some stakeholders. Because of lower production costs and the availability of
government incentives, ethanol prices in Brazil and some other countries can be significantly
lower than in the United States. To offset the U.S. tax incentive that all ethanol (imported or
domestic) receives, most imports are subject to a relatively small 2.5% ad valorem tariff, but
more significantly an added duty of $0.54 per gallon. This added duty effectively negates the tax
incentive for covered imports and has been a significant barrier to fuel ethanol imports.
However, under certain conditions imports of ethanol from Caribbean Basin Initiative (CBI)
countries are granted duty-free status.25 This is true even if the ethanol was produced in a non-
CBI country. In this scenario, the ethanol is produced in another country (historically Brazil or a
European country), dehydrated in a CBI country, then shipped to the United States. In recent
years, these imports have reached as high as 5% of the U.S. ethanol market. This avenue for
imported ethanol to avoid the tariff has been criticized by some stakeholders, including some
Members of Congress. With the establishment of a renewable fuel standard, as well as high U.S.

24 On December 23, 2008, the Department of Energy published a proposed rule to establish the incentive program. U.S.
Department of Energy, “Notice of Proposed Rulemaking: Production Incentives for Cellulosic Biofuels; Reverse
Auction ,” 73 Federal Register 78663-78670, December 23, 2008.
25 For more information on ethanol imports from CBI countries, see CRS Report RS21930, Ethanol Imports and the
Caribbean Basin Initiative (CBI)
, by Brent D. Yacobucci.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Şȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
gasoline and ethanol prices, there may be more interest in importing ethanol, either through CBI
countries or directly from ethanol producers.
In addition to the concerns over imports of duty-free ethanol from CBI countries, there is growing
concern that a large portion of ethanol otherwise subject to the duties is being imported duty-free
through a “manufacturing drawback.”26 If a manufacturer imports an intermediate product, then
exports the finished product or a similar product, then that manufacturer may be eligible for a
refund (drawback) of up to 99% of the duties paid. There are special provisions for the production
of petroleum derivatives.27 In the case of fuel ethanol, the imported ethanol is used as a blending
component in gasoline, and jet fuel (considered a like commodity) is exported to qualify for the
drawback. Some critics estimate that as much as 75% or more of the duties were eligible for the
drawback in 2006. 28 Therefore, critics question the effectiveness of the ethanol duties and the
CBI exemption.
On December 20, 2006, President Bush signed the Tax Relief and Health Care Act of 2006 (P.L.
109-432). Among other provisions, the act extended the duty on imported ethanol through
December 31, 2008, but did not address the duty drawback provisions or the CBI preference.
Ž‘’Œ•Žȱž›Œ‘ŠœŽȱŽšž’›Ž–Ž—œȱ
The Energy Policy Act of 1992 established mandatory alternative fuel vehicle purchase
requirements for various vehicle fleets.29 Under the law, 75% of the passenger vehicles purchased
by federal and state vehicle fleets must be capable of operating on alternative fuels; 90% of the
vehicles purchased by alternative fuel providers must be alternative fuel vehicles.30
The alternative fuel vehicle provisions of EPAct 1992 have been criticized as ineffective because,
while EPAct 1992 requires the purchase of vehicles capable of operating on alternative fuels, it
did not mandate the use of alternative fuels. In most cases, the vehicles purchased to meet the
requirement are dual-fuel vehicles (i.e., they can operate on either a conventional fuel or an
alternative fuel). Those vehicles are primarily fueled using gasoline, because gasoline tends to be
less expensive and more widely available than alternative fuels because the infrastructure to
provide alternative fuels is limited compared with the existing infrastructure for gasoline and
diesel fuel.
In addition, despite the vehicle purchase mandate, in previous years many agencies failed to meet
their statutory obligation. As a result, in 2002 the Center for Biological Diversity filed a lawsuit
with the U.S. District Court for the Northern District of California. In July 2002, the court ruled
that several federal agencies failed to meet their quotas and ordered those agencies to prepare

26 For more information on drawbacks, see U.S. Customs Service, Drawback: A Refund for Certain Exports,
Washington, February 2002.
27 19 U.S.C. 1313(p).
28 Peter Rhode, “Senate Finance May Take Up Drawback Loophole As Part Of Energy Bill,” EnergyWashington
Week, April 18, 2007.
29 For purposes of compliance with EPAct 1992, a covered vehicle fleet is one operated by an agency or company in a
metropolitan area with at least 20 passenger vehicles in one location.
30 For more information on vehicle purchase requirements, see CRS Report RL30758, Alternative Transportation Fuels
and Vehicles: Energy, Environment, and Development Issues
, by Brent D. Yacobucci.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
şȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
reports on their compliance with EPAct, which those agencies have completed.31 Since that time,
most agencies have complied with the requirement; in FY2007, the most recent year data are
available, all covered federal fleets met the requirement.32
The Energy Policy Act of 2005 (Section 701) modified the requirements for EPAct 1992
compliance. All dual-fuel vehicles purchased to meet the EPAct quotas are required to operate on
alternative fuels, unless an agency is granted a waiver by the Secretary of Energy. However, it is
unclear whether this requirement will significantly affect federal agency alternative fuel use. The
Secretary of Energy is required under the law to conduct a study of the effectiveness of the EPAct
requirements. Further, Section 703 of EPAct 2005 allows state and fuel provider fleets to petition
the Department of Energy (DOE) to waive the vehicle purchase requirement if the fleet certifies
other fuel-saving measures (e.g., using higher-efficiency conventional vehicles or hybrids).
On January 28, 2008, President Bush signed the National Defense Authorization Act for Fiscal
Year 2008 (P.L. 110-181). Among other provisions, the law amends the definition of “alternative
fuel vehicle.” Under the new definition, fleets covered by EPAct 1992 will be granted credits for
the purchase of hybrid, advanced diesel,33 and fuel cell vehicles, in addition to those alternative
fuel vehicles already allowed.
In addition to the requirements for federal, state, and fuel provider fleets, EPAct 1992 grants the
DOE the authority to extend the requirements to local government and private fleets. However, as
of 2002, DOE had not made a determination on requirements for local and private fleets. As part
of the above lawsuit, the Center for Biological Diversity also asked the court to force DOE to
promulgate new rules. In ruling on the above case, the U.S. District Court for the Northern
District of California ordered DOE to establish a timeline for a new rulemaking. DOE compiled a
timeline and, on March 4, 2003, it issued a rulemaking determining that such a program would
not promote the goals of EPAct, neither reducing dependence on foreign oil nor leading to greater
use of alternative fuel vehicles.34
The American Recovery and Reinvestment Act of 2009 (H.R. 1) appropriates $300 million to the
General Services Administration for the purchase of vehicles with high fuel economy, including
hybrid, plug-in hybrid, and pure electric vehicles.
Ž‘’Œ•Žȱž›Œ‘ŠœŽȱŠ¡ȱ —ŒŽ—’ŸŽœȱ
Some supporters of alternative fuel and advanced technology vehicles argue that tax incentives
for the purchase of vehicles and fuels are more effective than any purchase mandate. In addition
to the mandatory purchase requirements, EPAct 1992 established tax incentives for the purchase
of electric vehicles and “clean-fuel vehicles,” including alternative fuel and hybrid vehicles. The
Energy Policy Act of 2005 (Section 1341) significantly expanded and extended the vehicle
purchase incentives, establishing tax credits for the purchase of fuel cell, hybrid, alternative fuel,
and advanced diesel vehicles. For passenger vehicles, the credit is worth as much as $3,400 for

31 Center for Biological Diversity v. Abraham, N.D. Cal., No. CV-00027.
32 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Federal Fleet Compliance with
EPACT and E.O. 13149/E..O. 13423,
Fiscal Years 2000 through 2007.
33 Light-duty diesel vehicles that meet specified emissions standards.
34 68 Federal Register 10319.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŖȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
hybrids and advanced diesels, and as much as $4,000 for alternative fuel vehicles, depending on
vehicle attributes. The expiration date for the incentives also varies depending on the
technology.35
In the case of hybrid and advanced diesel vehicles, the number of vehicles eligible for the credit is
limited for each vehicle manufacturer. Starting the second calendar quarter after a manufacturer
sells the 60,000th vehicle eligible for the credit, the credit for that manufacturer’s vehicles is
reduced. Currently, only Toyota and Honda have sold enough vehicles to trigger a phaseout. For
Toyota (and Lexus) hybrids purchased after September 30, 2006, the credit was reduced by 50%;
the credit was reduced to 25% for vehicles purchased after March 31, 2007, and is zero for
vehicles purchased after September 30, 2007. Honda’s phaseout began January 1, 2008, and the
credit for Honda vehicles reached zero on January 1, 2009. Other manufacturers have yet to hit
the 60,000 vehicle mark.36
The Emergency Economic Stabilization Act of 2008 established a tax credit for the purchase of
plug-in vehicles, both pure electric vehicles and plug-in hybrids (i.e., gasoline/electric hybrid
vehicles that can fuel on gasoline or be recharged from the electric grid.) For passenger vehicles,
the credit is a maximum of $7,500, depending on the vehicle’s battery capacity. After sales of
vehicles eligible for the credit exceeds a total of 250,000 for all manufacturers, the credit is
phased out.
The American Recovery and Reinvestment Act of 2009 (H.R. 1) would significantly modify the
plug-in credits: the bill would eliminate the credit for vehicles above 14,000 pounds; establish a
credit of up to $2,500 for 2-wheeled, 3-wheeled, and low-speed 4-wheeled plug-in vehicles; and
establish a credit of up to $4,000 for the conversion of existing vehicles to run on battery power.
The bill would also allow purchasers to claim the plug-in, alternative fuel vehicle, and hybrid tax
credits even if they are subject to the Alternative Minimum Tax (AMT)—currently, taxpayers
subject to the AMT may not claim these credits.
’˜’ŽœŽ•ȱ
Biodiesel is a synthetic diesel fuel produced from oils, including soybean and canola oils, animal
fats, and recycled cooking grease.37 It can be blended with conventional diesel fuel and used in
diesel engines with few or no modifications. Further, with some engine modifications, it can be
used in a nearly pure form. Because biodiesel can displace conventional diesel without the use of
new (and in many cases costly) vehicles, there is growing interest in its use. Further, because it
can be produced from agricultural products, farmers (especially soybean and canola farmers) and
some environmentalists have a keen interest in its development as a way to promote rural
economies, reduce agricultural wastes, and limit greenhouse gas emissions. However, biodiesel
production is currently expensive: wholesale biodiesel from virgin oils can cost up to two times

35 For more information on vehicle tax incentives, see CRS Report RS22351, Tax Incentives for Alternative Fuel and
Advanced Technology Vehicles
, by Brent D. Yacobucci.
36 For more information on the hybrid vehicle tax credit, see Internal Revenue Service, Summary of the Credit for
Qualified Hybrid Vehicles
, at [http://www.irs.gov/newsroom/article/0,,id=157632,00.html], updated October 3, 2008.
37 For more information on biodiesel, see CRS Report RL32712, Agriculture-Based Renewable Energy Production, by
Randy Schnepf, and CRS Report RL30758, Alternative Transportation Fuels and Vehicles: Energy, Environment, and
Development Issues
, by Brent D. Yacobucci.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŗȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
more than conventional No. 2 diesel; biodiesel from recycled grease is less expensive but still
costs considerably more than conventional diesel.
The cost barriers for biodiesel production have generated interest in providing tax incentives for
biodiesel, in the form of either a production tax credit or an excise tax exemption, or both. Further
there is interest in developing new technologies to help reduce production costs. However, the
organic oils used as raw materials are one of the largest costs in production. Therefore, to
significantly reduce biodiesel production costs, the costs of soybean oil and other oils would need
to decrease substantially.
As was stated above, the American Jobs Creation Act, as amended, provides a tax credit of up to
$1.00 per gallon for the sale and use of biodiesel. In addition, the law provides an excise tax
credit for biodiesel blends (i.e., biodiesel and conventional diesel). Producers are eligible for one
credit or the other, but not both (see “Fuel Tax Incentives” above). These credits were set to
expire at the end of 2006; the Energy Policy Act of 2005 (P.L. 109-58) extended these credits
through 2008. Further, EPAct 2005 established a credit of $0.10 per gallon for small agri-
biodiesel producers, and a $1.00-per-gallon credit for “renewable diesel”—diesel fuel produced
from biomass through a different process than the biodiesel production process. The Emergency
Economic Stabilization Act (P.L. 110-343) further extended these credits through 2009. While
these tax credits generally do not make biomass-based diesel fuels less expensive than
conventional diesel, they do help make them more cost-competitive.
¢›˜Ž—ȱŠ—ȱžŽ•ȱŽ••œȱ
Over the past few years, interest has grown substantially in hydrogen fuel and fuel cells.
Hydrogen fuel can be produced using any energy source, and has thus been touted as a way to
limit dependence on energy imports. Further, when hydrogen is used in a fuel cell (a device that
produces electricity by converting hydrogen to water), mostly heat and water are produced,
drastically reducing or eliminating vehicle emissions. However, hydrogen fuel production is
currently very expensive, as are fuel cells. In addition, depending on the original fuel source,
overall fuel-cycle emissions can be a key concern.38
Because of the potential benefits from hydrogen and fuel cells, and because of the existing
technical and cost barriers to their commercialization, the Bush Administration strongly supported
research and development (R&D). In January 2002, the Bush Administration announced the
FreedomCAR initiative, which promotes cooperative R&D between the “Big Three” American
auto manufacturers (Chrysler, Ford, and General Motors) and the federal government. While the
partnership is conducting research on many automotive technologies, hydrogen and fuel cell
vehicles are a key focus. Further, in his January 2003 State of the Union address, President Bush
announced the Hydrogen Fuel Initiative, which increased federal spending on hydrogen fuel and
stationary fuel cell R&D. Overall, the President requested $1.8 billion between FY2004 and
FY2008 for both initiatives, including a $720 million increase in funding from earlier
appropriations. Over that time, Congress appropriated a total of $1.4 billion for the initiatives.39

38 For example, depending on the technology used, processing coal into hydrogen could lead to significantly higher
emissions of toxic compounds and carbon dioxide.
39 Congress agreed to increase funding for hydrogen and fuel cell research from $185 million in FY2003 to $266
million in FY2004, $305 million in FY2005, $335 million in FY2006, $335 million for FY2007, and approximately
$400 million for FY2008.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŘȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
The Energy Policy Act of 2005 authorizes a total of $3.3 billion through FY2010 for fuel cell and
hydrogen R&D.40
Opponents of the initiatives argue that hydrogen fuel and fuel cells may never be commercialized
and that the initiatives draw funding away from near-term technologies such as hybrid vehicles.
Further, some argue that research and development alone will not reduce petroleum dependence
and that Congress should instead consider tightening fuel economy standards for all vehicles. As
noted earlier, Congress did tighten fuel economy standards for all vehicles in the Energy
Independence and Security Act of 2007 (P.L. 110-140).
¢‹›’ȱŽ‘’Œ•Žœȱ
Hybrid gasoline/electric (and diesel/electric) vehicles are becoming increasingly popular in the
United States. Hybrids combine a gasoline (or diesel) engine with an electrical motor system to
improve efficiency.41 If their use becomes more widespread, they could help improve the overall
efficiency of the vehicle fleet and could help limit oil consumption. Further, they could do so
without significant changes to existing infrastructure, which has been a key barrier to the
expanded use of alternative fuel vehicles. By January 2009, Ford, General Motors, Honda,
Nissan, Mazda, and Toyota offered vehicles with hybrid powertrains. At the present time, only
hybrid passenger cars, SUVs, and pickups are available in the United States, but hybrid versions
of other vehicle models and classes are expected in the near future.
Because of their energy and environmental benefits, some states have provided drivers of hybrid
vehicles an exemption from high occupancy vehicle (HOV) lane requirements. Under TEA-21
(which expired on September 30, 2003), states had the authority to grant HOV exemptions for so-
called “Inherently Low Emission Vehicles” (ILEVs). The ILEV standard requires that a vehicle
have no evaporative emissions, a standard that is not met by any current hybrid. However,
because of the reduced emissions and improved fuel economy of hybrid vehicles, there has been
congressional interest in explicitly granting states the right to exempt them from HOV lane
requirements. While not addressing hybrids directly, the final version of the 2005 surface
transportation reauthorization act (P.L. 109-59) permits states to exempt certain high-efficiency
vehicles from HOV restrictions.
Further, as was stated above, the Energy Policy Act of 2005 and the Emergency Economic
Stabilization Act of 2008 expanded the incentives for the purchase of hybrid and plug-in hybrid
vehicles (see “Vehicle Purchase Tax Incentives” above).


40 For more information on the Bush Administration’s initiatives, see CRS Report RS21442, Hydrogen and Fuel Cell
Vehicle R&D: FreedomCAR and the President's Hydrogen Fuel Initiative
, by Brent D. Yacobucci.
41 For more information on hybrid vehicles, see CRS Report RL30484, Advanced Vehicle Technologies: Energy,
Environment, and Development Issues
, by Brent D. Yacobucci.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗřȱ

ȱ
•Ž›—Š’ŸŽȱžŽ•ȱŠ—ȱŸŠ—ŒŽȱŽ‘’Œ•ŽȱŽŒ‘—˜•˜¢ȱ›˜Ÿ’œ’˜—œȱ’—ȱ‘Žȱ
–Ž›’ŒŠ—ȱŽŒ˜ŸŽ›¢ȱŠ—ȱŽ’—ŸŽœ–Ž—ȱŒȱ˜ȱŘŖŖşȱ
Table 1. Comparison of Alternative Fuel and Advanced Vehicle Technology Provisions in H.R. 1
Topic
House Version
Senate Version
Conference Version
Comments
Advanced Battery
Appropriates $1 billion for loan
Appropriates $2 billion for
Similar to Senate provision
The House version makes direct
Manufacturing
guarantees for advanced battery
grants for advanced battery
reference to authorizations under
manufacturing, and $1 billion for
manufacturers
EISA, while the Senate and
grants for advanced battery
Conference versions do not
manufacturing facilities under Secs.
135 and 136 of EISA, respectively
Grants to States for Appropriates $200 million for
Appropriates $200 million for Appropriates $400 million for
Sec. 131 of EISA authorizes
Transportation
transportation electrification
transportation electrificationa
transportation electrificationb
electrification grants for a variety
Electrification
projects under Sec. 131 of EISA
of transportation modes, including
highway vehicles, airport ground
support vehicles, and ships
Grants for Advanced Appropriates $400 million for
Appropriates $350 million
Similar to House provision, but
Sec. 721 of EPAct 2005 authorizes
Vehicles
grants through the Clean Cities
through the Clean Cities
appropriates $300 million for Sec. 721 of grants to states, localities, and
program for the purchase of
program for the purchase of
EPAct 2005b
metropolitan transit agencies for
alternative fuel and advanced
alternative fuel and fuel cell
the purchase of alternative fuel
technology vehicles under Sec. 721 vehiclesa
and advanced technology vehicles
of EPAct 2005
GSA Purchases of
Appropriates $600 million for the
Appropriates $300 million for Similar to Senate provision

Fuel Efficient and
purchase of alternative fuel and fuel the purchase of vehicles with
Alternative Fuel
efficient vehicles for the federal
higher fuel economy (including
Vehicles
fleet
advanced technology vehicles)
Diesel Emissions
Appropriates $300 million for
Similar to House provision
Similar to House provision
EPA funding for this program in
Reduction
diesel emission reduction grants
recent years has been around $50
under Title VII, Subtitle G of EPAct
million annually
2005
ȬŗŚȱ

ȱ
Topic
House Version
Senate Version
Conference Version
Comments
Expansion of
For 2009 and 2010, expands the
Similar to House provision,
Similar to House provision
Sec. 1342 of the EPAct 2005
Alternative Fuel
current credit for the installation of but expands credit to include
established a tax credit for the
Refueling
alternative fuel refueling
electric vehicle recharging
installation of infrastructure to
Infrastructure Tax
infrastructure: increases
stations, if certain conditions
deliver alternative fuels—defined
Credit
percentage credit for retail
are met
as ethanol, natural gas, liquefied
installations to 50% and maximum
petroleum gas, hydrogen, or fuels
credit to $50,000; for hydrogen
containing at least 20% biodiesel;
retail infrastructure, maintains 30%
the credit is 30% of the installation
credit but increases maximum to
cost, up to $30,000 for retail
$200,000; increases residential
installations, or up to $1,000 for
credit to $2,000
residential installations
Modification of Tax
No provision
Modifies the existing tax credit Modifies the existing tax credit to cap
Section 205 of EESA established a
Credit for the
for plug-in vehicles to allow a
the per-vehicle credit at $7,500 for light- tax credit for the purchase of a
Purchase of Plug-in
10% credit, up to $4,000 for
duty vehicles and heavy-duty vehicles up new plug-in vehicle; the credit is
Vehicles
the purchase of 4-wheeled
to 14,000 pounds gross weight; replaces based on the battery capacity of
low-speed electric vehicles, as the 250,000 total vehicle limit for phase-
the vehicle, and is capped at
well as 2- and 3-wheeled
out of the credit with a 200,000 per-
$7,500 for light-duty vehicles and
electric vehicles; establishes a manufacturer limit; eliminates the credit up to $15,000 for the heaviest
10% credit, up to $4,000 for
for heavier vehicles; establishes a credit
vehicles; when total U.S. sales of
the conversion of an existing
of up to $2,500 for low-speed 4-wheel
vehicles eligible for the credit
vehicle to battery power
vehicles, as well as 2- and 3-wheeled
reaches 250,000, the credit begins
electric vehicles; establishes a credit of
to phase out; currently purchasers
up to $4,000 for the conversion of an
may not claim the plug-in credit
existing vehicle to battery power; allows and related credits for alternative
plug-in credit (as well as other alternative fuel and advanced technology
fuel and advanced vehicle credits) as a
vehicles if they are subject to the
personal credit against the Alternative
AMT
Minimum Tax (AMT)
Biorefinery Grants
No Provision
Appropriates $200 million for No provision
As yet unfunded, this program
and Loan Guarantees
2008 Farm Bill Biorefinery
would provide financial assistance
Assistance Program
for the development, construction,
and conversion of plants to
produce advanced biofuels
Source: CRS Analysis of: H.R. 1 as passed by the House and Senate; Senate Committee on Appropriations, Appropriations Provisions of the American Recovery and
Reinvestment Act, February 6, 2009; Joint Explanatory Statement of the Committee of Conference on H.R. 1; H.Rept. 111-16.
a. Senate report language specifies this appropriation.
b. Conference report language (Joint Explanatory Statement) specifies this appropriation.

Ȭŗśȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
˜›ȱ’’˜—Š•ȱŽŠ’—ȱ
California Energy Commission. ABCs of AFVs: A Guide to Alternative Fuel Vehicles.
Sacramento, CA. November 1999.
Electric Drive Transportation Association. Technology/Vehicle Overview. Washington, DC.
Updated January 2009. http://www.electricdrive.org
Fuel Cells 2000. Online Fuel Cell Information Center. Washington, DC. Updated January 2009.
http://www.fuelcells.org/
Methanol Institute. Methanol Institute Homepage. Washington, DC. Updated January 2009.
http://www.methanol.org/
National Biodiesel Board. Biodiesel Basics. Jefferson City, MO. Updated January 2009.
http://www.biodiesel.org/resources/biodiesel_basics/
National Hydrogen Association. General Information. Washington, DC. Updated January 2009.
http://www.hydrogenassociation.org/general/index.asp
Natural Gas Vehicle Coalition. About NGVs. Washington, DC. Updated November 2008.
http://www.ngvc.org/about_ngv/index.html
Propane Education and Research Council. Propane Vehicle Fleets. Washington, DC. Updated
January 2009. http://www.propanecouncil.org/trade/fleet/index.cfm
Renewable Fuels Association. Ethanol Industry Outlook 2008. Washington, DC. February 2008.
http://www.ethanolrfa.org/industry/outlook/
U.S. Department of Energy, Clean Cities Program. Alternative Fuels Data Center. Washington,
DC. Updated October 2008. http://www.eere.energy.gov/afdc//
U.S. Department of Energy. Fuel Cell Report to Congress. Washington, DC. February 2003.
——. National Hydrogen Energy Roadmap. Washington, DC. November 2002.
U.S. Government Accountability Office (formerly Government Accounting Office). Energy
Policy Act of 1992: Limited Progress in Acquiring Alternative Fuel Vehicles and Reaching Fuel
Goals. Washington, DC. February 2000. RCED-00-59.
——. Tax Incentives for Petroleum and Ethanol Fuels. Washington, DC. September 2000.
RCED-00-301R.
U.S. Internal Revenue Service. Hybrid Cars and Alternative Fuel Vehicles. Updated October 3,
2008. http://www.irs.gov/newsroom/article/0,,id=157632,00.html

˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŜȱ

•Ž›—Š’ŸŽȱžŽ•œȱŠ—ȱŸŠ—ŒŽȱŽŒ‘—˜•˜¢ȱŽ‘’Œ•ŽœDZȱ œœžŽœȱ’—ȱ˜—›Žœœȱ
ȱ
ž‘˜›ȱ˜—ŠŒȱ —˜›–Š’˜—ȱ

Brent D. Yacobucci

Specialist in Energy and Environmental Policy
byacobucci@crs.loc.gov, 7-9662




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