Alternative Fuels and Advanced Technology
Vehicles: Issues in Congress
Brent D. Yacobucci
Specialist in Energy and Environmental Policy
September 22, 2010
Congressional Research Service
7-5700
www.crs.gov
R40168
CRS Report for Congress
P
repared for Members and Committees of Congress

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Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

Summary
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 were 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 (P.L. 111-5) contains provisions for tax
incentives, federal grants and loans, and other federal support for alternative fuels and advanced
vehicles.
On February 3, 2010, the Environmental Protection Agency (EPA) finalized new rules for the
renewable fuel standard (RFS) that was expanded by the Energy Independence and Security Act
of 2007 (EISA, P.L. 110-140). In 2010, the RFS will require the use of 12.95 billion gallons of
ethanol and other biofuels in transportation fuel. Within that mandate, the RFS will require the
use of 0.95 billion gallons of advanced biofuels, including 6.5 million gallons of cellulosic
biofuels. EISA also requires that advanced biofuels (as well as conventional biofuels from newly
built refineries) meet certain lifecycle greenhouse gas reduction requirements. EPA’s
methodology and conclusions on various biofuels’ lifecycle emissions have been controversial.
EPA is also reviewing a waiver petition from Growth Energy to allow blends of up to 15%
ethanol in gasoline: currently gasoline is limited to 10% ethanol content under EPA
implementation of the Clean Air Act. Allowing higher blends of ethanol under the Clean Air Act
would remove one component of the “blend wall,” which limits the total amount of ethanol that
can be blended in gasoline nationwide; other blend wall components include vehicle and pump
certification and warranties, and state and local fire codes and other laws. EPA has stated that a
decision on newer vehicles could come by late September.
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 RFS; the Department of Transportation’s implementation of new fuel
economy standards enacted in 2007; and the Department of Agriculture’s implementation of the
2008 Farm Bill. Further, some key tax incentives for biofuels expired at the end of 2009, and
others will expire at the end of 2010. These incentives may be extended in the second session of
the 111th Congress.

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Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

Contents
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 ............................................................................................................... 6
The Renewable Fuel Standard (RFS)..................................................................................... 7
Ethanol “Blend Wall”............................................................................................................ 9
Cellulosic Biofuels.............................................................................................................. 10
Ethanol Imports .................................................................................................................. 11
Vehicle Purchase Requirements........................................................................................... 12
Vehicle Purchase Tax Incentives.......................................................................................... 13
Biodiesel and Renewable Diesel.......................................................................................... 14
Hydrogen and Fuel Cells..................................................................................................... 15
Hybrid Vehicles .................................................................................................................. 15
Alternative Fuel and Advanced Vehicle Technology Provisions in the American Recovery
and Reinvestment Act of 2009................................................................................................ 17
For Additional Reading ............................................................................................................. 19

Tables
Table 1. Comparison of Alternative Fuel and Advanced Vehicle Technology Provisions in
P.L. 111-5............................................................................................................................... 17

Contacts
Author Contact Information ...................................................................................................... 20

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Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

Introduction
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 before
rising significantly through summer 2008; 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.
Most Recent Developments
On March 6, 2009, Growth Energy (on behalf of 52 U.S. ethanol producers) applied to the
Environmental Protection Agency (EPA) for a waiver from the current Clean Air Act limitation
on ethanol content in gasoline. Currently, ethanol content in gasoline is capped at 10% (E10); the
application requests an increase in the maximum concentration to 15% (E15). If granted, the
waiver would allow the use of significantly more ethanol in gasoline than is currently permitted
under the Clean Air Act. The existing limitation leads to an upper bound of roughly 15 billion
gallons of ethanol in all U.S. gasoline. This “blend wall” could limit the fuel industry’s ability to
meet an Energy Independence and Security Act (EISA, P.L. 110-140) requirement to use
increasing amounts of renewable fuels (including ethanol) in transportation. On November 30,
2009, EPA sent a letter to Growth Energy neither granting nor denying the waiver, stating that
studies necessary for the agency to make a decision have not been completed, and that some of
that data may be available in May or June of 2010. To meet the high volumes of renewable fuels

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.
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mandated by EISA, EPA recognized that “it is clear that ethanol will need to be blended into
gasoline at levels greater than the current limit of 10 percent.” In July 2010 EPA updated the
status of the request, stating that some action could be taken in or after late September, but that
“insufficient data have been submitted” for EPA to make a decision on older vehicles and non-
road engines (e.g., lawnmowers).
On February 3, 2010, the Environmental Protection Agency (EPA) finalized new rules for the
renewable fuel standard (RFS) that was expanded by the Energy Independence and Security Act
of 2007 (EISA, P.L. 110-140). In 2010, the RFS will require the use of 12.95 billion gallons of
ethanol and other biofuels in transportation fuel. Within that mandate, the RFS will require the
use of 0.95 billion gallons of advanced biofuels, including 6.5 million gallons of cellulosic
biofuels. EISA also requires that advanced biofuels (as well as conventional biofuels from newly
built refineries) meet certain lifecycle greenhouse gas reduction requirements. EPA’s
methodology and conclusions on various biofuels’ lifecycle emissions have been controversial.
On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of
2009 (ARRA, P.L. 111-5). 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
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 lowered (starting in 2009) the
tax credit for ethanol produced from corn and other conventional feedstocks, and established a
credit for the production of advanced biofuels produced from cellulosic matter (such as trees and
perennial grasses).
Background and Analysis
Congressional Interest
Legislative Background
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.

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.
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The Energy Policy Act of 1992
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.5 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.
The Energy Policy Act of 2005
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
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.
The Energy Independence and Security Act of 2007
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.
The 2008 Farm Bill
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.

5 Alternative fuel providers are businesses that sell or distribute alternative fuels.
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The American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009 (P.L. 111-5) 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 provision 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 final versions
of the bill, see Table 1.
Other Legislation
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
and light trucks;6 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.
Current Issues
Recent events have renewed interest in alternative fuels and advanced vehicles. For example,
high pump prices for gasoline and diesel fuel through summer 2008 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 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

6 For more information on fuel economy standards, see CRS Report R40166, Automobile and Light Truck Fuel
Economy: The CAFE Standards, by Brent D. Yacobucci and Robert Bamberger.
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• 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.
Fuel Tax Incentives
There are three key tax incentives for alternative fuels: (1) a tax credit for conventional ethanol of
$0.45 per gallon,7 (2) a tax credit for biodiesel and renewable diesel of $1.00 per gallon,8 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).9 The credits for the retail sale of alternative fuels and for biodiesel and
renewable diesel expired at the end of 2009; the ethanol tax credits are scheduled to expire at the
end of 2010. As of September 2010, these credits had not been extended, although various bills
have been introduced to extend some or all of these.
In general, 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 was
reduced to $0.45 per gallon in 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 guidance on the tax credit, the Internal Revenue
Service ruled that renewable diesel includes synthetic diesel fuel produced from vegetable oils at
petroleum refineries.10 Most biodiesel producers are small plants, and many biodiesel producers

7 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 exceeded 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/.
8 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.
9 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.
10 U.S. Internal Revenue Service, Notice 2007-37: Renewable Diesel, April 23, 2007.
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were concerned that this decision could lead to a shift away from biodiesel production to
renewable diesel production at large refineries, although this effect seems limited. 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.”11 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. These credits have not been reinstated in 2010, although there is congressional interest in
doing so.
Ethanol and MTBE
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).12 MTBE and ethanol
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 million in 200913) 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).14
Before amendment by the Energy Policy Act of 2005, the Clean Air Act required that RFG
contain at least 2% oxygen by weight.15 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.16 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

11 P.L. P.L. 110-343, Division B, Sec. 202.
12 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
RL33290, Fuel Ethanol: Background and Public Policy Issues, by Brent D. Yacobucci.
13 As classified under the old 1-hour ozone standard that was replaced with a new, 8-hour standard in 2004.
14 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.
15 In the case of MTBE, this equates to roughly 11% by volume.
16 Renewable Fuels Association, “New Jersey Bans MTBE,” Ethanol Report, Issue #226, July 15, 2005.
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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.17 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.
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 2005 RFS (“RFS1”),
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.18 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 fuel19 in
2008, and 36 billion gallons in 2022.
The Renewable Fuel Standard (RFS)20
On February 3, 2010, the Environmental Protection Agency (EPA) finalized rules for the RFS as
expanded by the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140)—often
referred to as “RFS2.”21 As mandated by EISA, the rule will require the use of 12.95 billion

17 USDA estimates that in 2008/2009, that percentage will increase to 34%. U.S. Department of Agriculture, Economic
Research Service, Feed Outlook, January 14, 2009.
18 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.
19 While the original mandate in P.L. 109-58 covered only gasoline, the expanded mandate applies to all transportation
fuels as well as heating oil.
20 For more information on the RFS, see CRS Report R40155, Renewable Fuel Standard (RFS): Overview and Issues,
by Randy Schnepf and Brent D. Yacobucci.
21 U.S. Environmental Protection Agency, EPA Finalizes Regulations for the National Renewable Fuel Standard
Program for 2010 and Beyond, EPA-420-F-10-007, Washington, DC, February 2010, http://www.epa.gov/otaq/
renewablefuels/420f10007.htm.
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gallons of renewable fuels in transportation fuels in 2010. Most of this mandate will be met using
ethanol produced from corn, although within the larger RFS mandate, there are carve-outs for
cellulosic biofuels, biomass-based diesel substitutes, and other advanced biofuels.
One area of controversy is EPA’s conclusion about the greenhouse gas impacts of biofuels. As
part of its expansion of the RFS, EISA requires that all advanced biofuels, as well as conventional
biofuels from new refineries, have reduced greenhouse gas emissions relative to gasoline. In its
proposed rule, EPA found that many fuel pathways did not meet the threshold requirements in
EISA. However, its methodology was criticized by biofuels supporters. In the final rule, EPA
modified its methodology to reflect some of those comments. However, some biofuels opponents
counter that the final rules went too far in the opposite direction.22
A key component of the expanded RFS is a requirement starting in 2010 that a growing portion of
the RFS be met using cellulosic biofuels (see “Cellulosic Biofuels”). Under EISA, the cellulosic
biofuel mandate begins at 100 million gallons in 2010 and increases to 16 billion gallons by 2022.
However, EPA concluded that U.S. production capacity will be well below 100 million gallons in
2010: Using its authority under EISA to waive parts of the RFS, EPA set the cellulosic biofuel
mandate at 6.5 million gallons (ethanol equivalent) for 2010.23
While we proposed that the cellulosic biofuel standard would be set at the EISA specified
level of 100 million gallons for 2010, based on analysis of information available at this time,
we no longer believe the full volume can be met.... we have found that many of the projects
that served as the basis for the proposal have been put on hold, delayed, or scaled back. At
the same time, there have been a number of additional projects that have developed and are
moving forward.... the timing for many of the projects indicates that while few will be able to
provide commercial volumes for 2010, an increasing number will come on line in 2011,
2012, and 2013.... 5 million gallons (6.5 million ethanol equivalent) represents a reasonable,
yet achievable level for the cellulosic standard for 2010.24
By November 2010 EPA will need to determine the required fuel levels for 2011, including the
cellulosic biofuel mandate. As noted in its proposal for 2011, EPA expects that it will again need
to use its waiver authority. For 2011, EPA has proposed a cellulosic mandate of between 5.0 and
17.1 million gallons, well below the 250 million gallons scheduled in EISA. 25 EPA plans to
choose a single value when the rule is finalized in November.26

22 Steven Mufson, “A Boost for Corn-Based Ethanol?,” The Washington Post, February 4, 2010, p. A15.
23 For more information on EPA’s waiver authority, see CRS Report RS22870, Waiver Authority Under the Renewable
Fuel Standard (RFS), by Brent D. Yacobucci.
24 U.S. Environmental Protection Agency, Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel
Standard; Final Rule, EPA-HQ-OAR-2005-0161, Washington, DC, February 3, 2010, p. 14, http://www.epa.gov/otaq/
renewablefuels/rfs2-preamble.pdf.
25 U.S. Environmental Protection Agency, EPA Proposes 2011 Renewable Fuel Standards, Washington, DC, July
2010, http://www.epa.gov/otaq/fuels/renewablefuels/420f10043.htm.
26 For more information on current cellulosic biofuel production capacity and the cellulosic mandate, see CRS Report
R41106, Meeting the Renewable Fuel Standard (RFS) Mandate for Cellulosic Biofuels: Questions and Answers, by
Kelsi Bracmort.
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Ethanol “Blend Wall”27
Currently, ethanol concentration in gasoline is limited to 10% (E10). This limit is driven by four
key factors: (1) regulation of fuel additives under EPA’s implementation of the Clean Air Act; (2)
vehicle and engine warranties and certification; (3) design and certification of existing
infrastructure to deliver motor fuels (e.g., gasoline storage tanks, fuel pumps, etc.); and (4) state
and local codes and regulations, including fire codes.
Because of these limitations, the total volume of ethanol that can be blended into U.S. gasoline is
limited to roughly 14 billion to 15 billion gallons. However, by 2013 (or perhaps earlier), the RFS
mandates will exceed this “blend wall.” To meet the requirements of the RFS, gasoline suppliers
will need to blend ethanol above 10%, or will need to use other avenues for supplying renewable
fuels (e.g., using significantly more E85—85% ethanol and 15% gasoline—in vehicles designed
for its use; increasing the use of biodiesel and renewable diesel in diesel fuel). Because of these
concerns, various stakeholders are pushing for EPA to allow higher-level ethanol blends—E15,
E20, or higher.
On March 6, 2009, Growth Energy (on behalf of 52 U.S. ethanol producers) applied to EPA for a
waiver from the current Clean Air Act limitation of 10%. The application requests an increase in
the maximum concentration to 15% (E15). On November 30, 2009, EPA sent a letter to Growth
Energy neither granting nor denying the waiver, stating that studies necessary for the agency to
make a decision have not been completed, and that some of that data may be available in May or
June of 2010. To meet the high volumes of renewable fuels mandated by EISA, EPA recognized
that “it is clear that ethanol will need to be blended into gasoline at levels greater than the current
limit of 10 percent.” In July 2010 EPA updated the status of the request, stating that some action
could be taken in or after late September, but that “insufficient data have been submitted” for EPA
to make a decision on older vehicles and non-road engines (e.g., lawnmowers).
To grant the waiver, the petitioner must establish to EPA that the increased ethanol content will
not “cause or contribute to a failure of any emission control device or system” to meet emissions
standards. EPA is to consider short- and long-term (full useful life) effects on evaporative and
exhaust emissions from various vehicles and engines, including cars, light trucks, and non-road
engines. In its November 30 letter, EPA noted that long-term testing on newer vehicles has not
been completed, but that the agency expects that model year 2001 and newer vehicles “will likely
be able to accommodate higher ethanol blends, such as E15.” In that letter the agency stated that
EPA could “be in a position to approve E15 for 2001 and newer vehicles in the mid-year
timeframe.” In the July update, EPA has pushed back any decisions until September 2010 or later.
In addition to the emissions control concerns, other factors affecting consideration of the blend
wall include vehicle and engine warranties and the effects on infrastructure. Currently, no
automaker warrants its vehicles to use gasoline with higher than 10% ethanol. Small engine
manufacturers similarly limit the allowable level of ethanol. In addition, most gasoline
distribution systems (e.g., gas pumps) are designed to dispense up to E10. While some of these
vehicle and fuel distribution systems may be able to operate effectively on E15 or higher, their
warranties/certifications would likely need to be updated. Further, many current state laws
prohibit the use of blends higher than E10. Potential concerns with older, “legacy” vehicles and

27 For more information on the blend wall, see CRS Report R40445, Intermediate-Level Blends of Ethanol in Gasoline,
and the Ethanol “Blend Wall,” by Brent D. Yacobucci.
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equipment include the potential for higher ethanol concentrations to lead to corrosion of seals and
other components, corrosion of fuel tanks, higher operating temperatures for some engines (e.g.,
smaller non-road engines), and higher emissions of some pollutants.
If EPA were to grant a waiver only for newer vehicles, a key question is how fuel pumps might be
labeled to keep owners from using E15 in older vehicles and other equipment. A related question
is whether fuel suppliers would even be willing to sell E15 if some of their customers may not use
it. Further, it is unclear whether existing fuel distribution systems which were designed to
dispense E10 can handle the higher-level ethanol blends.
Cellulosic Biofuels28
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/byproducts 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 relatively 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,29 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.
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;30 and a

28 For more information on cellulosic biofuels, see CRS Report RL34738, Cellulosic Biofuels: Analysis of Policy Issues
for Congress, by Kelsi Bracmort et al.
29 A mixture of hydrogen and carbon monoxide that can be used to produce a variety of chemicals and fuels.
30 On December 15, 2009, the Department of Energy finalized a rule establishing the incentive program. U.S.
Department of Energy, “Final Rule: Production Incentives for Cellulosic Biofuels; Reverse Auction Procedures and
(continued...)
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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. (See “The Renewable Fuel Standard (RFS).”) 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.
Ethanol Imports
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 has
grown 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 imports31 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.32 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.
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.”33 If a manufacturer imports an intermediate product, then
exports the finished product or a similar product, then that manufacturer may be eligible for a

(...continued)
Standards,” 74 Federal Register 52867-52873, October 15, 2009.
31 When the $0.54 duty was established, the tax incentive for conventional ethanol was also equivalent to $0.54 per
gallon. Since then, the incentive for conventional ethanol has decreased (to $0.45 per gallon currently), while the duty
has remained at $0.54 per gallon.
32 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.
33 For more information on drawbacks, see U.S. Customs Service, Drawback: A Refund for Certain Exports,
Washington, February 2002.
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refund (drawback) of up to 99% of the duties paid. There are special provisions for the production
of petroleum derivatives.34 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 2006.35 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. The
2008 Farm Bill further extended the duty through December 31, 2010.
Vehicle Purchase Requirements
The Energy Policy Act of 1992 established mandatory alternative fuel vehicle purchase
requirements for various vehicle fleets.36 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.37
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
reports on their compliance with EPAct, which those agencies have completed.38 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.39
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

34 19 U.S.C. 1313(p).
35 Peter Rhode, “Senate Finance May Take Up Drawback Loophole As Part Of Energy Bill,” EnergyWashington
Week, April 18, 2007.
36 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.
37 For more information on vehicle purchase requirements, see the Federal Energy Management Program’s Fleet
Management program at http://www1.eere.energy.gov/femp/program/fedfleet_requirements.html.
38 Center for Biological Diversity v. Abraham, N.D. Cal., No. CV-00027.
39 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.
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Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

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,40 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.41
The American Recovery and Reinvestment Act of 2009 (H.R. 1) appropriated $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.
On January 24, 2007, President Bush signed Executive Order 13423. Among other provisions,
this order requires federal agencies to use commercially available plug-in hybrid electric vehicles
(PHEVs).
Vehicle Purchase Tax Incentives
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
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.42

40 Light-duty diesel vehicles that meet specified emissions standards.
41 68 Federal Register 10319.
42 The credits for hybrid and advanced diesel vehicles expired at the end of 2009. Credits for alternative fuel vehicles
will expire at the end of 2010. For more information on vehicle tax incentives, see CRS Report RS22351, Tax
(continued...)
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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.
The American Recovery and Reinvestment Act of 2009 (P.L. 111-5) significantly modified the
plug-in credits: the law eliminated the credit for vehicles above 14,000 pounds after 2009;
established a credit of up to $2,500 for 2-wheeled, 3-wheeled, and low-speed 4-wheeled plug-in
vehicles; and established a credit of up to $4,000 for the conversion of existing vehicles to run on
battery power. The law also allows purchasers to claim the plug-in, alternative fuel vehicle, and
hybrid tax credits even if they are subject to the Alternative Minimum Tax (AMT)—previously,
taxpayers subject to the AMT could not claim these credits. Eligibility for the plug-in tax credit
phases out once a manufacturer has produced 200,000 vehicles eligible for the credit. However, it
is unclear whether any automaker will hit this mark before the credit expires at the end of 2014.
Biodiesel and Renewable Diesel
Biodiesel and renewable diesel are synthetic diesel fuels produced from vegetable oils, including
soybean and canola oils, animal fats, and recycled cooking grease. They can be blended with
conventional diesel fuel and used in diesel engines with few or no modifications. Further, with
some engine modifications, they 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 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 and renewable diesel production have generated interest in
providing tax incentives, in the form of either production tax credits or excise tax exemptions, 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 production costs, the costs of soybean oil and other oils would
need to decrease substantially, or less costly feedstocks would need to be developed.
As was stated above, the American Jobs Creation Act, as amended, provided a tax credit of up to
$1.00 per gallon for the sale and use of biodiesel. In addition, the law provided an excise tax
credit for biodiesel blends (i.e., biodiesel and conventional diesel). Producers were 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 the end of 2009.

(...continued)
Incentives for Alternative Fuel and Advanced Technology Vehicles, by Brent D. Yacobucci.
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Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

As of September 2010, they had not been extended. 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.
Hydrogen and Fuel Cells
Over the past several 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.43
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 have been 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.44
The Energy Policy Act of 2005 authorized a total of $3.3 billion through FY2010 for fuel cell and
hydrogen R&D.45
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).
Hybrid Vehicles
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

43 For example, depending on the technology used, processing coal into hydrogen could lead to significantly higher
emissions of toxic compounds and carbon dioxide.
44 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.
45 For more information on the Bush Administration’s initiatives, see CRS Report RS21442, Hydrogen and Fuel Cell
Vehicle Research and Development (R&D): FreedomCAR and the President’s Hydrogen Fuel Initiative, by Brent D.
Yacobucci.
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improve efficiency. 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 2010, BMW, Ford, General Motors, Honda,
Nissan, Mazda, Mercedes-Benz, 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 the 1998
surface transportation bill (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).

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Alternative Fuel and Advanced Vehicle Technology Provisions in the
American Recovery and Reinvestment Act of 2009
Table 1. Comparison of Alternative Fuel and Advanced Vehicle Technology Provisions in P.L. 111-5
Topic
House Version
Senate Version
P.L. 111-5
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
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Topic
House Version
Senate Version
P.L. 111-5
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
instal ation 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 al ow 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 wel 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.

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For Additional Reading
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 2010. http://www.electricdrive.org
Fuel Cells 2000. Online Fuel Cell Information Center. Washington, DC. Updated January 2010.
http://www.fuelcells.org/
Methanol Institute. Methanol Institute Homepage. Washington, DC. Updated November 2009.
http://www.methanol.org/
National Biodiesel Board. Biodiesel Basics. Jefferson City, MO. Updated January 2010.
http://www.biodiesel.org/resources/biodiesel_basics/
National Hydrogen Association. General Information. Washington, DC. Updated January 2010.
http://www.hydrogenassociation.org/general/index.asp
Natural Gas Vehicles for America. About NGVs. Washington, DC. Updated July 2009.
http://www.ngvc.org/about_ngv/index.html
Propane Education and Research Council. Propane Vehicle Fleets. Washington, DC. Updated
December 2009. http://www.propanecouncil.org/trade/fleet/index.cfm
Renewable Fuels Association. Ethanol Industry Outlook 2009. Washington, DC. February 2009.
http://www.ethanolrfa.org/industry/outlook/
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Fuels Data Center. Washington, DC. Updated December 2009. 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.
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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

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Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

Author Contact Information

Brent D. Yacobucci

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


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