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Polis: Clean Energy is a Crux of the Tax Debate

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An expiring yet critically effective clean energy tax provision cleared a key hurdle Thursday, garnering praise and a sigh of relief from Congressman Jared Polis (D-CO). With growing concern that the Treasury's 1603 Grant Program would not be continued, Polis called for the program's renewal in a letter to Leadership with several House colleagues. After initial word that it was on the chopping block, the provision was included in the draft Senate bill unveiled late Thursday night.

"The continuation of the Treasury Grant Program means jobs for Colorado and is absolutely critical," said Polis. "This innovative provision has been among the most effective job creation tools for the solar, wind and clean tech sectors--small businesses whose growth and hiring have been leading the nation's economic recovery. The program will save the government $400 million over the next six years, and its true value is in leveraging private investment, $18 billion to date."

The 1603 Treasury Grant Program helps clean energy startups with their high upfront costs by allowing the tax credits the company would have otherwise received to be provided in the form of an up-front grant, costing the government nothing. Traditionally, in order for clean energy technologies to compete with the heavily subsidized fossil fuel industry, they have been promoted through tax credits. Unfortunately, tax credits fail to eliminate challenges like large upfront costs and lower initial profits, forcing the majority of funding to come from large loans which have significantly dried up as a result of the financial crisis.

The success of the 1603 Treasury Grant has been unparalleled. In addition to leveraging billions in private investment, it has helped to deploy 1,118 solar energy systems and enabled the construction of 10,000 MW of new wind capacity in 2009--more than double the 4,000 MW that would have been installed without the program. For Colorado's Clean Energy Economy, this means successful small businesses and jobs. The program has led to roughly 20,000 solar jobs in the US and saved or created 55,000 wind energy jobs. If the program is extended, it is estimated to create an additional 65,000 jobs in the solar field alone.

Unfortunately, the draft legislation that was unveiled on Thursday also contained a one year extension of the Volumetric Ethanol Excise Tax Credit (VEETC). While the draft legislation reduces the tax credit, the provision is an extension of a wasteful and failed policy.

"Ethanol is all around irresponsible," said Polis. "When both environmental groups and government waste watchdogs team up against an issue, you know it's worth taking a look. VEETC is a drain on our economy, costs taxpayers dearly, increases global warming pollution and raises food prices for consumers. This wasteful credit hasn't achieved any of the things it was created to do and it's time for it to go."

Current corn-based ethanol is a net greenhouse gas producer, and requires more energy to produce than it yields. According to the Congressional Budget Office (CBO), corn ethanol production accounted for 10-15 percent of the increase in food prices between April 2007-April 2008 and $600-900 million in additional costs to the Supplemental Nutrition Assistance Program and other child nutrition programs in 2009 alone. A July 2010 study by the CBO found that every gallon of ethanol used to replace gasoline costs the Federal government $1.78--adding up to billions for American taxpayers.

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