Senator Kemp Hannon announced the Senate passed a plan to combat global climate change and advance energy independence. The legislation (S.6160) provides tax incentives for the purchase of hybrid, fuel cell and high mile-per-gallon vehicles and promotes the availability of ethanol and biodiesel to New York State motorists.
As passed by the Senate, the first part of the plan would eliminate the assessment of the state sales tax on the purchase of new and used hybrid vehicles. In addition, the sale of new and used vehicles from Model Year 2008 and beyond that achieve a highway fuel economy estimate of 35 miles per gallon or more, as certified by the United States Environmental Protection Agency, would be exempt from state sales tax. The legislation also enables New York City and county governments to eliminate their local sales tax on hybrid and high mile-per-gallon vehicles.
As an example of the environmental benefits of hybrid vehicles, the Toyota Camry hybrid uses approximately 29 percent less gasoline than the non-hybrid version. At 14,000 miles driven per year, the hybrid owner would save roughly $425 in additional fuel costs. As noted by Consumer Reports, however, even the "most cost-effective models require an investment of about five years for the owner to break even." This legislation will reduce this cost recovery period.
The state tax credit for the purchase of hybrid vehicles expired in 2005. The federal government provided a personal income tax deduction of up to $2,000 for hybrid vehicles purchased in 2004 and 2005. In 2006, the federal tax deduction converted to a tax credit the amount of which depends on the make and model of the vehicle and the date on which it was purchased. As this credit phases out as more vehicles are purchased, the new state sales tax exemption is even more necessary to reduce the cost recovery period. While this legislation unanimously passed the Senate, the Assembly leadership has refused to allow a vote.
The second component of the plan establishes a 25 percent refundable tax credit for the installation of tanks, piping and other infrastructure the fuel distributors need to accommodate biofuels, such as E85 (ethanol) and B20 (biodiesel). To date, the state has invested over $25 million to build new ethanol facilities in New York State, enacted biofuel production tax credits and established a $10 million fund at the New York State Energy Research and Development Authority (NYSERDA) to offset the cost of installing specialized pumps at retail gas stations. During the next 18 months, it is expected that three new ethanol production facilities will be online in New York State-generating over 200 million gallons of ethanol each year.
Despite the dramatic increase in the sales of vehicles that operate on both biofuel and traditional gasoline (five million nationwide), E85 and B20 are generally unavailable to the public in New York State (only three retail gas stations sell E85 statewide). Almost all motor fuel sold in New York State is processed by 90 regional distributors. At present, not one of these 90 distributors is equipped with the infrastructure (piping, tanks, etc.) needed to handle biofuels. This legislation creates a financial incentive for these distributors to install this equipment and it will help establish a true market for alternative fuels in New York State. The cost to install the necessary tanks, piping, etc. ranges from $150,000 to $500,000 for each distributor. By promoting the widespread retail availability of biofuels, this legislation will:
1. Improve air quality and fight global climate change. As compared to traditional gasoline, ethanol and biodiesel significantly reduce carbon monoxide and hydrocarbon tailpipe emissions. In addition, biofuels produce significantly less CO2-equivalent greenhouse gas emissions and, by promoting the viability of New York State's farmers, fight sprawl.
2. Ease our dependence on foreign oil. Because 85 percent of all oil used to produce gasoline consumed in New York State is imported from the Middle East and other foreign countries, the increased availability of New York State-produced biofuels will prevent potential supply disruptions and mitigate the flow of American resources to nations that sponsor terrorism.
3. Bolster the state's economy. As noted above, approximately 85 percent of all oil used to produce gasoline consumed in New York State is imported from foreign countries. By replacing this gasoline with New York State-produced biofuels, it will re-circulate 100 percent of each dollar spent on these motor fuels within the state's economy (farmer, New York ethanol producer, regional distributor and local retailer). Further, expanded demand for E85 and B20 will encourage investment in future New York State biofuel production facilities. Industry analysis estimates that the average ethanol plant expands the local economic base by $110.2 million, generates $19.6 million in additional household income, supports the creation of up to 694 new permanent jobs and generates at least $1.2 million in new tax revenue for state and local government.
4. Expand overall motor fuel supply, create real retail competition and ease the upward pressure on gas prices. At current retail prices, E85 costs about 17 percent less per gallon ($2.60 v. $3.15) than regular unleaded gasoline. For drivers of Flex Fuel vehicles, this creates real competition for the lowest priced motor fuel. Moreover, this legislation will help increase the overall motor fuel supply (gasoline and biofuels), lessen the demand for traditional gasoline and, as a result, alleviate market pressure on gasoline prices.