18 CLIMATE CHANGE AND THE FEDERAL BUDGET August 1998 The JCT estimates that the proposal would result in revenue losses of $45 million between 1998 and 2003. Tax Credit for Rooftop Solar Equipment. The proposed tax credit would be available for two types of solar equipment-photovoltaic heating systems and water heating systems located on or adjacent to buildings. The credit would be equal to 15 percent of the total investment in either system up to a maximum credit of $2,000 for rooftop photovoltaic heating systems and $1,000 for solar water heating systems. It would be nonrefundable and would not be available for systems to heat swimming pools. For businesses, the credit would reduce the depreciable basis of the property by the amount claimed and would be subject to the limits of the general business credit. It would apply to equipment placed in service during calendar years 1999 through 2003 for solar water heating systems and through 2005 for rooftop photovoltaic systems. Under current law, a 10 percent energy investment tax credit for businesses is available for equipment that uses solar energy to generate electricity, to heat or cool or provide hot water for use in a structure, or to provide solar-process heat. The equivalent credit for residential solar systems expired in 1985. Under the proposals, businesses would have to choose between the present and the proposed tax credits. The JCT estimates that enacting the proposal would reduce revenues by $43 million through 2003 and $100 million through 2008. Tax Credit for Perfluorocompound and Hydrofluorocarbon Recycling Equipment. Perfluorocompounds (PFCs) and certain hydrofluorocarbons (HFCs) are extremely potent greenhouse gases because of their stability in the atmosphere and their capacity to absorb radiation. Under current law, manufacturers who install equipment to recover or recycle PFC and HFC gases used in producing semiconductors may depreciate the cost of that equipment over six years. The proposal would make available a 10 percent tax credit for installing PFC and HFC recovery or recycling equipment. The credit would be subject to the limits of the general business tax credit and would reduce the depreciable basis of the equipment by the amount claimed. To qualify, the equipment must recover at least 99 percent of the PFCs and HFCs used and must be placed in service between January 1, 1999, and December 31, 2003. The JCT estimates that enacting the proposal would reduce revenues by about $33 million between 1998 and 2003. Parking and Transit Benefits The Administration has also proposed an increase in benefits to encourage the use of mass transit and van pools. Current law provides for the exclusion of parking CHAPTER II CURRENT AND PROPOSED SPENDING PROGRAMS AND TAX POLICIES 19 in lieu of other employee compensation. However, for transit and van-pool benefits, the exclusion applies only if those benefits are in addition to other compensation. The current limits on the income exclusion (in 1993 dollars) are $155 per month for parking and $60 for transit passes and van-pool benefits. The proposal calls for eliminating the relative tax advantage of parking benefits. It would treat parking, transit passes, and van-pool benefits in the same way, subject to the same limits that currently apply to parking. The JCT estimates that the proposal would reduce revenues by $114 million through 2003 and $318 million through 2008. CHAPTER III OTHER FEDERAL SPENDING PROGRAMS Other federal programs and tax policies affect energy use and emissions of carbon dioxide-some positively, some negatively. Energy use is so important to the economy, and the government affects economic activity in so many ways, that a very broad range of government programs could be included. Deciding where to draw the line is difficult. The programs and tax policies included in this chapter represent one way to inventory a set of programs and tax policies associated with energy use and climate change. Programs closely associated with climate change include activities in transportation, energy conservation, and nuclear energy research and development that could affect emissions of carbon dioxide (or lower the costs of using less carbon). Those programs have multiple objectives-as do many that are directly related to climate change. Isolating the portions of the programs that should be charged to climate change is impossible. Nevertheless, since those programs are linked to activities related to climate change, they may be part of future changes to the policy mix. FEDERAL SPENDING PROGRAMS THAT AFFECT ENERGY USE The federal government currently funds several programs that have the purpose or effect of conserving energy or reducing emissions of greenhouse gases but that are not identified as being directly linked to climate change (see Table 6). The 1999 budget requests for most of those programs are near 1998 levels, with the exception of the Department of Energy's Weatherization Assistance Program, which would increase from $125 million to $154 million, and civilian nuclear R&D, which would rise from $7 million to $34 million. Programs and activities included are: The non-CCTI activities of the Partnership for a New Generation of Vehicles administered by the Department of Commerce's NIST, the National Science Foundation, and the Department of Transportation (DOT). The 1999 request totals $78 million, which is a slight decrease from 1998 levels. The Congestion Mitigation and Air Quality Improvement Program, 22 CLIMATE CHANGE AND THE FEDERAL BUDGET August 1998 TABLE 6. FUNDING FOR FEDERAL PROGRAMS ASSOCIATED WITH CLIMATE CHANGE (In millions of dollars of budget authority) Congestion Mitigation and Air Quality Improvement Program (CMAQ) SOURCE: NOTE. a. b Congressional Budget Office based on information from the Office of Management and Budget; Budget of the CCTI = Climate Change Technology Initiative; CMAQ = Congestion Mitigation and Air Quality Improvement Figures for CMAQ categories were calculated using the percentage share held by each category from 1992 to 1996 as follows: transit, 44.8 percent; traffic flow, 32.8 percent; surface transportation program devoted to CMAQ, 7.0 percent; shared ride, 4.4 percent; demand management, 3.8 percent; bicycle/pedestrian, 2 7 percent; and other, 4.5 percent. On May 22, 1998, the House and Senate passed the Transportation Equity Act for the 21st Century. The act would authorize funds to be appropriated out of the Highway Trust Fund for the CMAQ program at a funding level of $1.35 billion in 1999. Requested funding for the Advanced Transportation Technologies Consortium for 1999 is $20 million-$10 million for the Department of Energy and $10 million for the Department of Transportation—which is about $3.5 million greater than funding in 1998. |