Statement of the Alliance for Resource Efficient Appliances

The Alliance for Resource Efficient Appliances (AREA) fully supports H.R. 1316,

the "Resource Efficient Appliance Incentives Act". This bi-partisan appliance tax credit bill was introduced March 29, 2001 by Representative Jim Nussle (R-IA) and Representative John Tanner (D-TN) along with many other Members from both sides of the aisle.

This proposed tax credit will provide a per unit tax credit for appliance manufacturers who produce clothes washers and refrigerators that exceed the current Department of Energy standards. The credit is subject to an aggregate per company limit of $60 million and an annual limit of two percent of corporate gross revenues as well as the following:

Washing Machines—Manufacturers of super energy-efficient washing machines would be eligible to claim a credit of either $50 or $100 for each super energy-efficient washing machine produced between 2002 and 2006. The $50 credit is available for units that use 35% less energy than the standard in place through 2003 and use 17% less energy than the standards announced by DOE. The $100 credit is available for units that use 42% less energy than the standard in place through 2004 and use 42.5% less energy through 2006 than the standards announced by DOE.

Refrigerators—Manufacturers of super energy-efficient refrigerators would be eligible to claim a credit of $50 for each super energy-efficient refrigerator produced between 2002 and 2004 that is at least 10% more energy efficient than the DOE required efficiency standard that went into effect on July 1, 2001. Manufacturers would be eligible to claim a credit of $100 for each unit produced between 2002 and 2006 that is at least 15% more energy efficient than the 2001 DOE required efficiency standard.

The tax credit for the production of super energy-efficient washing machines and refrigerators creates the incentives necessary for both manufacturers and consumers to increase the production and sale of super energy-efficient appliances in the short-term and to expand marketing opportunities. The more rapidly those super energy-efficient appliances appear in the marketplace; the more rapidly energy savings will occur. For example, as a result of making the tax credit available between 2002 and 2006, the production and purchase of super energy-efficient washers is estimated to increase by almost 200% and the purchase of super energy-efficient refrigerators by over 285%. Moreover, this increase in the purchase of super energy-efficient appliances will create a market transformation. The long term cost savings of increased energy efficiency will lead to a dramatic change in consumer purchasing decisions that will last many years after the expiration of this tax credit.

The expanded use of super energy-efficient appliances has significant long-term environmental benefits. Over the life of the appliances, over 200 trillion Btus of energy will be saved.¹ This is the equivalent of taking 2.3 million cars off the road or closing down 6 coal-fired power plants for a year. Energy savings of this magnitude pay significant environmental dividends. For example, carbon emissions, the critical element in greenhouse gas emissions, will be reduced by over 3.1 million metric tons. In addition, the super energy-efficient clothes washers will reduce the amount of water necessary to wash clothes by 870 billion gallons or approximately the amount of water necessary to meet the needs of every household in a city the size of Phoenix, Arizona for two years. The net benefits to consumers over the life of the super energy-efficient clothes washers and refrigerators from operational savings is almost $1 billion.

The appliance industry and the advocacy organizations acknowledge that substantial energy savings are being achieved today through the use of more energy efficient appliances. However, industry has the technological ability to achieve even greater energy savings if properly crafted incentives are enacted to encourage greater consumer receptivity to the super energy-efficient appliances. Currently, a major hurdle to the more widespread use of the super energy-efficient clothes washers and refrigerators is the reluctance of many consumers to make a higher initial investment in order to receive the long term savings of the super energy-efficient appliances.

A tax credit available to manufacturers for the production of super energy- efficient washing machines and refrigerators can overcome much of the consumer reluctance by creating incentives for both manufacturers and consumers that will increase sales of super energy-efficient appliances. A credit provided at the manufacturers’ level is preferable to a credit at the consumer level because of – 1) the ease of administration; 2) the ability to limit the cost of the proposal by capping the benefits; 3) the higher leverage obtained by providing the tax credits upstream; and 4) the flexibility to select among many means of marketing for the best way to sell more energy-efficient appliances.

1. Of the total, approximately 150 trillion Btus are attributable to the super energy-efficient clothes washers and approximately 40 trillion Btus are attributable to super energy-efficient refrigerators.