Statement of the Methanol Institute, Rosslyn, Virginia

This testimony is presented on behalf of the Methanol Institute ("MI"), the national trade association for the U.S. methanol industry. As the voice of the methanol industry, MI has been a leader in supporting essential research and promoting the use of methanol in zero-emission fuel cell vehicles.

The Methanol Institute is pleased to endorse H.R. 1864 and S. 760, the Clean Efficient Automobiles Resulting from Advanced Car Technologies Act of 2001 ("the CLEAR Act"), legislation introduced this year by Congressman Dave Camp (R-Michigan) and Senator Orrin Hatch (R-Utah). The CLEAR Act would help level the playing field between the cost of advanced technology vehicles and conventional vehicles by providing tax credits to consumers who purchase hybrid electric, fuel cell, battery electric, and dedicated alternative fuel vehicles. In addition, the bill would provide incentives for the development of an alternative fuels infrastructure. The bill places a limit on the duration of the tax credits, time enough to allow production numbers to increase to the point that the new technology vehicles become price competitive with conventional vehicles.

Among the primary benefits of this legislation are more energy independence and cleaner air. Transportation in the United States accounts for two-thirds of our oil consumption, and 97 percent of our transportation needs depend on foreign oil. If we are going to reduce our dependence on foreign oil and cut pollution, we must focus on conserving and diversifying our transportation fuels. By promoting the use of alternative fuels and the purchase of advanced car technologies, the CLEAR Act would play a key role in our nation’s energy security. Every alternative fuel or advanced technology car, truck, or bus on the road will displace a conventional vehicle’s lifetime of emissions and need for imported oil. The use of dedicated alternative fuel vehicles, methanol and other fuel cell electric vehicles, battery electric vehicles and hybrids will have the added benefit of reducing greenhouse gases while providing consumers with increased choices.

The need to encourage the use of alternative technology vehicles has never been greater. Americans now drive more than 2.5 trillion miles annually and the collective odometer keeps rising. In 1998, 121 regions in our country failed to attain the Environmental Protection Agency’s National Ambient Air Quality Standards. This status directly threatens the quality of life of more than 100 million of our citizens who must bear the health and economic burdens associated with non-attainment. With important programs such a California’s Zero-Emission Vehicle mandate set for launch in 2003, consumers need to know that the government is interested in helping them reduce air pollution in their communities. The CLEAR Act will reduce the incremental costs to consumers to purchase cleaner vehicle technologies and help them become a part of the solution.

Historically, consumers have faced three basic obstacles to accepting the use of alternative fuels and advanced technologies. These are the cost of the vehicles, the cost of alternative fuels and the lack of infrastructure of alternative fueling stations. The CLEAR Act would lower all three of these barriers.

Specifically, the CLEAR Act would provide a tax credit of 50 cents per gasoline gallon equivalent for the purchase of alternative fuel, including methanol, at fuel stations. To ensure that consumers have better access to alternative fuel, the CLEAR Act extends until 2008 the existing $100,000 deduction for the capital costs of installing alternative fueling stations. The bill also provides a 50 percent credit for the installation costs of retail and residential fueling property, up to $30,000 and $1,000, respectively.

Furthermore, the CLEAR Act provides tax credits to consumers to purchase alternative fuel and advanced technology vehicles. The duration of the tax credits are limited to six years for qualified alternative fuel motor vehicles and ten years for fuel cell motor vehicles. To ensure that the tax benefit provided translates into a corresponding benefit to the environment, the fuel cell vehicle tax credit is split into two parts. First, a base tax credit of $4,000 is provided for the purchase of qualified fuel cell vehicles which may use any fuel, including methanol. A bonus credit of up to $4,000 is then provided based on the vehicle’s fuel efficiency. In this way, the CLEAR Act provides the greatest impact in terms of providing a social benefit to our citizens.

The CLEAR Act is supported by a broad and diverse coalition including the alternative fuels industry, environmental groups, and automobile manufacturers. President Bush’s National Energy Plan also endorses the concepts of the proposal.

The Methanol Institute believes that a comprehensive national energy strategy would not be complete without an incentive that promotes the use of alternative fuels and advanced car technologies. Accordingly, MI urges the Committee to give favorable consideration to the CLEAR Act as Congress continues to develop a comprehensive national energy strategy.