President Clinton’s FY 2001 Budget includes $976 million in tax incentives over 5 years and $2.1 billion over ten years to accelerate the development and use of bio-based technologies, which convert crops, trees, and other “biomass” into a vast array of fuels and products. These tax credits support the President’s August 1999 Executive Order 13134 and Memorandum on Promoting Biobased Products and Bioenergy, aimed at tripling U.S. use of biobased products and bioenergy by 2010. This initiative will increase the viability of alternative energy sources, help meet environmental challenges like global warming, support farm incomes, and diversify and strengthen the rural economy.

Cleaner Energy, Cleaner Environment. Bioenergy and bioproducts can dramatically reduce greenhouse gas emissions that contribute to global warming. Since crops absorb carbon during growth, their use for energy and other applications results in near zero net carbon release. Tripling our use of bioenergy and bioproducts by 2010 will reduce annual greenhouse gas emissions by up to 100 million tons -- the equivalent of taking over 70 million cars off the road.

New Economic Opportunities for a New Century. The goal of these tax incentives is to take advantage of advances in farm, forestry, and other biological sciences that are making biomass a viable competitor to fossil fuels as an energy source. These advances are fueling a revolution in the use of biomass to make low polluting electricity by burning willows and switchgrass along with coal in existing plants and by converting paper industry by-products into fuel gases. By creating high-tech jobs and new economic opportunities, meeting the President’s goal of tripling U.S. use of bioenergy and bioproducts could add $15 billion to $20 billion in new income for farmers and many rural communities.

Tax credits for electricity produced from biomass. This package of credits would:

• Extend current "closed-loop" biomass credit. This proposal, which includes plants and trees specifically grown for use as biomass, extends for 2.5 years the current 1.5 cent per kilowatt hour tax credit (adjusted for inflation after 1992), which covers facilities placed in service before January 1, 2002.
• Provide credits for "open loop" biomass facilities. This proposal expands the definition of biomass eligible for the 1.5 cent tax credit to include certain forest-related resources and agricultural and other sources for facilities placed in service from 2001 through 2005, and provides a 1.0 cent credit for electricity produced from 2001 through 2003 from facilities placed in service prior to July 1, 1999.
• Provide a credit for cofiring biomass and coal. This proposal adds a 0.5 cent per kilowatt hour tax credit for electricity produced by cofiring biomass in coal plants from 2001 through 2005.
• Provide credit for methane from landfills. This proposal adds a 1.5 cent per kilowatt hour credit for electricity produced from landfills not subject to EPA’s 1996 New Source Performance Standards/Emissions Guidelines (NSPS/EG) and 1.0 cent per kilowatt hour for landfills subject to NSPS/EG. Qualified facilities would be facilities placed in service after December 31, 2000 and before January 1, 2006.

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