## ACEE Posts Estimates of Hybrid Tax Credits

##### 15 August 2005

The American Council for an Energy-Efficient Economy (ACEEE) has posted its estimates of tax credits for 31 hybrid and diesel cars and light trucks that fall under tax credit provisions of the new federal energy bill.

These are best-guess estimates, based on a combination of preliminary 2006 model year data, 2005 model year data, and manufacturer announcements, and are intended only to give a sense of the magnitude of the upcoming credits, which will be available starting January 1, 2006.

Estimated credits for hybrid vehicles range from $250 to$3,150 (the maximum possible under the provision is $3,400), with the Toyota Prius projected to receive the highest credit. The 2wd Toyota Highlander hybrid and the Ford Escape hybrid are tied for second place, with a credit of$2,600 each, followed by the 4wd Highlander and the Rx400h in third with a \$2,100 credit.

The credit amount is largely determined by a vehicle’s city fuel economy relative to the average for its weight class, but vehicles that save at least 1,200 gallons of fuel over their lifetime relative to the class average gain additional credits. Vehicles must also meet moderately stringent tailpipe emissions requirements to qualify.

No diesel vehicle will achieve credits at the outset, because automakers have yet to produce vehicles clean enough to meet those emissions requirements. This situation may begin to change in model year 2007, because ultra-low-sulfur diesel fuel will become widely available in late 2006, facilitating emissions reduction technologies for new diesel models.

Credits for a manufacturer’s vehicles are phased out once 60,000 of them have received credits. In addition, the program favors heavier vehicles through the structure of the fuel savings credit and a more lenient emission requirement for vehicles over 6,000 pounds.

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### Comments

I'm not so sure I like the idea of giving a tax credit to a person who buys a vehicle getting 17 MPG.

Sure, if they purchase it instead of one that gets 15 MPG, the policy has been effective. But, what happens when they purchase this bigger truck that gets 17 MPG instead of a smaller one that gets 19 MPG, with the help of the tax writeoff. Now, we're giving tax breaks that are encouraging folks to buy fuel-inefficient vehicles. That doesn't seem so smart.

The system works fine if people (a) choose the class of car, and then (b) use price as a way to help choose the model. But, when people are willing to compare different classes and only some models within each class, the subsidy can result in people buying less fuel efficient cars, and take a tax rebate!

How often does this scenario happen? I have no idea. Still, if I were supreme despot, there'd be no subsidy for adjusted city MPG under 25 or 30, thats for sure. My sense is that if the target was 25, that you'd see some serious engineering to get those pickups up to 25 MPG and get a huge tax credit, instead of settling for 17, 20, 22, etc.

Hello, would this tax incentive also include USED 2005 hybrid that is under a certain mileage?

DOES ANYONE KNOW IF THE NEW LAW REQUIRES A 2006 MODEL PURCHASE OR CAN WE BUY A 2005 AFTER JAN 1 AND CLAIM THE DEDUCTION?? I'VE TRIED THE IRS BUT THEY ARE USELESS...IMAGINE THAT.
THANKS FOR ANY HELP.

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