Congressional Research Service


Date of this Version



Published by Congressional Research Service, 1-14,, IB10128


Alternative fuels and advanced technology vehicles are seen by proponents as integral to improving urban air quality, decreasing dependence on foreign oil, and reducing emissions of greenhouse gases. However, major barriers — especially economics — currently prevent the widespread use of these fuels and technologies. Because of these barriers, and the potential benefits, there is continued congressional interest in providing incentives and other support for their development and commercialization.

In the 109th Congress, alternative fuels and advanced technology vehicles have received a good deal of attention, especially in the debate over omnibus energy legislation. High fuel prices, especially in response to hurricanes along the gulf coast, have focused that attention. Major topics of congressional interest include tax incentives for alternative fuel production; the future of ethanol and the fuel additive MTBE, including the establishment of a renewable fuels standard (RFS); and research and development of hydrogen fuel and fuel cells. Other topics include government vehicle purchase requirements; tax credits for vehicle purchases; promotion of biodiesel fuel; and incentives for hybrid electric vehicles.

The Energy Policy Act of 2005 (P.L. 109-58, H.R. 6) contains many provisions relevant to alternative fuels and advanced technology vehicles. Among its provisions, the bill expands existing tax incentives for the purchase of advanced vehicles; authorizes R&D funding for hydrogen fuel and fuel cells; and requires that gasoline contain ethanol or other renewable fuel. H.R. 6 was signed by President Bush August 8, 2005.

In the fall of 2005, hurricanes along the Gulf Coast led to disruptions in refining capacity and oil supply, which then led to higher gasoline and diesel prices. Since then, Members of Congress have been seeking ways to reduce the vulnerability of the fuel system. Several bills have been introduced to promote further development of alternative fuels and advanced technology vehicles or to mandate their sale and/or use. High crude oil and gasoline prices in spring 2006 have further increased interest in moving away from a petroleum-based transportation system.

Because of concerns over the energy bill in the 108th Congress, some alternative fuels provisions from that energy bill were inserted into other bills. Some tax provisions, including tax credits for ethanol and biodiesel, were inserted into the conference report on the American Jobs Creation Act of 2004 (P.L. 108-357). Among other provisions, the new law replaced an existing ethanol tax exemption with a tax credit, and established tax credits for biodiesel.