New Federal Energy Bill
Tax Credits for Hybrids.
The new federal energy bill appears to have passed Congress.
This bill has tax credits for the purchase of hybrids. Note, this is a tax credit -- the amount is subtracted from your tax bill. That is a $2000 tax credit saves you $2000. The current tax law gives you a $2000 tax deduction -- if your tax bracket is 25%, you save $500. A tax credit is much better.
The amount of the credit is based on what improvement in fuel efficiency compared to 2002 cars or the same weight class. So, a 2005 Prius II weighs between 2750 and 3000 lbs and the average mpg of 2002 cars of that weight was 28.8 mpg. The Prius gets between 175% and 200% of that mpg (190%), so the tax credit is
$1200 for a new Prius. If the 2006 gets a bit better FE or it increases to over 3000 lb, it might get $1600.

For the Honda Civic Hybrid: Weight is between 2500 and 2750 lbs. 2002 average was 31.7 mpg. HCH mpg is 47 (CVT) combined EPA (148% of 2002 mpg). So the tax credit is
$400 for a 2005 Honda Civic Hybrid. The HCH mpg is very close to the 150% mark (1.5x31.7 = 47.55 mpg) which would give it $800 credit. The 2006 HCH is claimed to have 5% better FE than 2005, so it should get $800, and if its weight increases to the next weight class it might get a $1200 credit. (Manual transmission has only 48 mpg, so results will be the same as CVT.)

The Insight manual transmission has an EPA combined FE of 63mpg and weighs 1850 lb. The average under 2000lb 2002 car got 45.2 mpg. So it gets: 139% of a 2002 car's FE. The 2005 MT Honda Insight gets a tax crediit of:
$400 for a 2005 Honda Insight. Despite its absolutely outstanding fuel efficiency, other cars in its weight class also get excellent fuel efficiency, which hurts its potential for tax credit. I think this illustrates the inadequacies of the formula for this tax credit.

For a hypothetical Hummer Garguantua Hybrid with a weight over 26000 lb, and a non-hybrid version get 2 mpg and the hybrid version gets 3 mpg, the tax credit could be up to $15,000.
$15,000 tax credit for a Hypothetical Hummer Garguantua Hybrid (HHGH).

Link to the House version of the bill:

What an excellent post! Both informative, and hilarious in a sad sort of way (I refer to the HHGH). Thanks!

Careful reading of the bill reveals it to be something of a joke. But that is to be expected, given its authors.

To summarize: Increased vehicle weight is more important than improved MPG. Getting the US fleet FE to 40 MPG is a national security interest, and compact to mid-sized cars are the fulcrum on which success will be decided. So what do these morons do ? Promote SUVs, of course.

R2-E2, 2G Prius.
Highway/City/Husband/Wife MPG: 56.5, as of 12/2005, 26K miles

Jac Nasser, Ford President: "We are planning to launch a hybrid version of
this car [P2000] within this year [1998]. We will also make FCEV available in
2004."

If hybrid land barges get bigger tax credits than hybrid cars, I'm going to....

Why not individual incerntives such as installing solar roofs, etc?

60.3mpg lifetime - 71mpg in winter months

Best Run >
www.cleanmpg.com

"fanatic" is what the lazy call the dedicated

In other news, Honda has started offering a special removable trunk lining in the Civic and Accord hybrids. It appears to be 4 80-pound bags of sand. This $150 option puts the Hondas in a weight class resulting in an additional $800 tax savings.

The full text of the bill can be found at:

http://energycommerce.house.gov/108/...onf_report.pdf

Go to page 1391 for the start engine tax credits contents. The tax credit seems to consist of the sum of two parts: greater city mpg than a average vehicle of a similar weight and expected fuel savings over 120,000 miles compared to that average vehicle's city mpg. I'm not quite sure if the buyer gets the full credit and there are rules for partial credits I don't understand.

Here are the totals I came up with for a MT Insight and a new Prius:

$400 for the Insight.
(60mpg city is 132% better mpg than the city 45.2 mpg it's rated against and worth $400. This works out to 654 gallons saved over a 120,000 mile vehicle lifetime, which is short of the minimum of 1,200 gallons needed for tax credit benefits.)

$2,100 for the Prius.
(60mpg city is 210% better mpg than the city 28.8 mpg it's rated against and worth $1600. This works out to 2166 gallons saved over a 120,000 mile vehicle lifetime, which is worth $500.)

I'll refrain from commenting.

I'm guessing that the version of the Energy Bill Romir is using is closer to the final version than what I used; I base this on the fact that it is harder to understand (and it is the conference committee report).
Romir: Did you find a definition of the "Vehicle Inertia Weight Class"?
It looks like there mayalso be a tax credit for "advanced lean burn engines" (i.e. some Honda Civics non-hybrids --Civic HX?).
--Walter

Hi Walter,

Reuters included the url to that pdf in a story about the House passing it. I've read there are also supposed to be some tax breaks for diesel engines (lobbied for by GM and Chrysler and causing the hybrid tax breaks to be lowered) but I haven't had the patience to find it in the text.

As for "Vehicle Inertia Weight Class", I tried looking for EPA documents about that but couldn't find any. I was hoping for a clarification on the under 2000 weight class.

For the lean burn engines, they seem to want direct injection and at least 25% better fuel efficiency. Unfortunately, none of the current Honda lean burn engines in the US are direct injection. Hopefully this will help encourage them to offer them, and actually make them available. I was looking into getting a 01-05 Civic HX and aim for 50+ mpg, but they seem to be 10 times rarer than Insights.

So, when does this go into effect and what does it mean for those of us who bought Hybrids this tax year (2005)?

If my situation is an example, they won't go retroacive to 2005.

60.3mpg lifetime - 71mpg in winter months

Best Run >
www.cleanmpg.com

"fanatic" is what the lazy call the dedicated