Obama Seeks to Cut Clean-Diesel, Fuel-Cell Funding

The Obama administration proposed ending a clean-diesel grant program and cutting research for hydrogen fuel-cell vehicles while spurring the market for electric cars.

The U.S. Environmental Protection Agency’s fiscal 2012 budget reduces the Clean Diesel Program’s budget from $80 million in 2010 to zero. The program was reauthorized by Congress for five years and a total of $500 million in December.

“It’s clearly difficult budget times, but it’s hard to imagine a program that delivers more concrete benefits at a lower cost than the diesel-emissions reduction program,” said Allen Schaeffer, executive director of the Diesel Technology Forum, a trade group based in Frederick, Maryland.

President Barack Obama is working to realign the U.S. government’s vehicle-technology priorities. His budget proposes diverting funds from a dozen energy-company tax breaks to help put more electric vehicles on the road, doubling the share of electricity from so-called clean energy by 2035 and increasing the efficiency of energy use in buildings by 20 percent.

The budget proposal would transform a $7,500 tax credit for buyers of plug-in electric cars into a rebate at the dealership so purchasers wouldn’t have to wait to claim the credit on tax returns. Obama, in his State of the Union address last month, reiterated his goal of having 1 million electric vehicles, both plug-in and hybrid electric, on U.S. roads in four years.

Photographer: Mike Mergen/Bloomberg

Honda, which doesn’t have an electric car on the market, has leased FCX Clarity hydrogen cars to drivers in the Los Angeles area since 2008. Close

Honda, which doesn’t have an electric car on the market, has leased FCX Clarity... Read More

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Photographer: Mike Mergen/Bloomberg

Honda, which doesn’t have an electric car on the market, has leased FCX Clarity hydrogen cars to drivers in the Los Angeles area since 2008.

Diesel Grants

An extension of the current clean-diesel spending plan was signed into law in January and pays local governments to retrofit buses, trucks and construction equipment.

The program has been giving out grants since 2005, benefiting makers of retrofit equipment, such as Corning Inc., and newer, cleaner engines and vehicles, like Cummins Inc., Caterpillar Inc. and Navistar International Corp.

Eliminating the funding was “truly unfortunate,” said Dan Collins, a spokesman for Corning, which makes filters used to scrub diesel exhaust.

“Newer emissions regulations address this issue with engines built after 2007, but earlier models are among the heaviest air pollutants on the road today,” Collins said in an e-mail.

Cummins, a maker of diesel truck engines, plans to lobby to restore funding, Mark Land, a spokesman for the Columbus, Indiana-based company, said in an e-mail. The program has bipartisan support because it’s cost-effective, Land said.

Roy Wiley, a Navistar spokesman, declined to comment. Jim Dugan, a Caterpillar spokesman, had no immediate comment.

Public Health

While the EPA won’t dedicate any new funding in fiscal 2012, the program received money through the 2009 American Recovery and Reinvestment Act, with about $100 million yet to be spent. Every dollar in the program generates $12 to $13 in public-health benefits, EPA Administrator Lisa Jackson said on a conference call with reporters.

“It was one of the tough decisions we had to make,” Jackson said. The agency “will continue to support ongoing projects, adding to the tremendous public health benefits of cleaner air,” she said.

In addition to eliminating the diesel grants, the budget proposes allocating no money to a hydrogen fuel-cell program in the Energy Department that had $49 million in the 2010 fiscal year.

The George W. Bush administration called for $1.5 billion in funding over five years in the 2004 federal budget, divided between fuel-cell and hydrogen technologies. Department of Energy funding for the fuel-cell part of the equation peaked in 2006 at $84 million. Subsequent annual spending ranged from $45 million to $56 million.

A hydrogen fuel-cell industry trade group criticized Obama’s cuts, saying it would be foolish to abandon government investment.

‘Ceding Our Leadership’

“We ask Congress to act now and restore funding to fuel cell and hydrogen energy programs, or risk ceding our leadership to strategic competitors as we have done with wind, solar, and batteries,”Ruth Cox, president of the Fuel Cell and Hydrogen Energy Association, said in a statement. Honda Motor Co., Toyota Motor Corp., 3M Co. and Boeing Co. are members of the group.

Honda, which doesn’t have an electric car on the market, has leased FCX Clarity hydrogen cars to drivers in the Los Angeles area since 2008. Daimler AG started leasing fuel-cell Mercedes-Benz hatchbacks in California last year. Toyota plans to sell hydrogen cars in California, Japan and Germany by 2015.

“We will distribute globally to regions capable of supporting with infrastructure, including specific regions of the U.S.,” said John Hanson, a spokesman for Toyota’s U.S. unit. “The vehicles are coming.”

‘Commercial Viability’

Continued funding is critical if the U.S. is going to keep pace with Germany and Japan, said Sharon Basel, a spokeswoman for Detroit-based General Motors Co. Fuel cells and hydrogen are integral to reducing greenhouse gases, she said.

“The commercial viability of fuel cells are within the grasp of consumers, and it’s urgent that programs are supported that will get this technology into the market,” Basel said. “This is not the time to reduce investment.”

The president’s budget only marks the beginning of the process that will decide how federal money gets spent, said Schaeffer of the diesel group. A bipartisan majority in the Senate approved the emissions-reduction program on a 92-7 vote, he said.

“It’s great to invest in something that’s a moon shot, 15 or 20 years from now, but what are you going to do until then?” Schaeffer said. “Modest sums to help modernize and upgrade some of these older engines would be dollars well spent.”

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net.

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