The high cost of energy has caused tremendous hardship for many of our citizens, small businesses, and communities, especially during one of the coldest and snowiest winters in memory. Beyond the pocketbook, our reliance on foreign oil is a threat to our national security and gives the OPEC cartel and hostile nations like Venezuela the ability to disrupt our economy.
Our need for energy independence is perhaps the greatest challenge facing our nation today. Just as we met the challenge of Sputnik a half-century ago with a national commitment to land a man on the moon, I believe we must now embark on a national effort to achieve energy independence by 2020. This will require a comprehensive approach including energy conservation, new technologies, alternative fuels, and other policies that lessen our dependence on foreign oil.
The Senate took a step toward meeting this challenge when it recently approved a bipartisan amendment, which I authored with Senator Carl Levin of Michigan, that will help to provide a more sensible energy tax policy. Our amendment takes away needless tax breaks for big oil companies and instead directs the tax incentives to stimulate the development of renewable fuels and to help individuals afford clean-burning wood and wood-pellet stoves as well as plug-in hybrid electric drive vehicles. At a time when the profits of a single oil company have reached nearly $10 billion in a single quarter, it does not make sense for taxpayers to provide subsidies that oil company executives themselves have testified are not needed.
Instead, this funding, which amounts to billions of dollars, should be redirected to encourage energy conservation and to promote the production of alternative, renewal fuels. Cellulosic ethanol and biodiesel fuels are technologies that offer much potential for reducing our gasoline consumption and greenhouse gas emissions. The Collins-Levin amendment extends current production tax credits for biodiesel – including one for small producers – that otherwise would expire at the end of this year. Our amendment also includes a new tax credit for cellulosic ethanol, a form of ethanol that could be produced from wood chips, switch grass, or cull potatoes, and that would reduce greenhouse gas emissions. This incentive is a necessary boost for those who are developing the technology that will make this important new fuel source commercially viable.
Our amendment would also finance the legislation I have introduced to provide a $500 tax credit to assist consumers in replacing old, inefficient wood stoves with new, energy efficient clean-burning models. The U.S. Environmental Protection Agency estimates that 7.5 million older stoves, many of them installed during the oil crisis of the 1970s, are still in use today. New wood and pellet stoves use far less fuel and can reduce emissions by as much as 70 percent compared to older models.
The combination of advanced battery technology and hybrid systems in vehicles also would help to reduce both oil consumption and harmful emissions -- it is estimated that a plug-in hybrid could get the equivalent of 100 miles-per gallon. Tax incentives will be necessary to offset the increased cost to consumers and to achieve widespread acceptance. The Collins-Levin amendment calls for a base tax credit of $3,000, with up to an additional $2,000 available for vehicles with higher battery power capacity. These incentives will not only help make these vehicles more affordable now, but also will stimulate continued research and development of even more efficient vehicles.
The provisions in our amendment built on the renewable energy production and energy efficiency provisions already in the underlying budget bill. The budget resolution approved by Senate allows for the extension of the renewable electricity production tax credit. This includes technologies such as wind, solar, geothermal, and biomass energy. I believe it is important to give companies certainty now to plan and pursue investments in renewable electricity generation since these efforts require large up-front capital investments. Companies will not continue to expand renewable energy production in the absence of this credit, which makes such projects cost-competitive with traditional energy sources.
The legislation also would encourage energy efficient buildings, products, and power plants. Making buildings more energy efficient can dramatically reduce our use of oil and save money for consumers at the same time. For example, on average, weatherizing a home reduces heating bills by 31 percent and overall energy bills by $358 per year.
America responded to the Sputnik challenge with resolve and a commitment to innovation. With that same spirit and determination, we can achieve energy security by ending our dangerous dependence on foreign oil. A sensible energy tax policy is a step toward that goal.