Bush Budget Includes $4,000 Tax Credit for Hybrid EVs

DETROIT, Feb 4 (Reuters) - Consumers who buy gasoline-electric hybrid vehicles in the next seven years would get up to $4,000 in tax credits under President Bush's proposed budget, while buyers of fuel-cell vehicles could get up to $8,000.The proposals come just as the Bush administration, Congress, automakers and environmentalists are wrestling over how federal fuel economy standards should be revamped or raised. U.S. automakers have been ardent supporters of such tax credits, saying that consumers would otherwise be reluctant to pay for the higher costs of designing and building environmentally friendly models.

But one environmentalist said the tax proposal would not reduce fuel use if it gives automakers room under federal fuel efficiency standards to crank up production of gas-thirsty sport utility vehicles and pickups.

In its fiscal 2003 budget recommendations to Congress, the Bush administration said the credits would vary based on the vehicle's fuel efficiency. For hybrids, the credit would depend on the share of the vehicle's power generated by the electric motor and by the improvement in city fuel economy ratings over a similar 2000 model year vehicle. For fuel cell vehicles, the minimum credit would be $4,000, with the maximum $8,000 credit available if the vehicle improved on a 2000 model year vehicle city fuel economy by 300 percent. Both credits would cover purchases between Dec. 31, 2000 and Jan. 1, 2008. So far, only two hybrid cars are available in the United States: Toyota Motor Corp.'s (7203.T) Prius sedan and Honda Motor Co. Ltd.'s (7267.T) two-seat Insight. Both are sold in limited numbers.

Honda will begin selling a hybrid version of its Civic sedan later this spring. Ford Motor Co. has committed to selling a hybrid version of its Escape SUV in 2003, while General Motors Corp. has said it will offer a hybrid pickup truck in 2004. The Chrysler arm of DaimlerChrysler AG (DCXGn.DE) has also said it will offer a hybrid vehicle in 2003, but has scrapped plans to use its system on a Dodge Durango SUV. While automakers have touted their research into fuel cells, which use hydrogen to create electricity without pollution, the first fuel cell vehicles aren't expected until later this decade and will likely be sold to business fleets.

American drivers now burn some 9 million barrels of oil a day in their cars and trucks. That's expected to grow to 12 million barrels a day by 2010 if fuel economy does not improve, according to the U.S. government. Last year, U.S. passenger vehicles created 284 million metric tons of carbon dioxide gas, a major contributor to global warming. Despite the growing fuel use, automakers have long fought increases in federal fuel economy standards, saying the standards do not change customer choices and do little to reduce consumption."We've strongly supported consumer incentives as a better answer to fuel economy improvements," said GM spokesman Mike Morrissey.

Under the current federal rules, automakers must meet average fuel economy levels based on the number of vehicles they sell. Dan Becker, director of the Sierra Club's global warming programs, said the proposal would not improve the environment if it let automakers build more SUVs and pickups. "For every advanced vehicle, there would be another gas guzzler, with no net oil savings and no emissions savings," Becker said. "It's merely putting wings on a sow."