Overview
Title
To amend the Internal Revenue Code of 1986 to modify the clean fuel production credit to provide a special rate for sustainable vessel fuel.
ELI5 AI
The bill suggests giving special treatment to clean fuel made for boats, making it cheaper and helping the environment, but only if it meets certain rules. This special deal for boat fuel would last until 2035, starting from 2026.
Summary AI
S. 692 is proposed legislation that seeks to amend the Internal Revenue Code of 1986 to modify the clean fuel production credit. It introduces a special rate for sustainable vessel fuel, allowing it to qualify as transportation fuel under specified conditions, such as being suitable for use in commercial vessels, not derived from certain unwanted sources, and meeting environmental standards. Additionally, this special rate for sustainable vessel fuel would remain available until the end of 2035, with the changes effective for fuel produced after December 31, 2025.
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AnalysisAI
The bill titled S. 692, known as the "Sustainable Vessel Fuel Act," seeks to amend the Internal Revenue Code of 1986 to enhance the clean fuel production credit. Specifically, it aims to include sustainable vessel fuel in this tax credit, providing it with a special rate akin to that of sustainable aviation fuel. The bill outlines conditions for what constitutes sustainable vessel fuel and establishes a timeline for when these amendments will take effect and terminate.
General Summary
This legislation introduces sustainable vessel fuel as a category eligible for clean fuel production credits. The aim is to incentivize the production and use of environmentally friendly fuels for commercial vessels and ferries. According to the bill, sustainable vessel fuel must not be made from palm fatty acid distillates or petroleum, should have a zero emissions rate, and must meet specific technical standards. The credit for these fuels is set to start after December 31, 2025, and expire on December 31, 2035.
Significant Issues
One significant concern is the broadening of the clean fuel production credit to cover vessel fuel without apparent extensive analysis of the environmental impacts or benefits. This extension could lead to government money being spent on fuels that might not deliver the anticipated environmental gains.
Another issue lies with the claim that sustainable vessel fuels will have a zero emissions rate, which could be ambitious or difficult to monitor. This stipulation might result in practical challenges when verifying compliance and ensuring that the fuels qualify under the defined criteria.
The bill also introduces a longer timeline for the credit's availability for vessel fuels compared to other transportation fuels. This difference might raise questions about whether sustainable vessel fuel is receiving preferential treatment and whether it aligns with other clean energy policies.
A further concern is the level of discretion given to the Secretary to set standards for these fuels. Such discretion could lead to inconsistency in how the standards are applied, leading to a lack of transparency in the evaluation process.
Impact on the Public
For the general public, this bill may promote the transition towards cleaner fuels in the maritime industry, which could contribute positively to environmental health and efforts to combat climate change. By fostering the development of sustainable fuels, there could also be long-term economic benefits through the growth of green jobs and industries.
Impact on Stakeholders
Producers of sustainable vessel fuel may stand to benefit significantly from this bill, as it would make their products more competitive by offering a tax credit. This could attract investment into the development and manufacture of such fuels.
Maritime industry stakeholders, including ferry operators and shipping companies, might find potential cost reductions if sustainable vessel fuels become economically viable due to the tax credits, thus encouraging adoption.
Conversely, traditional fuel producers might see a negative impact due to diminished demand for conventional fuels.
Lastly, the regulatory authorities tasked with implementing and monitoring compliance with these new standards might face challenges in maintaining consistency and transparency in enforcement, which could invite scrutiny over the effectiveness and fairness of the program.
Overall, while the bill seeks to advance environmental goals, it must address these issues to ensure that it delivers genuine benefits without unintended drawbacks.
Issues
The inclusion of sustainable vessel fuel alongside sustainable aviation fuel expands the scope of the clean fuel production credit, possibly without a thorough justification or analysis of the environmental impacts. This issue pertains to Section 2(a) and impacts the overall policy direction of fuel subsidies.
The definition of 'sustainable vessel fuel' as having an emissions rate of zero (Section 2(b)(2)(B)(ii)(III)) may be unrealistic or difficult to verify, leading to potential challenges in implementation and monitoring.
The termination date for the special rate for sustainable vessel fuel is extended to December 31, 2035, in contrast to other transportation fuels that have a termination date of December 31, 2027. This discrepancy could lead to questions about preferential treatment or inconsistencies with wider policy goals. This issue is addressed in Section 2(c).
The provision grants significant discretion to the Secretary to determine and identify standards for sustainable vessel fuel. This could lead to inconsistencies or a lack of transparency in how standards are applied, as per Section 2(b)(2)(B)(iii).
The effective date for the amendments is set for fuel produced after December 31, 2025, which leaves a gap period that may complicate planning and compliance for businesses involved in fuel production. This concern is detailed in Section 2(d).
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the bill is called the “Sustainable Vessel Fuel Act,” which is the official name by which this legislation may be referenced.
2. Special rate under clean fuel production credit for sustainable vessel fuel Read Opens in new tab
Summary AI
The section adds sustainable vessel fuel to the clean fuel production credit under Section 45Z of the Internal Revenue Code, specifying that the fuel must not be derived from palm fatty acid distillates or petroleum, must have zero emissions, and must meet certain standards. The amendments will apply to fuel produced after December 31, 2025, and the credit for sustainable vessel fuel ends on December 31, 2035.