THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING BY
PRESIDENT'S SENIOR ECONOMIC ADVISOR GENE SPERLING,
SECRETARY OF ENERGY FEDERICO PENA,
TREASURY DEPUTY ASSISTANT SECRETARY FOR TAX ANALYSIS
JOHN KARL SCHOLZ,
STAFF SECRETARY TODD STERN,
SENIOR DIRECTOR OF NEC PETER ORSZAG
The Briefing Room
3:15 P.M. EST
MR. TOIV: Good afternoon. As you know, the President's radio address tomorrow will be on the subject of climate change. He's going to talk about some of the proposals that he's going to have in his budget on that subject. This briefing is embargoed until the President's radio address is delivered tomorrow morning at 10:06 a.m. This is an embargoed briefing.
Our briefers are Gene Sperling, the President's Senior Economic Advisor; Energy Secretary Federico Pena; Karl Scholz, who is the Deputy Assistant Secretary for Tax Analysis -- Secretary of Treasury, that is; and Todd Stern, who is the Staff Secretary here at the White House, who has been coordinating our effort on climate change for quite a long time now. Some will give statements; some will be available for Q and A.
MR. SPERLING: Hi. Today the President is unveiling a $6.3 billion package designed to address the issue of challenge of climate change; $6.3 billion which is designed to provide positive incentives and research to reduce greenhouse gas emissions. It is divided between $3.6 billion in tax cuts over the next five years and $2.7 billion in increased R&D spending.
When the President announced his position at the National Geographic Auditorium he promised that there would be at least $5 billion of combined tax cuts and R&D in his new budget. This is $1.3 billion more than that. And we think that this package is a very good example of what we spoke about when we said that there were win-win opportunities for positive incentives that would clearly show how we can address the issue of climate change and strengthen our economy at the same time.
I am going to, in a moment, turn over the mike to Secretary Pena who is going to go through the R&D portion. And we have John Karl Scholz, who is the, I think, heir-apparent Secretary of Treasury, but currently the Deputy Assistant Secretary of Treasury for Tax Policy, and really the administration work horse on tax policy -- will be here to go through some of the specific tax cuts that are in here, including the solar roof tax credit, which the Vice President is announcing today.
Let me focus on one aspect of our plan before I turn it over to Secretary Pena. And I should also say Todd Stern will be here to answer any other questions people have on our diplomatic -- or congressional strategy. One aspect I'd like to focus on before I turn it over to Secretary Pena, however, is a tax incentive that we are announcing to inspire the production and marketing of fuel- efficient cars that could help reduce greenhouse gas emissions significantly.
The transportation sector now accounts for one-third of the greenhouse gas emissions in the United States and is the fastest growing sector. Between 1990 and 2010, the transportation sector is expected to increase 43 percent, relative to 24 percent for building and 21 percent for the industries. Therefore, it is important that part of our initiative at each step focus on what we can do to slow down the growth in greenhouse gas emissions in the transportation sector.
The Clinton administration and the auto industry have been working together for some time to reduce those emissions. Five years ago, the President of the auto industry launched our partnership for a new generation of vehicles -- what we refer to as PNGV -- which was to develop a production prototype of a family car with three times the fuel economy of today's comparable car by 2003, 2004. To provide strong incentives for Americans to purchase these efficient cars, our budget will propose the following set of tax cuts related to the automobiles.
In the year 2000, the President's budget proposes a tax credit of $3,000 for any vehicle that gets twice the base fuel economy for its size class. The $3,000 credit would be available for purchasing of qualifying vehicles after December 31, 1999. The credit amount would phase down to $2,000 in 2004, $1,000 in 2005, and would phase out in 2006.
We also propose a $4,000 tax credit for each vehicle that gets three times the base fuel economy for its class. The $4,000 credit would be available for purchases of qualifying vehicles after December 31, 2002 and before January 1, 2007. These credits amount to $660 million over five years and would be available for all qualifying vehicles, including cars, minivans, sports utility vehicles, pick up trucks and electric vehicles.
I'd like to make one important point, which is our goal with this tax incentive is straightforward. We want to provide an incentive for the automobile industry and for the American consumer to produce and to purchase the cars of the future that can help us reduce greenhouse gas emissions and address the climate change problem that this country and the world faces.
What we put forward as to its exact details and designs is a proposal for consideration. We very much want to work with the big three, with environmental groups, with the UAW to ensure that what we're doing is the best targeted to reducing greenhouse gas emissions and done in a way that does not disfavor our industries or our workers. And so while we put this proposal out for consideration, we plan over the next several weeks to consult closely with all interested parties and to be open-minded as to what is the best way to ensure that we have a targeted tax cut for a new generation of cars that can address the climate change issue. Our goal is to be as effective as possible in reducing climate change --greenhouse gas emissions. And we look forward to working with all parties in making sure that our legislative proposal that we hope to pass this year has as much support and is as effective as possible.
With that, I'd like to turn it over to Secretary Pena. I think that, as you will see, day in, day out, as we address climate change that Secretary Pena will in very many ways be the point person for this administration on the R&D initiatives that we want to take on, and for future efforts down the road that will deal with the energy industry and our energy future as it affects climate change. So with that, I give you Secretary Pena.
SECRETARY PENA: Thank you very much, Gene. Let me, before I address the R&D aspects of the President's announcement, put this in a broader context. Please recall that when the President announced our position on greenhouse gases, as we were going into Kyoto, he said we were going to have a three-staged process.
In stage one, which was between 1998 and about 2004, we would invest in technology, provide tax cuts, look at our own federal use of energy and take some other steps to begin to reduce both energy use and reduce greenhouse gas emissions. And then in phase two, between approximately 2004 and 2008 or so, we would try to work out the specific mechanisms of international trading, joint implementation, which are additional international tools to help us reduce the effort in reducing greenhouse gas emissions. And then in phase three, commit ourselves to the binding aspects of the Kyoto protocol. So it is in that context that the President is making the announcement.
Let me talk about the $2.7 billion the President has announced for R&D spending. It has three aspects to it. Number one, it will complement the deployment of new technologies that will reduce greenhouse gas emissions from the tax side. Secondly, it will complement our ongoing efforts to better understand the science of climate change, to develop new technologies that will improve energy efficiency and otherwise reduce greenhouse gas emissions. And thirdly, the technology budget will help move technologies from the laboratory, from the workbench on the shop floor and then out into consumers' homes and to our vehicles.
The technology investment is $472 million for 1999, and this is, of course, above the 1998 current investment. The Department of Energy is requesting the bulk of that increase with about $330 million of additional resources. In over five years, the total investments rise to $2.7 billion, with almost $1.9 billion for the Department of Energy's research and development program.
You have heard the President speak, I think very eloquently -- and I've talked about this myself -- about our belief of the role that technology can play in helping us reduce greenhouse gas emissions. We will invest in new technologies that will use energy more efficiently and cut energy bills. We're going to bring down the cost for clean renewable energy sources such as solar and wind power. And let me give you a few examples.
As you know, the President announced that by 2010 we would install one million solar roofs, either photovoltaic or hot-water systems, in that time frame. Today the Vice President in California is going to be addressing that issue. But let me say we are very confident that we will not only meet the one million solar roof target, we will exceed it.
The Department of Energy's budget request includes $100 million in fiscal year '99 to improve the performance and to reduce the price of solar and other renewable energy sources. We will partner with the private sector so that the private sector will take the lead in bringing these new technologies into our factories and into our homes.
Let me give you an example of that. Gene alluded to the Partnership for a New Generation of Vehicles. We have a goal of developing a mid-size car that will get us 80 miles to the gallon with the same safety, comfort and pricing considerations that consumers want in cars today. A product prototype is expected by the year 2004. But let me emphasize that we've already seen the major car companies announce that they're going to be marketing cars which are much more fuel efficient than today, getting 50 to 60 miles per gallon as early as 2001.
So the climate change technology initiative will include $277 million for the Partnership for a New Generation of Vehicles, which is up from the current amount we're investing -- $227 million.
Let me give you three examples of what happened just a few weeks ago when the automakers announced their new vehicles, where the partnership helped contribute to their breakthrough technologies. Number one, General Motors announced an advanced battery for their ED-1 which will take them from 70 miles to 140 miles per charge. That is a direct result of the partnership that the Department of Energy's labs formed with General Motors.
Secondly, there was an announcement by all three manufacturers about the use of lightweight materials which will reduce the weight of cars by 30 to 50 percent -- a direct result of our partnership.
Thirdly, there was an announcement of an advanced diesel hybrid car which is linked to an electric motor, and that came directly out of our Partnership for a New Generation of Vehicle program.
So those are some examples of what we already know is working with the current investments we've made in the last several years, which gives us a very high degree of confidence that these new technological investments are going to pay off in years to come.
We are also going to cut the federal government's use of energy. Today the federal government is investing $8 billion a year in our own energy bill. Our goal is to reduce energy by our federal buildings by 30 percent by the year 2005. We have recently announced a $750 million energy savings performance contract where private companies come into our federal buildings, make their own investments at their own cost, with new technologies to reduce our own energy cost. We then take those savings and pay the private company back for the investments that they make. It is already working. That's going to be a very important part of our strategy.
Thirdly, in terms of appliances, we're going to reinvigorate the way in which we set new standards for appliances. Some time ago we made a decision about new standards for refrigerators. Refrigerators today are three times as efficient as those made in the 1970s. But in three years, because of the recent standard we issued, new refrigerators will run on the energy it takes to light a 50 watt bulb, which is one-fifth the energy of old appliances. Another example of the kind of technology that we're supporting is something called a horizontal access washing machine. Some of you may have learned about this very recently. The companies that are making these machines, which use half the amount of water and half the amount of electricity, cannot keep up with demand on the part of consumers.
A very important part of the research that is new that we have not invested in in the past very much is carbon sequestration, or capturing carbon dioxide in forms where it does not enter the atmosphere. We are investing in a number of strategies which range from capturing CO2 in trees, other plant matter, oil and gas wells, in aquafirs or the ocean. Our DOE budget will increase to $30 million from about almost nothing to allow us to move on carbon sequestration.
Let me conclude my comments by simply saying that almost every month we observe a new technological breakthrough, whether in fuel cells or cars or appliances or other technology. And we have seen that when we partner with the private sector we can make extraordinary breakthroughs in new technologies that reduce energy consumption and also clean up the atmosphere. So we have a very high degree of confidence that the President's announcement is going to move us in a long way of ultimately reaching the goals and the objectives of the Kyoto protocols that were agreed to very recently.
I'll be happy to answer your questions in a moment. Thank you.
MR. SCHOLZ: In our handout we describe briefly the nine tax incentives that we have that supports the President's climate change technology initiative. The tax incentives are organized around the four major carbon emitting sectors of the economy. I'm just going to very briefly go over a couple highlights.
For buildings, important energy emitting sector, we're providing a tax credit, a 20 percent tax credit for energy efficient building equipment. This is going to provide a subsidy for extremely efficient fuel cells, central air conditioners, gas and electric water heaters and gas and electric heat pumps.
For industry, we're providing a 10 percent investment tax credit for combined heat and power systems, frequently called cogeneration equipment. This is a very promising energy saving innovation that we think the investment tax credit will stimulate and yield great dividends.
For transportation, Gene has already mentioned the tax credits for highly fuel efficient vehicles. And for electricity, we propose to extend -- or the President proposes to extend the tax credit for electricity produced from wind and biomass. There are several other initiatives that we are happy to talk about in questions and answers, but those are several highlights from the tax portion of this initiative.
MR. TOIV: Questions?
Q Is it possible at all to put a rough calculation on what percentage all this will bring the United States towards meeting the -- Kyoto, or is that just too amorphous?
SECRETARY PENA: We can't quantify that for you today, and let me tell you why. Our strategy in reaching the goals of Kyoto include not only technology investment and the tax incentives we've talked about today, but they also include international trading, they include joint implementation and some other strategies. So we need to sort of give you a total picture of how each of those strategies, once implemented and working will get us to meet the goal that was agreed to in Kyoto.
And today, because we're only dealing with one aspect of it, we can't give you a very precise figure. But we're very confident that in combination, all of these strategies are going to ensure that we meet the goal that we agreed to in Kyoto.
Q What do you say to the rumblings in Congress that this is a back-door way of implementing the deal without --
SECRETARY PENA: A back-door deal of?
Q A back-door way of implementing the treaty without getting it ratified in the Senate?
SECRETARY PENA: It is a good public policy to reduce the $8 billion we waste every year on the part of the federal government in using energy, irrespective of Kyoto. It is a good public policy to find a way to make power plants that use three units of coal to only produce one unit of power. It is a good public policy to have refrigerators and washing machines and light bulbs that are much more energy efficient than we have today.
These are things we ought to be doing anyway to reduce the federal budget, to reduce the cost to consumers, and also to clean up our environment. So in that sense, this three-stage process that the President outlined when he made his announcement makes a lot of sense and will methodically get us to a point before we enter the third stage of binding commitment to make sure we're making significant progress both in the science and in the technology.
MR. SPERLING: Can I just add one thing? Kyoto -- what's significant about Kyoto was the timing on binding commitments. There has, as best I know, always been, before Kyoto, efforts, PNGV included, supported by both parties to take voluntary steps by this country, particularly in ways that were this type of win-win strategy to try to address the issue of climate change, implementing -- what we said is that we would not even send the Kyoto treaty to the Senate until there was significant developing country participation. So there is nothing that we're doing here that is in any way locking the country into a binding commitment without ratification by the Senate. This is the type of voluntary win-win effort that I think has had support for years from people on both sides of the aisle.
Q Why did the administration not take a consumption tax approach, basing a tax on how much individual fuel contributes to air pollution or climate change?
MR. SPERLING: We prefer tax incentives.
Q But your energy conservation group yesterday released a report arguing that that would be the most effective way in the long run of actually reducing emissions, by, in effect, reducing consumption if you tax the fuel according to how much they pollute.
MR. SPERLING: We have always balanced what's best for the economy with our goals for reducing greenhouse gas emissions, and we think this is the right strategy. We're not interested in using tax increases. That's not an option that we spend any time considering. We said from the beginning that our focus was going to be on providing incentives; we are still having a price incentive, but we're doing it by giving people a positive price incentive to both produce and purchase and consume products that people use that are efficient and would reduce greenhouse gas emissions.
So we just disagree as to the strategy for going forward. We want to press these tax incentives and R&D investments. And we think that these are, as we said, the type of win-win scenarios that we feel we can get support across the board from and start to make some efforts to address this problem even this year.
Q Some of the environmental groups have said that $6.3 billion is a good start, but no so much different from past budgets, that there has been money before for R&D. Why is this different this year? And also, why $6.3 billion? Can you talk about how you arrived at that figure? Why not $3 billion, why not $10 billion?
MR. SPERLING: What we did was, because the President was going to make his speech in October, what we did was that we had both the people working on climate change, together with the budget team, and we looked at what we felt was good policy -- and the Secretary talked about this -- reflecting some of the recommendations from the PCAST recommendation, and also what we could do based on the recommendations that we had gotten from the interagency group that was working on the tax cuts, and what we could fit into the budget in light of the fact that we are in the second year of a balanced budget plan.
And we felt at that time that we could safely say that we would be able to fit $5 billion into our budget. As we went through, we found that we were able to do more. And the President and Vice President both wanted to try to go above that goal. So I don't think it's much different than any other priority. You try to do the most you can in light of other competing priorities and the budget constraints. And in this case I think we also were guided by some of the recommendations -- not all, but most probably -- or many of the recommendations that came from PCAST, which stands for Presidential Committee of Advisers on Science and Technology. I knew that.
Q How will this package be paid for?
MR. SPERLING: Our overall tax cut package is a revenue neutral package which we'll announce in all its details on Monday, but it will be between $20 billion and $25 billion. And it is paid for by closing what we felt were unnecessary loopholes or corporate subsidies in the tax code. And all of those details will be out on Monday. And Treasury will have a brutally exciting briefing on all of them, which I don't think anyone should miss. I've gotten in several times, and it's a thriller.
But the key thing is that we will have -- is that this is a revenue-neutral package. It is $24 billion in tax cuts for mainly child care and climate change and education. And it will be paid for with loophole closures and reducing unnecessary corporate subsidies in the tax code.
Did you want to say on how this reflected the past proposals, the amounts? Or, Peter, do you want to?
MR. ORSZAG: Just in answer to the one question that had been raised about current levels of activity versus what this represents. Again, this $6.3 billion is above current funding levels, so it does not -- it goes above what the FY'98 funding levels are. And just to give you an indication of what's happening in the near term, under this proposal, the tax package plus R&D in FY'99 would amount to $1.7 billion. That's relative to $819 million in FY'98. So more than doubling in one year. So this is, in answer to your question, a significant increase off of current levels.
MR. SPERLING: So just making clear, the $6.3 billion is above the baseline, not the total. That is above. That is extra above what is already in, and so from '98 to in our new budget, the amount that is part of our overall climate change initiative goes from $819 million in '98 to $1.713 billion in '99. And I think that is in the paper that you should have.
Q On the transportation section, how much of this --the credits start in January of 2000, but in 2000 and 2002, how much of a -- to what extent will people be able to take advantage of this in those first four years, considering most of the auto makers are talking, at best, of having these hybrid cars in somewhere around the 2004 period, 2003 or maybe not even then. This is a back-loaded thing.
MR. SCHOLZ: No, the distinction is on the two times versus the three times automobiles, and so the years that you're talking about are exactly right; 2004 is the year where the three times vehicle is expected to be manufactured. The two times, the cars getting two times gas mileage, we expect to see on the market as early as 2000 or 2001. And hence the timing of the two times credit versus the three times credit.
Q So you think in 2000 a substantial number of these vehicles will be available?
MR. SCHOLZ: 2001 is the year, again, we're anticipating. That's far enough off into the future that we wanted, in designing the credit, to give the possibility if things are accelerated at all.
Q But the credit starts at January 1, 2000, which would be the 2001 model year. So you're saying the 2001 model year you feel you'll have these cars available?
MR. SCHOLZ: We think that there is a sufficient likelihood that they'll available that we wanted to make sure that the tax credit was available at that time.
MR. SPERLING: Our goal is to provide an incentive -- the goal is not simply to predict what the current time line is; our goal is, obviously, to provide incentives for more activity in this area to take place and competition. And to the degree that this helps spur competition for companies -- in all of these tax cuts, part of the goal is to spur competition and to spur a market that provides more people a positive market incentive to develop and market products that lower greenhouse gas emissions.
So it's not just predicting where things are before a tax incentive. The goal, with the tax incentives and the R&D, to try to encourage this type of market behavior.
Q What's the likelihood of getting this budget package to Congress given that some Republicans are talking about holding it up until they get the protocol to ratify?
MR. SPERLING: I think this is going to be a popular proposal. I think these are, again, the type of tax incentives in which, to the degree that they are paid for and under fiscal discipline, provide a win for industry. They're a win for consumers. And I think that they'll be popular. I think they will focus attention on these types of products and increase consumer awareness and will increase the degree and incentive for companies to go out and support having these tax incentives and then try and take advantage of it.
So perhaps some may oppose having these tax incentives, but we think we really do -- we expect this to be a popular proposal. And I think that what you'll see is that while there are differences among people on our target or timetable or what we exactly agreed to in Kyoto, most of those people say that they care about this issue, that they want to do something, that they think that this is worth addressing, but they are -- they may have differences with us on exact targets or exact timetables. So for all of those people, this is a chance to join hands and say, well, here's something we can all agree on. So our hope is that whatever controversy exists in other aspects, that this is something that can bring people who care about this issue but maybe have different opinions on the exact timing of the problem, this is a chance to people who care about climate change who say they care about climate change to come together and do something positive.
MR. STERN: Let me just add one word on that. I concur with all of the things that Gene said. I would also mention that I know that Senator Byrd's office, just as an example, is quite interested in working with us on the technology package. And I heard it on a panel I was on recently with a senior member of Senator Byrd's staff. There was a similar kind of question, and they made it quite clear that they would be interested in working on the technology package.
Q Secretary Pena, could you tell us which of the PNG technologies are the ones that you personally regard as the most promising at this point?
SECRETARY PENA: I gave you three earlier. I think you heard those, and they are already being implemented in the announcements made by the automakers just a few weeks ago. In addition to that, I think there is extraordinary promise in fuel cells. We just made an announcement about three months ago with some U.S. companies about a major breakthrough in fuel cells which can be operated on gasoline.
Heretofore, the concern had been you could only operate them on compressed natural gas or ethanol or methanol or hydrogen, and now we think we have a breakthrough which will allow us to use the current infrastructure -- service stations all over the country -- using gasoline which can generate those fuel cells and run cars. So I think that would be an extraordinarily promising breakthrough. There are lots of things we're doing in batteries. There are lots of things we're doing on lightweight materials. And of course, the most recent announcement about the clean diesel engine, which is one of the concepts that people seem to be embracing would be another major breakthrough.
So almost every year we are seeing new announcements on new breakthroughs which people thought were not possible, and now we're realizing they are possible, they are doable and they are commercially feasible.
Q How do you respond to the concern of a lot of environmentalists that it seems to -- direction of the -- is much more toward conventional fuels rather than -- other fuels that might require a new infrastructure?
SECRETARY PENA: Well, the example I gave you, the fuel cell that we are working on can run on either compressed national gas, methanol, ethanol or gasoline. So our challenge is to work with the fuel industry to see if we can develop a diversity of fuel sources; but also to have the infrastructure in place so that fuel source will be available to customers as readily as other fuel sources are now available. So that's sort of the challenge. But we see a diversity of fuels out in the marketplace over a period of years.
Q Related to that, how do you assess the credit, then, if you're doing it based on fuel economy if you're talking about other possible inputs to the vehicle other than gasoline? And is it fair to count it based on the gasoline input rather than the pollution output?
SECRETARY PENA: I think -- I'll have the Treasury folks talk about -- it's miles per gallon and efficiency that you're looking at.
MR. SCHOLZ: There will be conversions, standard conversions that will be done for alternative fuels in order to put them on an equivalent scale. And as Gene and others have emphasized, details on this proposal are still to be worked out with people from industry, from the environmental community and elsewhere who want to contribute.
But the general idea is that there would be a conversion that would not advantage one type of fuel versus another.
Q -- input rather than the output -- the input of fuel, rather than the output of the pollution, right? If somebody has created a system that handles, like a fuel cell, for instance, that handles the pollution, that creates less pollution per amount of gasoline, is that somehow disadvantaged?
MR. SCHOLZ: No, it will not be. So that the conversions would be done so as to, again, not disadvantage promising alternative fuel sources for automobiles.
Q -- numbers estimate on how many people will actually get these various levels of benefit?
MR. SCHOLZ: Through 2003 -- the market we expect to take off after 2003 -- but through 2003, on the rough order of magnitude of a quarter of a million cars subsidized. Those are mainly two times, because the three times credit doesn't go into place until 2003.
Q Is there any link to ability to pay or is it just based on the kind of product you buy? In other words, even a millionaire gets the tax credit if he buys the right vehicle?
MR. SCHOLZ: Correct. In the sense that the credit is going to be for the purchase of one of these highly efficient vehicles is tied to the purchase of a good.
Q Is there anything in the package for -- regular old daily household light bulbs --
SECRETARY PENA: Two answers to that question. Number one, we are now working on a new light bulb that would be far longer lasting than current light bulbs. And, secondly, by reducing -- in partnership with not only our laboratories, but the private sector -- the cost of those light bulbs, and with some public education, we think consumers will begin to make those kinds of investments knowing that over a very short period of time they would recoup the, in some cases, additional cost -- but hopefully a modest additional cost -- and then have reduced energy costs thereafter, after they recoup the investment.
So there is some public education involved here and that's what the President was alluding to the other day when he said, why isn't it that more consumers aren't using this. And we're going to participate with a number of actors around the country, and players, to find a way to do more public education about these technologies.
Q -- bulbs exist today? I mean, the question is, is there a credit in there for people to buy those? If they cost $20 a bulb nowadays --
SECRETARY PENA: Not on the bulbs. Not on the bulbs, apparently.
MR. SCHOLZ: There is a subsidy for -- Secretary Pena said fuel efficient homes, for highly efficient homes. But that tends to be focused on appliances and other aspects of the home, a whole home credit. So there is no specific light bulb credit.
Q Why not, when that's something that's so widely used and the technology exists and we know the savings is there, why isn't --
MR. SCHOLZ: In the design of the tax credits, a really crucial point is that what you want to avoid in tax policy is to subsidize, or disproportionately subsidize behavior that people are already adopting. And so what we've tried to do here in designing these incentives are find promising technologies that already exist, many of which -- or all of which are highly energy efficient, and then try to raise the bar by providing incentive for consumers to adopt those technologies.
And we think the technologies that we've identified are the most promising and the most administrable of the various options that we considered.
MR. SPERLING: I just want to say an example on the car taxes, here is an area where there is tremendous work, there is exciting signs of technology breakthroughs. An by providing what will be I think American consumers will think is a pretty exciting, if not dramatic tax incentive of $3,000 to $4,000 for fuel efficient car, that that will strongly affect those who are responsible for the long-term design, production and marketing of cars. And it is that positive interaction that we have talked about in creating market-based incentives and market-based systems that are win-win strategies -- wins for consumers, win for industry and a win for climate change by reducing greenhouse gas emissions.
And so I think it is very much the positive effect providing those incentives and getting the consumer pull to have people produce them; or, to the degree people do produce them and then are eligible for the tax incentive, the degree that that inspires that industry to go out and inform people for their own market incentives as to the benefits of that type of technology in products people buy in their daily lives.
Q Criticism of the -- solar roofs proposal was that it was more symbolic than substantive in terms of real reductions in greenhouse gases. I know you can't give us a number, but is there some way to characterize the kind of down payment this represents in terms of meeting our obligations?
MR. SPERLING: Probably speaking for all of us, I think that as time goes on we may have a better feel on the specific items. Right now we are working and preparing for overall testimony on some of our projections, and I think that in the near future you will see an analysis and testimony from Janet Yellen that will give more details. But I think it's better to be safe than overly speculative on the individual items. I think at this point we need to do more work to know, as Secretary Pena said, whether some of these can be broken out and analyzed alone or whether it makes more sense to analyze them in interaction with other policies that we'd be implementing.
Q In the building area, is the 20 percent tax credit envisioned mostly for commercial apartment or even apartment buildings or commercial buildings, not necessarily homes? Or is it also envisioned that it would be for homes?
MR. SCHOLZ: It will be both. In particular, the central air conditioning was likely to be disproportionately residential or homes. Other things are more likely to be commercial. So it will be a mix.
Q So it's not just those huge air conditioners for buildings; it also would be home-type --
MR. SCHOLZ: It should be very highly efficient central air conditioning that would be used in homes.
Q And in the home purchase, if I were buying a house, what kind of house would I have to buy to be able to take advantage of this $2,000?
MR. SCHOLZ: Why, a highly energy efficient house, of course.
Q Is it readily out there?
MR. SCHOLZ: There is a model energy standard out here that the credit is going to be based on. So the idea -- again, details to be still worked on, but the idea is for homes that are 50 percent more efficient than this model energy standard would be eligible for this credit. So again, on all of these credits the design is to try to set the bar quite high.
Q Are these really market incentives, because it sounds like what you're describing are subsidies on the demand side, like giving people a tax break on buying a car and subsidies on the production side by giving these partnerships with private enterprise? So I'm curious, if people really want fuel-efficient cars or good houses like you're describing, why don't they just buy them? Why do you need to do these programs?
MR. SPERLING: It is not our opinion that the only things that affects behavior in this area is price alone. It is clear that there are many kinds of behavior people do because they care about the environment if they're better informed. But you cannot deny the positive cycle of incentives and information that can happen to the degree that there is a $3,000 to $4,000 tax incentive out there for consumers, that obviously creates a tremendous market incentive for the auto industry to compete among itself to see who can get there best, who can get there first. So that is an incentive -- by putting the incentive with the consumer, you obviously create a great incentive for those who want to sell to the consumers and whose profits and livelihood are based on that.
So that provides a very positive incentive for auto companies, a price incentive for them to work harder in this area and to do more. And then, when auto companies have a product, they then will have a tremendous incentive to inform the American public about the benefits of the product, about the tax incentive. And that itself creates a positive information flow, which may make more people care and understand about this and want to buy more fuel-efficient cars, which only increases the incentive more for those who produce it to produce in this area.
So I do think -- I would not underestimate the degree that the market works -- can work in a virtuous, positive cycle like this if we've chosen the right incentive to do so. And I think, in light of the projected growth in the transportation industry, in light of America's love and fascination with cars, that this is, we think, a promising incentive.
Thank you.
MR. TOIV: Thank you all. Once again, a reminder -- that was an embargoed briefing. It's embargoed until 10:06 a.m. on Saturday. The briefer who had not been introduced was Peter Orszag. We will have another briefing starting here within about five minutes on the civil aviation agreement between the United States and Japan. That will not be embargoed, of course, and we'll be out here in a few more minutes.
END 4:01 P.M. EST