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April 22, 2021 Articles

A Look Inside the Climate Change Initiatives in Biden’s American Jobs Plan

While the plan focuses broadly on making traditional infrastructure improvements, it also encompasses climate-focused policies dedicating hundreds of billions of dollars toward tackling the issue of climate change.

By Lauren A. Ferrigni

On March 31, 2021, the Biden administration announced the American Jobs Plan, which proposes to allocate more than $2 trillion in federal funding over the next decade toward rebuilding and transforming various segments of the nation’s aging infrastructure. While the plan focuses broadly on making traditional infrastructure improvements, it also encompasses climate-focused policies dedicating hundreds of billions of dollars toward tackling the issue of climate change and ensuring that the nation’s infrastructure can withstand the projected impacts thereof. In fact, the majority of the economic proposals outlined in the plan that deal with infrastructure improvements include climate change considerations and provide more detailed insight into several of the Biden administration’s purported environmental remediation and clean energy objectives.

Energy Efficiency and Clean Electricity Standard

A hallmark of the plan’s climate change proposals is the establishment of an Energy Efficiency and Clean Electricity Standard (EECES), which would require the United States to achieve 100 percent carbon-free electricity by 2035. The standard is aimed at cutting electricity bills and pollution, increasing competition in the market, incentivizing more efficient use of existing infrastructure, and continuing to leverage existing carbon free energy resources. Additionally, while there has been considerable debate at the state regulatory level over whether certain sources of zero-emission generation such as nuclear and hydropower should qualify as clean energy, the plan categorizes these resources as “clean” for purposes of the EECES. Specific guidelines concerning implementation of an EECES are not established in the plan.

Modernizing the Electric Transmission System and Incentivizing Clean Energy Generation

The plan points to the recent disruptive power outages experienced in Texas as evidence that our nation’s “aging electric grid needs urgent modernization” to withstand future extreme weather events and promote public health and safety. Moreover, the plan emphasizes that power outages can cost the U.S. economy up to $70 billion annually. To ensure that the United States capitalizes on the opportunity for “reenergizing” its power infrastructure, the plan proposes to invest $100 billion toward building a more resilient electric transmission system and incentivizing clean energy generation. More specifically, the plan seeks to lay the foundation for accomplishing this objective with the following policies:

  • establishing a new investment tax credit targeted at transmission that incentivizes the buildout of at least 20 gigawatts of high-voltage capacity power lines and mobilizes tens of billions in private capital to modernize the power sector;
  • creating a new Grid Deployment Authority at the Department of Energy that allows for better leveraging of existing rights-of-way and supports creative financing tools to spur the buildout of priority, high-voltage transmission lines;
  • proposing a ten-year extension and phasedown of an expanded direct-pay investment tax credit and production tax credit for clean energy generation and storage;
  • expanding the Section 45Q tax credit for carbon capture, making it direct pay and easier to use for hard-to-decarbonize industrial applications, direct air capture, and retrofits of existing power plants;
  • establishing a new production tax credit for decarbonized hydrogen demonstration projects; and
  • employing the federal government’s purchasing power to drive clean energy deployment across the market by purchasing 24-7 clean power for federal buildings.

By investing in modernizing the power grid, the plan seeks to enable the heightened generation and transportation of cheaper, cleaner electricity throughout the United States.

Proliferation of U.S. Electric Vehicle Market

The plan further proposes to allocate $174 billion toward investments in domestic electric vehicle (EV) production and infrastructure development. This program will provide consumers with point-of-sale rebates and tax incentives to encourage increased purchases of American-made EVs. Additionally, the plan seeks to establish grant and incentive programs for state and local governments, as well as the private sector, to support the development of an expanded national network of 500,000 EV chargers by 2030. It would also create a new Clean Buses for Kids Program, implemented through the Environmental Protection Agency (EPA) in collaboration with the Department of Energy, which would replace 50,000 diesel transit vehicles and electrify at least 20 percent of the nation’s school bus fleet. The plan would also take advantage of the purchasing power of the federal government to transition to an all-electric federal fleet in the future. Implementation of the above proposals is anticipated to make the American EV market more competitive with those of China and other global leaders.

Investment in Climate Science and Clean Energy Research and Development

Another important component of the plan involves investing $35 billion in research and development (R&D) efforts for technological solutions to address climate change impacts and secure America’s position as “a global leader in clean energy technology and clean energy jobs.” These significant R&D efforts include the launch of ARPA-C, a climate-focused version of the Advanced Research Projects Agency, to support the development of novel technologies and methods for reducing emissions and strengthening climate resilience. The plan also seeks to invest $15 billion in demonstration projects for “utility-scale energy storage, carbon capture and storage, hydrogen, advanced nuclear, rare earth element separations, floating offshore wind, biofuel/bioproducts, quantum computing, and electric vehicles, as well as strengthening U.S. technological leadership in these areas in global markets.” Moreover, the plan proposes investing $46 billion of federal procurement spending toward the development of clean energy technologies to help meet the President Biden’s goal of achieving net-zero emissions by 2050.

Remediation Efforts and Promoting Environmental Justice

The plan supports engaging in substantial environmental remediation and restoration efforts, particularly in terms of safeguarding clean environmental and energy resources for low-income, vulnerable communities that have already experienced significant economic and public health associated impacts from climate change. The plan seeks to enable the provision of clean, safe drinking water to all by investing:

  • $45 billion in the EPA’s Drinking Water State Revolving Fund and in Water Infrastructure Improvements for the Nation Act grants to replace 100 percent of the nation’s existing lead pipes and service lines;
  • $56 billion in grants and low-cost flexible loans to states, tribes, territories, and disadvantaged communities across the country; and
  • $10 billion to monitor and remediate PFAS (per- and polyfluoroalkyl) contaminants in drinking water supplies and support rural small water and wastewater infrastructure development.

The Biden administration also makes capping hundreds of thousands of orphan oil and gas wells, and restoring and reclaiming abandoned coal, hardrock, and uranium mines a priority through a $16 billion investment to address safety concerns associated with ongoing air and water pollution impacting disinvested communities. The plan would additionally contribute $5 million toward the remediation and redevelopment of Brownfield and Superfund sites to make these once heavily polluted and idle properties new hubs for economic growth.

Moreover, the plan includes a $10 billion investment for establishing a new Civilian Climate Corps aimed at employing a diverse workforce dedicated to the conservation of the nation’s public lands and waterways and advancing environmental justice principles. Overall, the plan targets 40 percent of the benefits of climate and clean infrastructure investments to rural, disadvantaged communities impacted by the market-based transition to clean energy.

Plan Financing

If the plan is passed as reflected in its current form, the Biden administration would be poised to spend more on climate and clean energy investments than any other administration in U.S. history. While details on how the various proposals and programs outlined in the plan are to be financed remain uncertain, the plan identifies Biden’s Made in America Tax Plan as potentially playing an important financing role. If passed alongside the Made in America Tax Plan, it is projected that the American Jobs Plan will be fully paid for within the next 15 years and reduce deficits in the years thereafter. Proposed changes to the corporate tax code that are identified as supporting the financing of the plan include the following:

  • Increasing the corporate tax rate from 21% to 28%;
  • Setting a global minimum tax rate of 21% for U.S. multinational corporations;
  • Denying companies expense deductions and eliminating loopholes for offshoring jobs, while providing a tax credit on expenses for onshoring jobs;
  • Enacting a minimum 15% tax on large corporations’ “book income”; and
  • Eliminating all tax preferences and incentives for fossil fuels.

In addition to these proposed corporate tax code revisions outlined in the Made in America Tax Plan, the Biden administration is also calling for restoring payment collections from polluters into the Superfund Trust Fund to help cover remediation costs when needed.

Prospects for Adoption

Rather than touting a standalone piece of climate legislation, which undoubtedly would face stronger opposition from the Republican Party or could more easily be reversed by a future administration, President Biden has sought to integrate various climate change initiatives more seamlessly across multiple areas of the federal government’s jurisdiction. Notwithstanding this, the Biden administration still likely faces an uphill battle in terms of successfully moving its climate-focused infrastructure plan up through Congress.

Further, the plan may end up looking quite different from its proposed form, in that it will likely require substantial changes from both congressional Republicans and Democrats for approval. While both parties have indicated support for heightened infrastructure investment, the plan is likely to foster significant disagreement surrounding the pervasive climate priorities incorporated throughout the proposed plan. Republicans may express support for pieces of the plan, such as investment in innovation and the need to upgrade traditional infrastructure, but are likely to oppose many of the climate provisions and proposed corporate tax increases to finance the plan.

In turn, Democrats will largely support the climate-focused nature of the plan. However, progressive members of the party may claim that the plan in fact falls short and should incorporate more funding for addressing climate and clean energy initiatives. In the event that Democrats end up incorporating portions of the plan into a bill, the party will likely use the budget reconciliation process for seeking adoption of the plan, thereby allowing the proposed legislation to pass in the Senate with a simple majority vote.

While there is likely a long road ahead in terms of the parties being able to reach a consensus on the scope of the plan and how it should be financed, the proposed plan serves as an important starting point for future negotiations with Congress on climate-related issues. In addition, the proposed plan provides more detailed insight into the climate change and clean energy priorities of the Biden administration and the associated initiatives that may be forthcoming.

Lauren A. Ferrigni is with Fennemore in Phoenix, Arizona.

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