Biden’s Jobs Plan Sets Bold Goals For Infrastructure, Climate Change, And The Economy

Vinson & Elkins LLP

On March 31, 2021, President Joe Biden announced the American Jobs Plan (the Plan). The Plan proposes approximately $2 trillion in government funding over the next decade focused on infrastructure, the electric grid, high-speed broadband, climate change, and jobs creation. According to the White House, “[t]he American Jobs Plan is an investment in America that will create millions of good jobs, rebuild our country’s infrastructure, and position the United States to out-compete China.” The Plan outlines a vision of government investment in infrastructure and technology that is a radical departure from the practice of the last few decades—invoking both the federal highway program of the post-WWI era and the space race in setting out the scale of its goals for renewed public investment in infrastructure and resilience with a focus on the energy transition.

While the president did not provide details for how these goals would be accomplished, the announcement provides insight into the economic priorities and broader policy goals of the Biden Administration. The Plan seeks to build on statements President Biden made on the campaign trail, focusing on boosting resiliency to combat the effects of climate change, strengthening American manufacturing and securing supply chains, and investing heavily in a clean energy economy through the growth of electric vehicles (EVs) and support for renewables, all built upon the assumption that such investments will boost “green” jobs in the US economy. Many of the measures in the Plan reflect the president’s goal of achieving 100% carbon-free power generation by 2035, including calls for a national Energy Efficiency and Clean Electricity Standard (EECES).

Absent from the Plan is any discussion of how this climate-focused infrastructure package plays into the Biden Administration’s preparation of its Nationally Determined Contribution (NDC) to be submitted under the Paris Agreement. However, the Biden Administration is currently in the process of determining the United States NDC—which it has committed to announce at an Earth Day summit later this month—suggesting that the Plan likely contains many of the elements that will be considered in determining the amount of carbon emission reductions the United States can commit to achieving.

The Plan allocates 40% of the total price tag toward climate and clean infrastructure investment, with a focus on spurring investment in socio-economically disadvantaged communities. This comes on the heels of the announcement of the White House’s new Environmental Justice Advisory Council, and further underscores the Biden Administration’s commitment to environmental justice as a key priority. Regardless of whether or not the Plan becomes a reality, the proposals within it represent another clear signal from the administration that environmental justice issues will play a pivotal role in targets for federal investment.

Also not fully fleshed out is how the various Plan programs will be financed; however, it appears the Tax Code will play an important role. The Plan is paired with the president’s “Made in America Tax Plan,” which proposes increasing the corporate tax rate from 21% to 28%, setting a global minimum tax of 21% for US multinational corporations, and a minimum 15% tax on a corporation’s “book income.”

A summary of the Plan’s key energy-related financial incentives and tax provisions follows.

Infrastructure Investment

The Plan calls for $621 billion in transportation infrastructure funding relating to repairing roads and bridges, modernizing public transit, investing in passenger and freight rail service, and improving ports, waterways, and airports. The Plan would also include significant incentives to promote the electrification of transportation, including a grant and incentive programs for EVs and charging stations, replacement of diesel transit vehicles and electrification of at least 20% of all school buses, and electrification of the federal vehicle fleet. Another component of the plan calls for significant investment in passenger rail and bus services, and the modernization of bridges, roads, airports, and ports of entry. Certain specific incentives called for by the plan are outlined in the table below.

Incentives Target Total Funds Allocated under the Plan Specific Goals for Funds
EVs $174 billion
  • Improve supply chain resiliency (e.g., battery manufacturing, rare metals sourcing)
  • Retool existing auto manufacturing capacity
  • Point of sale rebates and tax incentives for EV purchases
  • Construct 500,000 EV charging stations by 2030
  • Replace 50,000 diesel-engine public transit vehicles and electrify at least 20% of the yellow school bus fleet
Public Transit $85 billion1
  • Doubles federal funding for public transit
  • Reduce repair backlog
  • Expand bus and rail transit to areas across the country
Roads and Bridges $115 billion
  • Modernize 20,000 miles of highways, roads, and main streets
  • Fix the “10 most economically significant bridges in the US”2 and 10,000 smaller bridges
  • $20 billion for increased road safety measures to reduce potential for crashes and fatalities
Airports, Waterways, Ports $42 billion
  • Fund existing Airport Improvement Program
  • Support terminal renovations
  • Spur development of multi-modal connections to nations airports to reduce vehicle traffic
  • Fund the Health Ports Program; designed to reduce air and noise pollution impacting neighborhoods near ports, which are disproportionately communities of color
Addressing Historical Community Fragmentation from Infrastructure Development $20 billion
  • Reconnect neighborhoods cut-off from larger communities by prior infrastructure projects
  • Support development of advanced carbon-sink payments and longer-lasting infrastructure

An additional $50 billion is dedicated to improving “infrastructure resilience,” or the ability to recover from disruptions such as natural disasters and terrorist attacks, with a focus on investment in disadvantaged communities and shoring up natural ecosystem services that can mitigate extreme weather impacts. The Plan makes note that the Biden Administration would seek to streamline infrastructure permitting, but the likelihood of success of such efforts is in doubt. The Trump Administration also attempted to expedite environmental permitting and reviews for infrastructure projects under the National Environmental Policy Act by reducing opportunities for public participation, which was promptly challenged by a number of states and environmental groups. While the Biden Administration would likely take a very different approach, the example from the prior administration highlights the difficulty of expediting major federal projects and satisfying key stakeholders.

As presented, the Plan does not make clear how it would spend these funds on infrastructure improvements. Were the proposed spending for the infrastructure improvements outlined above to move forward in Congress, a key question will be whether the Federal Government will seek to create public-private partnerships for infrastructure improvements, similar to the models for clean energy development projects outlined in the 2020 Energy Act previously summarized here, or if the United States would seek to directly contract for and oversee infrastructure improvements.

Clean Water, Electric Grid, and High-Speed Broadband Investment

While many water systems have upgraded their infrastructure over the years, pockets of aging infrastructure still exist, including pipes found in both public water systems but also private homes and property that pose risks of lead contamination in drinking water. To address these challenges, the Plan calls for replacing 100% of the nation’s lead pipes and service lines and upgrading and modernizing water systems and infrastructure. As with other areas, the Plan is light on details though it does call for Congress to invest $45 billion in existing U.S. Environmental Protection Agency programs such as the Drinking Water State Revolving Fund, a pre-existing federal-state partnership that provides low-interest loans to both public and private water systems, and the grant program established under the 2016 Water Infrastructure Improvements for the Nation Act (WIIN Act). WIIN Act grants already focus on funding improvement projects in small and socio-economically disadvantaged communities. The $45 billion would be on top of an additional $56 billion targeted at modernizing water systems for states, tribes and territories.

The Plan would also provide $10 billion for monitoring and remediation of per- and polyfluoroalkyl substances (PFAS). PFAS, also known as “forever chemicals” have been linked to certain types of cancers and other diseases. These man-made chemicals were commonly used in fire-fighting foam and consumer products, such as cookware, food packaging, and stain repellants, and also in automotive industrial applications. PFAS are currently the subject of intense state and growing federal scrutiny, having been detected in a number of public water systems. Increased monitoring is likely to lead to discovery of new sources of PFAS contamination and drive increased remedial action.

The Biden Administration proposes investing $100 billion to build a more resilient electric transmission system and modernize power generation through tax credits (discussed below), establishing new agencies supporting state, local and tribal governments, and using the federal government’s purchasing power to increase demand for clean energy deployment. The goal is to add at least 20 gigawatts of high-voltage transmission lines, which is seen as essential for ensuring grid reliability while massively expanding renewable generation capacity.

The Plan further seeks to support distressed communities through a commitment to expanding decarbonization projects, including the establishment of “ten pioneer facilities that demonstrate carbon capture retrofits for large steel, cement, and chemical production facilities.” The Plan would also prioritize the building of high-speed broadband infrastructure and reducing the cost of broadband internet service.

Energy Tax Credits

The Plan includes a number of new and expanded tax credits with respect to energy, including:

  • A ten-year extension and phase down of the investment tax credit for energy property (which includes energy storage property) with a direct pay option
  • A ten-year extension and phase down of the production tax credit for energy property with a direct pay option
  • An expanded carbon capture Section 45Q credit with a direct pay option
  • Expanded home and commercial building energy efficiency tax credits
  • A new investment tax credit with respect to high-voltage capacity power lines

EECES

All of the energy-related tax incentives and investment in power infrastructure are directly related to the Biden Administration’s call to achieve carbon-free electric power generation by 2035. This aggressive goal outpaces voluntary commitments by many utilities to achieve carbon-free generation by 2050. The Plan indirectly acknowledges that the incentives will have to be coupled with an EECES to achieve the president’s emissions goal.

An EECES would mandate efficiency measures and require an ever-increasing amount of renewable or low-emitting power generation. Clean electricity standards are a market-based, technology-neutral portfolio standard that requires a certain percentage of retail electricity sales come from zero or low carbon sources. Low or zero carbon emission generation creates a type of emission credit. Currently, over half the states have some form of a renewable energy or clean electricity standard. State plans vary significantly, with some favoring a particular type of renewable power generation over others, or allowing energy efficiency measures to count, while some exclude certain sources of zero-emission generation, such as nuclear or fossil-fuel fired power plants retrofitted with CCS.

The Plan does not specify how an EECES would be implemented, but does note that existing zero emission generation such as nuclear and hydropower would qualify. Establishing an EECES would require new legislation from Congress, and likely reforms from the Federal Energy Regulatory Commission as well with respect to transmission capacity, renewable energy and energy storage pricing.

R&D and Manufacturing

The Plan calls for a $180 billion investment in research and development (R&D) programs, including an investment in the National Science Foundation and funding for climate-focused research such as “demonstration projects for climate R&D priorities, including utility-scale energy storage, carbon capture and storage, hydrogen, advanced nuclear, rare earth element separations, floating offshore wind, biofuel/bioproducts, quantum computing, and EVs, as well as strengthening U.S. technological leadership in these areas in global markets.”

An additional $300 billion would be dedicated to strengthening manufacturing supply chains and creating and protecting jobs in response to the COVID-19 pandemic.

Under the Plan the administration would be required to use its purchasing power with respect to EVs, charging ports, and electric heat pumps for residential heating and commercial buildings.

Plugging and Abandonment of Oil and Gas Wells and Mining Reclamation and Brownfields

Some estimate that there are as many as 3 million orphaned oil and gas wells that have not been properly plugged and abandoned (P&A). These wells lack a solvent responsible party to fund P&A, and typically become burdens of the state (or, if located on federal lands, the federal government). The Plan recognizes that these wells are a potential source of methane leaks, a potent greenhouse, and pollution resulting from brine releases. The Plan would direct $16 billion to fund oil gas P&A activities, and the funding would also be available for reclamation work at coal, uranium, and hard rock mines. Absent from the Plan are any details with respect to implementation or scope of eligibility for funding. It remains unclear whether or not the Biden Administration would use the funds called for by the Plan to bolster existing state and federal programs or launch a new federal program.

The Plan also calls for investing $5 billion in redeveloping idled brownfield properties, with a focus on eliminating blight and renovations in environmental justice communities.

Additional Climate Measures

Other key climate-focused provisions of the Plan include: (1) $10 billion to establish a “Civilian Climate Corps,” which would focus on preserving natural resources and improving community resiliency to climate change; (2) invest $35 billion in climate research and fund the Advanced Research Projects Agency-Climate to develop new technologies related to energy storage, carbon capture and storage, hydrogen, advanced nuclear, rare earth element separations, floating offshore wind, biofuel/bioproducts, quantum computing, and EVs, and (3) build or retrofit over 2 million homes and commercial buildings to improve energy efficiency.

Corporate Tax Provisions

Key corporate tax provisions in the Plan include the following:

  • Increasing the corporate income tax rate from 21% to 28%
  • Setting a minimum 21% global tax rate for US multinational corporations
  • Denying companies expense deductions and eliminating “loopholes for offshoring jobs,” while crediting expenses for onshoring
  • Enacting a minimum 15% tax on a corporation’s “book income”
  • Eliminating all tax preferences and incentives for fossil fuels

In addition to changing the Tax Code, in an effort to spur brownfield redevelopment, the Plan also calls for reinstating a tax to fund the Superfund Trust Fund. The Plan also calls for eliminating existing subsidies on fossil fuel production, but does identify any specific subsidies.

Prospects for Adoption

While President Biden’s American Jobs Plan is bold, support even among congressional Democrats could require substantial changes and ironing out many crucial details. President Biden has signaled he is open to negotiating the scope of this ambitious infrastructure package with congressional Democrats and Republicans, though this may prove difficult. While both parties claim to be supporters of infrastructure investment, there is not consensus on priorities—and, indeed, on what constitutes “infrastructure” in the first place. The Senate Minority Leader and other Republican Senators and Congressmen have already signaled an opposition to many of the climate-focused provisions of the Plan, desiring a standalone infrastructure package. Members of the progressive wing of the Democratic Party have claimed that they do not believe that the Plan goes far enough, and some environmental groups have already made statements against supporting the CCS incentives called for by the Plan.

The Plan makes numerous references to existing legislation currently proposed in Congress for incentivizing CCS, EVs, and other clean energy measures. The White House likely hopes that the Plan will serve as a blueprint for future negotiations with Congress, and Speaker Pelosi and Senate Majority Leader Schumer have announced their support. The scope of the Plan, its cost, and how it will be funded all have to be resolved before the dream has a chance to become reality. An open question is how much additional deficit spending Congress will be willing to undertake. Nevertheless, the Plan sends clear policy signals about the Biden Administration’s priorities and the need to protect the American economy from the impacts of climate change and ensure that the U.S. is a clean energy leader. We will continue to monitor these developments as further details and legislation are forthcoming.

1 Another $80 billion is called for to address Amtrak’s repair backlog and modernize the Northeast Travel corridor.

2 The White House did not release a list of the 10 bridges.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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