Climate and energy provisions of the Build Back Better Act represent the single-largest investment in our nation’s low-carbon future, putting United States on a pathway toward meeting its commitment to reduce greenhouse gas emissions 50 to 52 percent below 2005 levels by 2030. The U.S. Senate will soon consider the measure and will almost certainly revise the version that passed the House last month.
In the following, C2ES domestic policy experts highlight the climate and energy provisions they like in Build Back Better, and explain why they would make a real difference in the transition to a net-zero economy.
Tax Credits for Innovation
Clean Energy Tax Credits (Subtitle F)
Doug Vine, Director of Energy Analysis: Comprising nearly 60 percent of allocated funds ($320 billion), a suite of clean energy tax credits is the largest portion of the historic investment in climate-related spending. The Build Back Better Act extends existing tax credits like the Production Tax Credit (PTC) and Investment Tax Credit (ITC) that have been effective in helping to deploy wind turbines and solar panels over the past three decades. It would also expand the ITC to include energy storage technologies, reducing project costs and increasing grid reliability and resiliency in a world of increasing intermittent generation resources. Additionally, the proposal creates new credits for existing nuclear power — the largest source of zero-emission electricity, which helps avoid early facility closures and emission backsliding. Finally, the production of clean, versatile hydrogen would be eligible for credits to help it compete against fossil fuels in hard to decarbonize applications across a range of sectors. Recent analysis from the Rhodium Group shows that the clean energy tax credits in the Build Back Better Act complemented by regulations, state and corporate actions can reduce U.S. emissions by 45 to 51 percent below 2005 levels by 2030.
Extension and Modification of Credit for Carbon Dioxide Sequestration (Sec. 136106)
Mahmoud Abouelnaga, Solutions Fellow: A flagship report from the International Energy Agency found that “reaching net zero will be virtually impossible without carbon capture, utilization, and storage (CCUS) technologies.” The Build Back Better Act represents the most ambitious and timely-needed support for large-scale deployment of carbon capture and sequestration technologies. It would extend the Sec. 45Q “commence construction” window through 2031, which would give more projects the time required to scale up. It would also provide a direct pay option for the Sec. 45Q tax credit to many project developers currently not able to benefit from the credit due to the constraints of tax equity transactions. Another important element of the proposal is enhancing tax credit value for industrial, power, and direct air capture facilities.
Tax Credits for Qualified Wildfire Mitigation Expenditures (Sec. 136306)
Jason Ye, Associate Director of Outreach: The risk of wildfire has grown across the western United States and is expected to increase due to a changing climate. Wildfires cause far-reaching adverse effects like damaged habitat, degraded air quality leading to health impacts, and drinking water supply contamination. These impacts and the efforts to prevent fires result in significant costs to the United States. The Build Back Better Act includes a first-of-its-kind federal tax credit for up to 30 percent of individuals and businesses’ qualified wildfire mitigation expenses to create “fuel breaks” in vegetation. Wildfires are not the only extreme weather threat we face. The Senate can improve upon this provision by borrowing from the SHELTER Act to broaden the tax credit to cover additional disaster mitigation expenses.
Investing in Climate Solutions
Greenhouse Gas Reduction Fund (Sec. 30103)
Brad Townsend, Vice President for Policy and Outreach: Scaling low- and zero-carbon technologies in time to avoid the worst impacts of climate change — while bolstering resilience to those impacts — requires an urgent and unprecedented infusion of capital. The greenhouse gas reduction fund will provide $29 billion for a range of grants and financing for projects that reduce emissions of greenhouse gases and other air pollutants, while also leveraging private capital at scale. With targeted support for zero-emission distributed technologies, zero-emission vehicle supply chains, and low-income and disadvantaged communities, the greenhouse gas reduction fund will become a self-sustaining support system for communities navigating the transition to net-zero.
USDA Assistance for Rural Electric Cooperatives (Sec. 12007)
Maddie Lee, Associate Fellow: Serving 92 percent of persistent poverty counties and over 42 million people in the United States, rural electric cooperatives are a critical part of our nation’s electricity infrastructure. However, due to financial limitations and lack of access to federal incentives, cooperatives have faced challenges incorporating renewable energy into their power mix: they have reduced carbon dioxide emissions only 23 percent from 2005 to 2020 compared with a 40 percent reduction in the same time period across the entire power sector. Grants and loans provided to cooperatives to increase renewables penetration and energy efficiency as well as offset the cost of coal retirements would not only spur key emissions reductions across the energy sector, but bring societal, health, and economic benefits of renewable energy to critical populations served by cooperatives.
Greening Federal Procurement
General Services Administration Procurement and Technology (Sec. 80008)
Verena Radulovic, Vice President for Business Engagement: The federal government is the nation’s largest purchaser of goods and services, and President Biden’s Wednesday executive order outlined plans to use that buying power to drive down emissions from construction materials. The resources allocated by BBB would enable agencies to do so. As noted in a recent C2ES webinar, the federal government can specify, in its procurement process, that goods made with lower embodied emissions are given preference.. This would help industries in high-emitting, hard-to-abate sectors (such as steel and cement), sending a necessary market signal to invest in innovations that substantially lower emissions. According to a recent study, approximately half of the annual carbon dioxide emissions from cement consumption in the United States is associated with public construction, with a quarter of those emissions resulting from federally funded projects. The Build Back Better Act’s allocation of $3.25 billion over ten years for , the U.S. government’s purchasing agent, comes at a critical time. With the Infrastructure Investment and Jobs Act now law, an opportunity exists to re-build roads and bridges and other critical infrastructure with reduced climate impacts, which will catalyze near-term, industry-wide emissions reductions and help transform industries to stay competitive in a lower-carbon economy.
United States Postal Service Clean Fleets (Sec. 80003) and General Services Administration Clean Fleets (Sec. 80001)
Stephanie Gagnon, Associate Policy Fellow: It is long past time to update the U.S. Postal Service fleet, a majority of whose delivery vehicles are well past their expected service lifetime of 24 years. Short-range delivery vehicles like mail trucks are ideal candidates for early fleet electrification, because they follow predictable routes and schedules — making it easier to charge and deploy them efficiently — and their slow speeds and frequent stops are much more efficient for an electric vehicle than a combustion engine vehicle. The Build Back Better Act would allocate more than $2.5 billion for the purchase of electric delivery vehicles, and another $3.4 billion for the purchase, design, and installation of supply equipment for those vehicles. Combined with the almost $3 billion of additional funding for the General Services Administration to procure zero-emission vehicles, these necessary provisions in the Build Back Better Act would both significantly reduce emissions from transportation and save billions in avoided fuel and maintenance costs, while giving the zero-emission vehicle industry the financial capital and certainty to scale up development and deployment.
Climate Information for Decisionmakers
Adaptation Science Centers (Sec. 71502)
Laura Brush, Resilience Fellow: The recently passed bipartisan infrastructure bill will significantly increase federal funding for adaptation and resilience efforts at the local level. To apply for these funds, though, cities and towns will need to be able to conduct climate risk assessments and develop resilience project plans — technical processes that are often challenging for small, rural, and under-resourced communities. Regionally based, climate-focused federal programs like the USGS Climate Adaptation Science Centers (CASCs) help to fill local gaps by providing technical assistance to communities and co-developing localized climate risk assessments and resilience strategies. The Build Back Better Act increases funding for the CASCs to develop localized climate information, allowing them to serve a greater number of communities. Congress should continue to increase funding for the CASCs and similar programs at other agencies to help communities harness federal funding sources and accelerate local resilience action.
NRCS quantification of carbon sequestration and GHG emissions (Sec. 13003(a)(3))
Christina Cilento, Associate Policy Fellow: Of the more than $20 billion allocated for conservation investments in agriculture in the Build Back Better Act, I’m excited about funding for conservation technical assistance, including $600 million for USDA’s Natural Resources Conservation Service (NRCS) to assess the carbon sequestration and emissions reduction impacts of their technical assistance activities. This funding is modest compared to other agriculture investments, but it can provide critical data that will allow NRCS to close knowledge gaps around the climate impacts of various management practices. Based on this data, NRCS can then bolster support for practices with the greatest climate benefits, thus strengthening the effectiveness of all NRCS programs.
Measuring embodied emissions (Secs. 30113 and 30118)
Chris Kardish, Industrial Policy Fellow: In addition to new technologies and production processes, decarbonizing industry will also require stimulating demand for low-carbon steel, cement, and other emissions-intensive materials that are ubiquitous in the United States and other economies. One critical step, however, is having consistent and transparent information on emissions the goods contain so buyers — from car companies to the U.S. government — can choose from the greenest producers. The Build Back Better Act would allocate $250 million for the EPA to develop a standardized way of declaring the embodied emissions of construction materials and products (known as “environmental product declarations”) and another $100 million to identify and label low-carbon construction materials for federal transportation projects based on environmental product declarations.
What’s Not There…
Nat Keohane, President: The 10 provisions highlighted above would reduce greenhouse gas emissions, deploy clean energy, and help communities build resilience to a changing climate. In total, the climate provisions in the Build Back Better framework would be an historic investment that would represent meaningful progress in addressing the climate crisis. However more policies will be needed to meet our long-term climate goals. An escalating economy-wide fee on carbon pollution is the “secret sauce” to any effective suite of policies. A carbon fee would make every other policy more effective, including the investments in Build Back Better as well as federal regulations and state policies. It would help to cut emissions, spur innovation and deployment of new technologies, and (in tandem with a carbon fee on imports) enhance U.S. competitiveness in a global economy by capitalizing on the low carbon intensity of U.S. industry.