RFF experts assess the Biden administration’s American Jobs Plan, which includes policy approaches to boost clean energy, protect the environment, and speed decarbonization efforts.
Last week, the Biden administration released the American Jobs Plan, a strategy which the White House describes as “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 contains four main elements, all of which are addressed in this blog post: transportation infrastructure; infrastructure related to water, internet, homes, and electricity; reducing the current backlog of infrastructure investment; and the systems in place for innovation and research and development. Much of the plan relates these elements to workforce training and equity for all Americans.
Scholars at Resources for the Future (RFF) have reflected on this policy road map and here lay out their impressions of how aspects of the plan may fare in achieving broader goals for decarbonization, energy access, environmental health, and economic well-being.
Speeding Deployment of Electric Vehicles and Boosting Charging Infrastructure
Benjamin Leard: The administration aims to provide point-of-sale rebates for consumers who purchase electric vehicles—a potential improvement over the current system, wherein the federal government uses a tax credit to subsidize the purchase of electric vehicles. The government tax credit primarily helps households that pay $7,500 per year or more in income taxes, whereas a rebate could be more equitable.
Still, the American Jobs Plan includes no apparent strategy to address the huge stock of used gasoline vehicles on the road. A one-year-old gasoline vehicle will likely be driven for about 15 to 20 years before it is scrapped. Rapid decarbonization of the transportation sector requires getting those gasoline-fueled vehicles off the road quickly.
Joshua Linn: The American Jobs Plan includes stipulations to replace 50,000 diesel transit vehicles and electrify at least 20 percent of the nation’s yellow school bus fleet, suggesting that the administration recognizes the need to decarbonize more than just conventional passenger vehicles. The plan also affirms President Biden’s earlier campaign proposal to build a national network of 500,000 electric vehicle charging stations across the nation. Notably, the administration should carefully consider exactly how it will rapidly expand charging infrastructure; for example, by strategically locating charging stations along freeways and beyond the home and workplace. Experimental approaches, such as smaller-scale pilot programs, are likely necessary before sizable investments are made.
Related research and commentary:
Modernizing the Electricity Grid
Karen Palmer and Susan Tierney: The American Jobs Plan includes several recommendations that focus on research, development, and demonstration (RD&D) of new technologies as well as training for the new energy work force. These priorities align with what we see as necessary reforms to the US electricity system and supporting institutions. We recently served on a National Academies of Sciences, Engineering, and Medicine (NASEM) panel on the future of electric power in the United States, which released a report of findings this February. In the fourth chapter of the report, the NASEM panel highlights the fact that the United States has not kept up with other Organisation for Economic Co-operation and Development (OECD) countries and China in terms of growth in energy RD&D and suggests that a need exists for a dramatic expansion of US investment in research related to the electric system. Given various challenges, such as renewable energy resource integration and deep decarbonization, the NASEM committee recommends in its report at least a doubling of federally funded RD&D over the next decade. Such support should go not just to RD&D on technologies but also toward social science questions surrounding the future of the grid. The report also recommends that more resources be devoted to training and retraining of the workforce to meet the challenges of operating the grid of the future, and includes the suggestion to enable better management of challenges to grid security, either through cyber threats or other means. For a brief overview of some of the highlights of this report, listen to this recent episode of the Resources Radio podcast.
Nicolas Hippert / Unsplash
$46 billion
The American Jobs Plan sets the goal of allocating $46 billion in new federal procurement funds to help develop markets for electric cars, charging ports, clean materials, and advanced nuclear reactors and fuels.
Energy Efficiency and Clean Energy Standard
Kevin Rennert: The American Jobs Plan sets the goal to establish an energy efficiency and clean energy standard that cuts pollution, increases competition, and prioritizes “environmental safety as well as environmental justice.” Utilities under typical clean electricity standard proposals have an annual obligation to show that they’re providing a greater share of their electricity from clean electricity sources, either by bringing more of their own clean electricity generation online or by purchasing clean electricity credits that represent clean electricity which was put on the grid by another entity.
Modeling of previous clean electricity standards suggests that such policies can drive high rates of penetration of clean electricity resources with relatively limited effects on electricity rates compared to a baseline without the policy. For example, we conducted a model analysis of the Smith-Lujan Clean Energy Standard Act of 2019, which was targeting net-zero emissions by roughly 2050. The analysis finds that, as of 2035, the act would reduce greenhouse gas emissions in the power sector by 61 percent, increase total generation by renewables from 30 percent to 56 percent, avoid the retirement of 43 gigawatts of nuclear generation, prevent 30,000 premature deaths from air pollution between 2020 and 2035, and increase nationally averaged electricity rates by 4 percent.
The American Jobs Plan includes no apparent strategy to address the huge stock of used gasoline vehicles on the road. A one-year-old gasoline vehicle will likely be driven for about 15 to 20 years before it is scrapped. Rapid decarbonization of the transportation sector requires getting those gasoline-fueled vehicles off the road quickly.
Benjamin Leard
The energy efficiency and clean energy standard in the American Jobs Plan targets a net-zero greenhouse gas emissions power sector by 2035, consistent with President Biden’s proposal on the campaign trail, along with the recent reintroduction of the CLEAN Future Act in the House of Representatives. Considering the proposed policy in isolation, moving to 100 percent clean electricity over a nearer-term time horizon could be expected to raise electricity rates more than over a longer time horizon. The American Jobs Act, however, proposes a variety of provisions that will affect the rate impacts of any clean electricity standard. Many of those provisions could be expected to lower the cost of bringing clean energy on the grid and reduce consumer electricity usage overall, thereby reducing any potential effects on ratepayers.
Credit: Oil and Gas Photographer / Shutterstock
Alan Krupnick: With the American Jobs Plan, the administration is making clear that it aims to make a clean energy standard the centerpiece of its plan to reduce CO₂ emissions from the power sector. White House National Climate Advisor Gina McCarthy also has indicated that nuclear power and carbon capture would be eligible for clean energy credits in such a system, adding flexibility and creating new demand-pull pressure for market expansion and technological innovation in these two areas. My research on decarbonized hydrogen and responsibly produced natural gas—gas that is produced, processed, and delivered with low methane leaks—also suggests two additional areas for extra credit: decarbonized (blue) hydrogen blended with natural gas in pipelines that bring the gas to electric utilities, as well as natural gas sourced by electric utilities and certified as having low methane leaks.
Related research and commentary:
- Issue brief: Projected Effects of the Clean Energy Standard Act of 2019
- Report: Decarbonized Hydrogen in the US Power and Industrial Sectors: Identifying and Incentivizing Opportunities to Lower Emissions
- Report: Differentiation of Natural Gas Markets by Climate Performance
Orphaned Wells and Abandoned Mines
Daniel Raimi: The American Jobs Plan proposes spending $16 billion to decommission orphaned oil and gas wells and clean up abandoned mines. These legacy assets of coal, oil, and gas production cause a variety of environmental damages and public health risks, primarily due to impaired soil and water quality and methane emissions. In our recent analysis of environmental remediation programs, we discuss how many of the potential jobs needed to carry out this reclamation work are well-suited for workers in today’s coal, oil, and gas sectors. In another recent report from RFF and Columbia University, we estimate that decommissioning the documented US inventory of 57,000 orphaned oil and gas wells would support more than 10,000 job-years and reduce methane emissions at a cost of between $67 and $170 per ton of CO₂ equivalent.
Related research and commentary:
- Report: Green Stimulus for Oil and Gas Workers: Considering a Major Federal Effort to Plug Orphaned and Abandoned Wells
- Magazine: Plugging Orphaned Oil and Gas Wells: What We Know and Need to Know
- Testimony: Virtual Forum on Reclaiming Orphaned Oil and Gas Wells: Creating Jobs and Protecting the Environment by Cleaning Up and Plugging Wells
CatwalkPhotos / Shutterstock
50,000
The American Jobs Plan includes stipulations to replace 50,000 diesel transit vehicles, and affirms President Biden’s earlier campaign proposal to build a national network of 500,000 electric vehicle charging stations across the nation.
General Investments in Distressed and Rural Communities
Daniel Raimi: One of the key messages of our Fairness for Workers and Communities in Transition report series is that multiple policy types will be needed to support energy workers and communities in transition and that those policy types will need to be adaptable to local conditions. The strategies that might work well in Athens, Ohio will look different from the strategies needed in Colstrip, Montana. The administration’s proposal seems to recognize this fact. The American Jobs Plan aims to target investments in distressed communities and rural communities that are affected by a clean energy transition with a variety of tools, including workforce development programs attached to labor standards, economic development programs (such as investing in innovative manufacturing and small businesses), environmental remediation programs, and—of course—infrastructure.
Related research and commentary:
- Report: Examining Federal Economic Development Support for Coal Communities: Athens, Ohio Region
- Blog: Equitable Transition to a Low-Emissions Future: Thriving in a Clean Energy Economy
- Report: Coal Communities in Transition: A Case Study of Colstrip, Montana
Programs to Boost Decarbonized Hydrogen and Carbon Capture
Alan Krupnick: The administration has proposed 15 demonstration projects to produce decarbonized hydrogen, located in distressed communities, and the use of a production tax credit to defer the added costs. Based on the economics, these projects will work at a reasonable cost only if carbon capture technologies are added to existing steam methane reforming–based hydrogen production facilities to make blue hydrogen. Demonstration projects and tax credits are useful, but the administration should consider the complexities of these programs to ensure that its goals are met. First, the credit could enable more flexibility in project design if it’s based on CO₂ reduced, rather than based on decarbonized hydrogen produced. Otherwise, the credit primarily will benefit places where steam methane reforming plants are already located, which may not be in those distressed communities that the plan seeks to help. Second, a credit of about $50 per ton of CO₂ reduced probably would be enough to get the wheels turning. Third, the administration should consider that carbon capture projects already are eligible for tax credits under the bipartisan 45Q program, though the current standards may be too restrictive. Fourth, the goal of limiting demonstration projects to just 15 facilities seems arbitrary; either a tax credit could apply to all eligible projects, or each of the 15 projects could be financed at least in part by the government directly.
The credit could enable more flexibility in project design if it’s based on CO₂ reduced, rather than based on decarbonized hydrogen produced. Otherwise, the credit primarily will benefit places where steam methane reforming plants are already located, which may not be in those distressed communities that the plan seeks to help.
Alan Krupnick
The administration plans to do something similar for carbon capture facilities more generally, with ten projects covering steel, cement, and the chemical industries. Again, since 45Q offers tax credits for carbon capture and sequestration projects, the need for an entirely new program is unclear. An articulation of the administration’s priorities with these ten projects would be helpful, particularly in light of the administration’s plan to extend 45Q deadlines and allow companies without sufficient tax liability to receive the credit directly.
Related research and commentary:
- Podcast: Illuminating the Future of Electric Power in the United States, with Karen Palmer
- Explainer: Federal Climate Policy 105: The Industrial Sector
- Report: Decarbonized Hydrogen in the US Power and Industrial Sectors: Identifying and Incentivizing Opportunities to Lower Emissions
Procurement Powers
Alan Krupnick: The American Jobs Plan sets the goal of allocating $46 billion in new federal procurement funds to help develop markets for electric cars, charging ports, clean materials, and advanced nuclear reactors and fuels. My research shows that green federal procurement policies can make a difference in innovation and costs through scale economies. But the administration also should consider that investments in advanced nuclear reactors will be costly and that electric car technologies might be developed enough to not need further government spending (although investments in charging stations will likely prove useful). The best approach with a green procurement program is to focus on obtaining cleaner materials to build roads, bridges, buildings, and military equipment, such as “green” cement and steel purchased through government contracts.
Related research and commentary:
Credit: Drew Angerer / Getty Images
The Absence of Price Signals for Decarbonization
Marc Hafstead and Michael Toman: The strategy in the American Jobs Plan for promoting more rapid energy decarbonization relies heavily on tax breaks and direct government spending. As a recent Washington Post editorial observes, a carbon tax that raises the cost of fossil-based energy would strengthen incentives for switching to lower-carbon energy resources and for developing new, even more affordable lower-carbon energy options. A revenue-neutral carbon tax could help make the tax system more efficient and equitable, assist lower-income groups in coping with higher energy costs, and provide financing for lower-carbon energy innovation. The benefits of incentive-based approaches for reducing greenhouse gas emissions in a suite of decarbonization policies have been clearly demonstrated in RFF research going back more than a quarter century. RFF research has shown that well-designed carbon pricing can have a small impact on national employment levels. Tax breaks and direct government spending are also unlikely to have a large net impact on jobs—some industries will create new jobs, whereas others will likely lose jobs.
Related research and commentary:
- Explainer: Carbon Pricing 104: Economic Effects across Income Groups
- Data tool: Carbon Pricing Calculator
- Journal Article: Jobs and Environmental Regulation
