In an address from Pittsburgh, “the City of Bridges,” President Biden on March 31, 2021, proposed the “American Jobs Plan,” which would spend approximately $2 trillion over the next ten years on a wide variety of infrastructure investments. The package includes not just investments in roads and bridges that are traditionally included in infrastructure bills, but also new investments to address environmental justice and disadvantaged communities through investments in schools, health care, technology research, drinking water infrastructure, and transit systems. The proposal is bold and controversial, but many of the core elements of the infrastructure proposal are likely passable using budget reconciliation.

Consistent with the Biden Administration’s government-wide emphasis on addressing climate change, the proposal includes a heavy emphasis on reducing greenhouse gas (GHG) emissions and transitioning to a low-carbon economy. These energy- and climate-related provisions are described below.

Key Takeaways For the Energy Industry

The American Jobs Plan proposes large investments in energy infrastructure and research aimed at reducing GHG emissions. Major energy- and climate-related investments include:

• $100 billion in electricity infrastructure.

• $213 billion in affordable and sustainable housing

• $174 billion for electrification of the transportation system

• $50 billion for infrastructure resilience

• $180 billion in new research and development funding, including research on renewable energy and carbon capture and sequestration.

The proposal includes provisions that would expand or extend several existing tax incentives aimed at supporting expansion of renewable energy, as well as the creation of new tax incentives. These include:

• A ten-year extension and phase down of investment tax credits and production tax credits for clean energy generation and storage. The proposal would allow a direct-pay option so that in circumstances where a tax credit cannot be used because an entity has no tax liability that a tax credit could be used to offset, the tax credit could be directly paid to that entity.

• A new investment tax credit for construction of electric transmission, which the proposal describes as “a targeted investment tax credit that incentivizes the buildout of at least 20 gigawatts of high-voltage capacity power lines” that would support investments of tens of billions in private capital.

• An extension of the 48C tax credit for advanced manufacturing, including manufacturing of energy-related equipment. 

• A new investment tax credit for energy storage at 30 percent for 10 years with a direct pay mechanism. 

• “Expand and reform” the Section 45Q tax credit for carbon capture, reuse and sequestration facilities.

The proposal also includes several specific measures aimed at electrification of the transportation system. These include:

• Grant and incentive programs that will encourage state and local governments and the private sector to build out a national network of 500,000 electric vehicle charging stations by 2030.

• Conversion of 50,000 diesel-powered transit vehicles and 20% of the nation’s school bus fleet to electricity.

• Electrification of the federal transportation fleet, including the U.S. Postal Service vehicle fleet.

Additional initiatives aimed at achieving the Administration’s stated goal of a GHG-neutral power sector by 2035 include:

• A new federal Energy Efficiency and Clean Energy Electricity Standard, apparently modeled on state Renewable Portfolio Standards, that would encourage the use of carbon-free resources for electricity production.

• Creation of a new Grid Deployment Authority at the Department of Energy that would leverage existing rights of way and financing tools to facilitate construction of high-voltage electric transmission lines.

• Clean energy block grants that can be used by state and local governments to support deployment of renewable energy.

• The purchase of 24/7 clean energy for federal buildings.

• A new $27 billion Clean Energy and Sustainability Accelerator that would “mobilize private investment” in renewable energy, building retrofits, and clean transportation.

Research, development, and deployment initiatives related to energy include:

• $35 billion to create ARPA-C, a research program modeled on the successful ARPA-E research program, to support research in energy- and climate-related breakthrough technologies.

• $15 billion for demonstration projects for technologies including utility-scale energy storage, carbon capture and storage, hydrogen, floating offshore wind, rare earth metals separation, and advanced nuclear technology.

• $50 billion for the National Science Foundation to support research in a variety of areas, including advanced energy technology.

• $30 billion in addition research funding and $40 billion to upgrade the nation’s research laboratories.

• 15 decarbonized hydrogen demonstration projects and 10 carbon capture retrofits for large GHG emitters like steel mills, cement, and chemical production facilities, with construction in disadvantaged communities to be emphasized.

The Biden proposal also includes a number of initiatives aimed at promoting the nation’s capacity for advanced manufacturing and workforce development that are likely to benefit energy-related manufacturing. These include:

• Creation of a new office in the Department of Commerce to monitor domestic manufacturing and to fund investments in critical goods, which is likely to include manufacturing capacity for electric vehicle batteries and raw materials like lithium.

• A $20 billion Community Revitalization Fund, which would support at least ten regional innovation hubs.

• $31 billion to support small businesses with access to credit, venture capital, and research funding.

• A $40 billion Dislocated Workers Program that will retrain workers to provide the skills necessary for industries such as clean energy.

Other notable provisions include:

• $10 billion to create a Civilian Climate Corps to employ workers for climate resiliency, natural resource conservation, and similar projects.

• $5 billion in “brownfields” funding, aimed at rehabilitating and redeveloping unused or underused contaminated properties.

• $16 billion to support reclamation of orphaned oil and gas wells and abandoned mines.

The proposal would be funded by the “Made in America Tax Plan,” which is projected to pay for the new spending over a period of fifteen years. The major provisions of the tax plan are:

• An increase in the corporate tax rate from 21% to 28%.

• A 15% minimum tax on the book income of large corporations.

• Elimination of subsidies and tax preferences for fossil fuels.

Outlook

By setting forth an ambitious plan for major increases in federal spending, the Biden Administration has made clear it will not shrink from the challenges of legislating in a closely-divided Congress. Congressional Democrats aim to bring the legislation to the President’s desk by the Fourth of July, but achieving that timeline will be difficult. The Biden proposal has already drawn opposition from the right on the grounds that it is too expensive and expansive, and from the left on the grounds that it is insufficiently ambitious. Nonetheless, at least some elements of the proposal are likely to be enacted and, depending on whether Democrats can maintain support from their caucuses and navigate filibuster rules in the Senate, a substantive portion of the program could be enacted via the budget reconciliation process. The proposal and ensuing legislative process therefore bears careful scrutiny from those involved in the energy industry.