The Infrastructure Investment and Jobs Act is a Major Down Payment for Climate Action
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The Infrastructure Investment and Jobs Act is a bipartisan infrastructure bill that has been described at times as a once-in-a-generation investment in our infrastructure and a major down payment to fund climate and clean energy priorities. This legislation represents a significant—and essential—step forward in federal efforts to transition the United States toward a net-zero carbon emitting economy.
Some have criticized the bill’s climate benefits for not including direct regulations to reduce emissions. But this assessment is misguided. Any successful, multi-decade strategy to address the risks of climate change must include a portfolio of programs focused on (1) technology development, (2) enabling infrastructure, and (3) market signals or regulations. The IIJA provides a strong push on the first two elements, even though it is not designed to be a comprehensive climate bill. More policy will be needed going forward, but these provisions are critical pieces of a climate policy agenda and will drive significant carbon emissions reductions over time.
When getting a loan to buy a house, the size of the down payment matters a lot for overall costs and how quickly the ultimate goal—i.e., owning a home outright—can be achieved. In this sense, the IIJA works in much the same way. It represents a massive upfront investment that will dramatically enhance energy innovation progress, reduce the costs of our most promising advanced energy technologies, and bring forward in time their deployment trajectories. Accomplishing all of this will make it more likely and less expensive to reach our climate goals.
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The Challenge of U.S. Climate Action
Rapid progress toward decarbonizing the global economy is needed over the next several decades to avoid the worst consequences of climate change. The Biden administration has set both interim and mid-century goals to direct America’s energy transition: net-zero U.S. greenhouse gas emissions by 2050 and a 50% reduction from peak U.S. emissions (2005 levels) over the next decade, by 2030.
To date, clean energy innovation has taken an outsized role in enabling U.S. emissions reductions. Federal programs to drive down the costs of wind and solar have been wildly successful. Without concerted R&D spending from both the public and private sectors, the U.S. would not have the suite of commercial low- and zero-carbon technology options it has today for decarbonized electricity, buildings, and passenger vehicles, in particular. These technologies underpin our expectations of how rapidly and cost-effectively the United States can reduce its GHG emissions; without them, the 2030 goal would be a stretch. Even with the clean energy technologies in the marketplace today, it’s clear we will need more tools to hit our long-term goals, and there are other obstacles looming. For example, we see significant uncertainties regarding America’s ability to site, permit, and build infrastructure at a fundamentally faster pace.
Setting the Conditions for Climate Success
The IIJA creates both near-term (i.e., over the next decade) and long-term enabling conditions for the U.S. to address GHG emissions that will need to be eliminated by 2050. It accomplishes this goal with four critical pathways: (1) R&D, (2) demonstration projects, (3) backbone infrastructure for net-zero, and (4) infrastructure permitting reform.
(1) R&D enables faster deployment and emission reductions:
The IIJA provides significant funding for clean energy innovation across a range of technologies featured in the Energy Act of 2020. It is well understood that R&D plays a critical role in enabling low-carbon technology “breakthroughs” for cost and performance improvements that will allow faster deployment and emissions reductions across the economy. Even modest improvements can have significant benefits for speeding up deployment, because of the massive scale of technology adoption required for economy-wide decarbonization.
For example, as part of the Decarb America Research Initiative, the Bipartisan Policy Center recently found that clean energy innovation will drive cost breakthroughs leading to faster and larger CO2 reductions. Our analysis revealed a 24% greater reduction in CO2 emissions in 2050 relative to a scenario without innovation breakthroughs. Evolved Energy Research, working with the Environmental Defense Fund, found that R&D can accelerate deployment of key technologies and drive forward emissions reductions, allowing the United States to significantly reduce lifetime cumulative emissions and potentially achieve net-zero prior to 2050.
(2) Demonstration Projects accelerate commercial readiness:
Many low-carbon technologies required to transition the United States to a net-zero economy are not yet ready for deployment or tested at commercial scale. The IIJA takes a major step to address this gap by funding commercial demonstration projects for electricity storage, hydrogen, carbon capture, direct air capture, renewable energy, advanced nuclear energy, and other key options. It also establishes and funds a new Department of Energy Office of Clean Energy Demonstrations, which will provide essential institutional leadership to manage this ambitious new technology demonstration program.
BPC’s American Energy Innovation Council has found that demonstration is often the weak link in transitioning a technology from the early stages of innovation to a commercial product and mass deployment. These demonstration projects establish the technical, economic, and environmental viability of technologies in practice, yet this critical phase is too often where promising clean energy technologies will wait interminably—especially complex, capital-intensive, and large-scale technologies. Building the first set of commercial projects for these advanced technologies on this accelerated timescale will make them available for deployment much sooner than would otherwise be the case, by a decade or more. For example, the IIJA makes the largest-ever investments to fast-track development of hydrogen production facilities, which could avoid 7 million metric tons of CO2 emissions annually—the equivalent of 1.5 million cars driven for one year.
(3) Net-zero necessitates new backbone infrastructure:
The IIJA includes foundational investments in critical energy infrastructure to enable forward progress in America’s clean energy transition, including substantial investments in clean power and grid systems, clean transportation, offshore wind ports, and rural broadband for smart grid and other next generation climate technologies. BPC’s Decarb America modeling analysis found that expanded transmission, distribution systems, and end-use infrastructure like electric vehicle charging are a requirement for any path to net-zero.
(4) Permit reform enables net-zero infrastructure:
The IIJA improves scoping and siting processes for electricity transmission and includes key provisions for modernizing and accelerating infrastructure permitting. BPC’s Decarb America modeling analysis found that across different net-zero scenarios, the U.S. will need to maintain an infrastructure build rate higher than the country has ever achieved historically—for the next three decades or more. A key insight is that deployment constraints, not cost differences, are likely to be more important in determining which mix of technologies is used to achieve net-zero. In a future without faster deployment capabilities for renewable energy due to siting and permitting constraints, the path was harder and the costs increased by almost $900 billion compared to a net-zero reference case. The IIJA will go a long way toward supporting common sense permitting improvements that will save money and time in our energy transition. These are important environmental benefits that must not be overlooked or dismissed. Reforming infrastructure planning and permitting processes to be better suited to the pace and scale of clean energy deployment required to meet net-zero is an urgent priority.
Conclusion
Can the world’s largest economy decarbonize in just three decades? To date, the United States has reduced its GHG emissions by 20% from peak levels, according to an analysis of data from Rhodium Group, an energy analysis and consulting firm. Another 6% of reductions is expected with no new policy action. But we can’t stay at business as usual, and the country doesn’t yet have the backbone infrastructure in place for a full clean energy transition. The IIJA is a critical down payment for economy-wide decarbonization, creating the enabling conditions this decade and beyond for the United States to achieve net zero.
Figure 1. Breakdown of the greenhouse gas emission reductions required for the U.S. to achieve net-zero by 2050. Source: Based on Rhodium Group data/The Atlantic
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