by Reinout Debergh
This is the first of a series of articles which will be focusing on specific topics of the Build Back Better Act (BBBA) in the USA. This article highlights some key provisions regarding the transport sector. Transport, as an economic sector, is the biggest polluter, responsible for 29% of total US greenhouse gas (GHG) emissions in 2019. The goal of the BBBA is to encourage the shift to cleaner transport through various measures from electric vehicles to new types of fuels to energy efficiency [1].
Aviation
Two key provisions for aviation are 1) the alternative fuel and low-emission aviation technology program and 2) the sustainable aviation fuel credit [2].
The program is a competitive grant program providing grants for projects that 1) produce, transport, blend, or store sustainable aviation fuels (SAFs), or 2) develop, demonstrate, or apply low-emission aviation technologies (LEAT). USD 247 million is allocated for SAFs [3]. SAFs are either synthetic fuels or biofuels. They have to achieve at least a 50% lifecycle GHG emissions reduction relative to petroleum-based jet fuels [2]. USD 47 million is allocated to LEAT [3]. This refers to technologies that enhance aircraft fuel efficiency, increase the usage of SAFs or reduce GHG emissions from the operation of civil aircrafts.
Projects are judged based on the following criteria: 1) capacity to increase the domestic production and deployment of SAFs or LEATs, 2) GHG-emissions, 3) capacity to create new jobs and supply chains in the US, and 4) benefits of diverse SAF feedstocks.
The SAF credit is a tax credit of 1.25-1.75 USD/gallon (0.26-0.46 EUR/liter) of SAF sold or used as part of a qualified fuel mixture (meaning a mix of SAF and kerosene produced in the US) [2, 4]. The higher the achieved emission reduction, the higher the tax credit (limited to 0.5 USD increase). Therefore, more and cleaner SAFs mean less taxes and thus more profit for the taxpayer [2].
The old version included provisions on CORSIA including 6 million USD to ensure the US complies and commitment to regulations, but these have been left out in the most recent version (Rules Committee Print 117-18) [2].
Road
Key measures include investments in electric vehicles (EVs), tax credits and the Community Climate Incentive Grant program [2].
EVs
The Department of Energy is appropriated USD 3.5 billion for the fiscal year 2022 and to remain available until expended, to allocate in the form of grants for the domestic production of electric vehicles (plug-in, hybrid or hydrogen fuel cells) [2, 3]. USD 5 billion is allocated for clean heavy-duty vehicles [5]
The government itself is also cleaning up, with USD3 billion for the procurement of zero-emission and electric vehicles. Additionally it will spend about USD 6 billion for EVs and charging stations for the US Postal Service [2].
Finally, the Greenhouse Gas Reduction Fund aims to accelerate innovation and prioritize the needs of environmental justice communities [6]. It includes (in USD): 7 billion for zero-emission technologies, 2 billion for charging infrastructure, 12 billion for general assistance, and 8 billion specifically for low-income and disadvantaged communities.
Tax credits
People can get a tax credit of at least USD 4,000 and up to USD 12,500 to buy EVs. This depends on whether the vehicle was bought before 2027, whether the final assembly of the vehicle happened in the US and whether the battery cell was made in the US. The amount is also limited to 50% of the purchase price. From 2027, it will only apply to vehicles assembled in the US [4].
Other tax credits are included for used and commercial EVs, the amoung depending on battery capacity and 30% of the vehicle cost respectively t [4].
Tax credits, already in place for biodiesel, renewable diesel, second generation biofuels, and alternative fuels, are extended until the end of 2026 [2]. The ‘clean fuel production tax credit’ applies to fuels produced in the US with lifecycle GHG emissions of at least 25% less than the current US average [4]. This can include SAFs [2]. Other tax credits are those for qualified fuel cell motor vehicles (with hydrogen fuel cells) and alternative fuel refueling property (charging infrastructure) [4, 7].
Community Climate Incentive Grant program
This program of USD 4 billion consists of three parts:
- USD 50 million for the Federal Highway Administration to
- set up a GHG performance measure;
- set up an incentive structure for states to achieve significant carbon reductions;
- establish requirements, guidance, and regulations to reduce on-road GHG emissions;
- administrative expenses
- USD 950 million as grants for states that make significant progress in reducing emissions or that adopt strategies to achieve net-zero surface transportation emissions by 2050
- USD 3 billion for projects by non-state entities to reduce emissions.
Other
USD 60 million is allocated to the Environmental Protection Agency (EPA) to reduce diesel emissions and USD 960 million is to be used as grants for transportation fueling and distribution facilities for biofuels [4].
Other
- USD 20.2 billion for investments in public transit of which about half benefits vulnerable communities [8];
- Tax credit for electric bikes;
- USD 600 million for Port Infrastructure and Supply Chain Resilience including projects to develop offshore wind support infrastructure and environmental remediation projects [4];
- USD 3 billion to produce, in the US, 1) heavy-duty vehicles or 2) trains or locomotives, maritime vessels, aircraft or hyperloop technology if they emit no exhaust GHG emissions [2];
- USD 360 million in grants for programs to train contractors on how to install energy efficiency retrofits [3].
Conclusion
The BBBA includes billions in long-needed investment in the transport sector. The red line throughout the measures is the focus on domestic manufacturing [2]. Thus, it also fits within Biden’s narrative of creating jobs for the American people [9]. However, its passage in Congress was recently thrown in serious doubt [10].
References
[1] Sources of Greenhouse Gas Emissions, EPA, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions, accessed on 08/11/2021.[2] H.R.5376 – Build Back Better Act, 117th Congress (2021-2022), https://www.congress.gov/bill/117th-congress/house-bill/5376/text, accessed on 28/10/2021.
[3] Wilt, H.B., Breaking Down the Build Back Better Act, The Dispatch, https://uphill.thedispatch.com/p/breaking-down-the-build-back-better, accessed on 11/11/2021.
[4] House Democrats Forge Ahead with $550 Billion for Climate in Build Back Better Act: Summary of Climate, Energy and Environment Provisions in the House Budget Reconciliation Package, Akin Gump, https://www.akingump.com/en/news-insights/house-democrats-forge-ahead-with-dollar550-billion-for-climate-in-build-back-better-act-summary-of-climate-energy-and-environment-provisions-in-the-house-budget-reconciliation-package.html, accessed on 11/11/2021.
[5] Brackemyre et al., Biden Administration Introduces Build Back Better Act, Providing Significant Funding for Clean Energy and Climate Initiatives, JD Supra, https://www.jdsupra.com/legalnews/biden-administration-introduces-build-8399078/, accessed on 14/11/2021.
[6] Pallone F., Pallone Applauds Release of Build Back Better Act Legislative Text, House Committee on Energy and Commerce, https://energycommerce.house.gov/newsroom/press-releases/pallone-applauds-release-of-build-back-better-act-legislative-text, accessed on 14/11/2021.
[7] Electric Vehicle Tax Credit For 2021, eFile, https://www.efile.com/electric-vehicle-car-tax-credits/, accessed on 14/11/2021.
[8] Wanek-Libman, Build Back Better bill contains nearly $20 billion for better transit and high-speed rail, Mass Transit, https://www.masstransitmag.com/management/article/21244437/build-back-better-bill-contains-nearly-20-billion-better-transit-and-highspeed-rail, accessed on 15/11/2021.
[9] The Build Back Better Framework: President Biden’s Plan to Rebuild the Middle Class, The White House, https://www.whitehouse.gov/build-back-better/, accessed on 15/11/2021.
[10]. Brown, H., Joe Manchin negotiated Build Back Better with Joe Manchin, MSNBC, https://www.msnbc.com/opinion/joe-manchin-negotiated-build-back-better-joe-manchin-n1287278, accessed on 14/01/2021.
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