President Biden’s first infrastructure proposal – the American Jobs Plan – includes a bit of everything. There’s infrastructure yes, but much, much more, including $215+ billion for priorities like electric vehicles, biofuels and other forms of energy, and even agriculture. Compared to current federal funding levels for these interests, the president’s plan would represent a huge increase in taxpayer support and for some programs/incentives, continued subsidies for industries that have already received decades of federal dollars.
Furthermore, certain special interests not specifically mentioned in the proposal are already lobbying for a piece of the $2+ trillion pie (or even more taxpayer spending). Case in point is aviation which received a new sustainable aviation fuel blender’s tax credit in the second tax-descriptor version of President Biden’s proposal (while the industry is requesting a credit of $2/gallon, Biden’s plan doesn’t currently provide details on the exact amount). Similar tax credits for corn ethanol have already been rejected on a bipartisan basis because they failed to deliver climate benefits while spending $6 billion per year. Thankfully the President’s proposal does not propose other continued biofuels subsidies or consumption mandates. However, if the same palm and soy crops are shifted from first-generation, climate-damaging biofuels to aviation fuel, Biden’s climate commitments will not be fulfilled by this potentially very expense new taxpayer subsidy.
In many parts of the infrastructure plan, the devil will be in the details to determine if policy goals line up with actual future investments and funding priorities. Lessons should be learned from past programs and federal subsidies – for clean energy programs, for instance – that did more harm than good while wasting taxpayer dollars along the way. For instance, the American Jobs Plan proposes large new investments in a $27 billion clean energy accelerator program and a $15 billion research and development program for various types of energy, but similar programs like the Dept. of Energy (DOE) Loan Guarantee Program invested federal dollars in failed projects and created numerous long-term liabilities for taxpayers.
A deeper dive into some of the agriculture, energy, electric vehicle, climate, and biofuels sections of the infrastructure proposal includes the following:
- Plan calls on Congress to invest in “agricultural resources management and climate-smart technologies” as an infrastructure investment, in addition to protection of land and water resources, wildfire protection, and coastal resilience to sea-level rises and hurricanes.
- Within the goal of retooling and revitalizing American manufacturers and small businesses, the plan aims to fund R&D at land grant universities and position U.S. agriculture “to lead the shift to net-zero emissions while providing new economic opportunities for farmers.” Ensuring that new programs do not work at cross purposes with other federal programs aimed at climate protection, clean water, and environmental sustainability will require a dedicated effort on the part of both Congress and the Administration.
- Energy Efficiency and Clean Electricity Standard: Plan would establish an Energy Efficiency and Clean Electricity Standard (EECES) – for 100 percent carbon-pollution free power by 2035 – in part “to leverage the carbon pollution-free energy provided by existing sources like nuclear and hydropower.” Nuclear is carbon-free, but its waste is certainly a pollutant without a solution and after decades of subsidies, it still isn’t economic. Biomass power – which may actually increase greenhouse gas emissions – is not mentioned specifically in this proposal, but it would be included in the House Energy and Commerce Committee’s version of the Clean Electricity Standard.
- Accelerator program: A new $27 billion Clean Energy and Sustainability Accelerator program “to mobilize private investment into distributed energy resources.” The House Energy and Commerce Committee’s infrastructure and climate bills proposed spending of $100 billion or $50 billion on a similar accelerator program, which has similarities to the failed DOE Loan Guarantee Program.
- Investment and production tax credit for energy sources: Ten–year extension and phase-down of an “expanded investment tax credit and production tax credit for clean energy generation and storage.” The plan does not specify which types of renewable energy are included, but historically, the credit has included wind, solar, biomass, and other forms of energy. Notably, tax incentives for bioenergy in particular do not usually include the same safeguards or requirements for real, durable GHG reductions that other federal programs encompass. If these are not included (and enforced), the tax incentives could spur greater production of energy types that increase – instead of decrease – climate and taxpayer risks.
- Carbon capture: Reform and expansion of the Section 45Q tax credit for carbon capture and sequestration (CCS) projects, “making it direct pay and easier to use for hard-to-decarbonize industrial applications, direct air capture, and retrofits of existing power plants.” Reform for the credit is badly needed, particularly making sure that businesses claiming it are actually sequestering the carbon they claim. But it was already expanded and extended to allow any facility that starts construction by 2026 to claim it. That’s past the end of the President’s current four-year term.
- In addition to tax incentives, the plan includes direct funding for “large-scale sequestration efforts” and 10 “pioneer facilities that demonstrate carbon capture retrofits for large steel, cement, and chemical production facilities.” Industrial CCS has been subsidized for over a decade. It has a somewhat better track record than CCS for power plants, but that’s not saying much given the lack of a single power plant using CCS today. The Recovery Act after the Great Recession provided $1.4 billion to Industrial Carbon Capture and Storage with no real uptake from industry afterward. There’s no evidence spending billions more will make a difference.
- Fossil Fuel Taxes: Like his former boss, President Biden is proposing to cut all tax breaks for fossil fuel industries. No list is provided, but the breaks include intangible drilling cost deductions, percentage depletion, enhanced oil recovery credits, and others (see p. four of this report). Some of these breaks have been on the books for a century and are long-overdue for removal. Cutting them out of the tax code will increase “tax receipts by over $35 billion in the coming decade,” according to the Treasury Department. The climate outcomes of the elimination of oil and gas tax breaks, however, could be cancelled out at least in part by other proposals in the infrastructure plan, but the devil will be in the details.
- EVs: $174 billion investment for electric vehicles (tax breaks, point of sale rebates, manufacturing support, etc.)
Climate Research, Biofuels, and Other Energy Sources
- New sustainable aviation fuel blender tax credit: Devil would be in the details as to whether the new tax credit would incentivize continued use of food-based-biofuels such as palm, soy, and other climate-damaging fuels.
- $35 billion for R&D, innovation, clean energy, and climate science investments:
- Launching a new DOE Advanced Research Projects Agency-Climate (ARPA-C) program to “develop new methods for reducing emissions and building climate resilience”
- $5 billion increase in climate-focused research funding
- $15 billion in demonstration projects for climate R&D priorities, including “utility-scale energy storage, carbon capture and storage, hydrogen, advanced nuclear, rare earth element separations, floating offshore wind, biofuel/bioproducts, quantum computing, and electric vehicles…” This amount, if enacted by Congress, could significantly increase federal R&D funding for these sectors. Taxpayers have already spent billions on similar programs/projects that have failed to deliver climate benefits – such as the DOE Loan Guarantee Program, biofuels and biomass R&D and bioenergy refinery programs at the U.S. Dept. of Agriculture, etc.
- New national climate lab: affiliated with a Historically Black College or University (HBCU) as part of a $40 billion investment in “upgrading research infrastructure in laboratories across the country”