Environmental and social provisions in the Infrastructure Investment and Jobs Act and Build Back Better Plan

President Joe Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law on November 15, investing $550 billion above baseline levels (the equivalent of approximately 1% of GDP) in US infrastructure over the next five years.

The $1.2 trillion package will be the largest federal investment in infrastructure projects in decades, targeting improvements in roadways, bridges, public transportation, and water systems. Importantly, as the world increasingly moves toward a low-carbon economy, the IIJA will fund and expand climate mitigation, social equity, and environmental justice programs. The IIJA does little to reduce the country’s emissions level, but President Biden’s Build Back Better (BBB) plan, which has been passed by the US House but not the Senate, includes a hefty sum dedicated to climate mitigation and resiliency as well as funding for social programs and environmental justice. Paired with the IIJA, BBB would be an important piece of legislation to help the US meet the goals of the Paris Agreement and sustainably recover from the COVID-19 pandemic.

In this research, KBRA outlines the provisions included in the IIJA and details its environmental- and social-related funding. The report also highlights the environmental and social policies contained in the BBB Act, though the passage of BBB is currently uncertain.

Key Takeaways

• The IIJA contains historic levels of funding for infrastructure projects, as well as funds for climate mitigation and expansions in social equity programs.

• However, the IIJA’s mission is to improve the quality of US infrastructure, so it does little to address greenhouse gas (GHG) emissions and meet the goals of the Paris Agreement.

• The president’s BBB framework, if passed, will specifically target emissions and go further to improve environmental and social outcomes across the country.

IIJA Overview

According to the White House, 20% of America’s highways and major roadways and 45,000 bridges are in disrepair. While the topic of increased infrastructure funding has historically had bipartisan support in the House and Senate, passing an infrastructure-focused spending package has been contentious over the past few years. Actual federal spending on infrastructure projects has steadily increased since the 1940s; however, when adjusted for inflation and increasing material and operational costs, federal spending on infrastructure as a share of GDP has declined since the 1980s. According to the Biden administration, the IIJA will be the largest injection of money in infrastructure projects since the interstate highway system was built in the 1950s.

The largest spending item in the IIJA, at $110 billion, is devoted to repairing aging roads and highways across the US, and $40 billion of that is reserved for bridge reconstruction. The IIJA also includes money to upgrade other aging infrastructure across the country, including modernizing the power grid ($65 billion), upgrading water infrastructure ($25 billion), and improving broadband reliability and access ($65 billion). The bill also dedicates funding to strengthening the electrical grid against potential cybersecurity attacks.

The IIJA also allots $39 billion to improvements in the country’s public transportation systems. The Department of Transportation estimates that the repair backlog for public transit includes approximately 24,000 buses, 5,000 rail cars, and 200 stations. Another $66 billion of funding will go toward improving Amtrak’s railways, with a focus on the Northeast Corridor, which runs from Boston to Washington, DC and is the country’s busiest rail line in terms of ridership. The bill also includes $25 billion for US airports aimed at upgrading runways, gates, and terminals while also funding air traffic control tower repairs. Another $17 billion will fund port and waterway infrastructure improvements.

The bill will be funded through a variety of sources, including over $200 billion in unspent COVID relief funding, $50 billion in Medicare rebates, and $87 billion from wireless spectrum sales, among others. Though supporters of the bill say it will be completely paid for through new revenue and savings, the Congressional Budget Office (CBO) estimates it will add $256 billion to the deficit over the next 10 years.

Notably, although the federal government will control a large portion of the funding, states will have significant discretion over how the allocated money is spent and ultimately which communities and areas within their state are prioritized. For more information, see our recent publication, The Infrastructure Investment and Jobs Act—What the $1.2 Trillion Funding Means for States.

Environmental Provisions in IIJA

Although IIJA’s main purpose is not climate mitigation, it includes important new environmental-related funding and expansions to existing programs that will be important in combating the effects of climate change. The bill’s public transit funding will help support reductions in private transportation emissions while also encouraging cleaner transit options, with $7.5 billion for expanding state and local access to zero-emission and low-emission buses and ferries. An additional $7.5 billion provides for building EV charging infrastructure across the country. The IIJA also includes $3 billion in funding for the battery production supply chain in the US, which will be an important investment for increasing EV use. Also, $3 billion will expand battery research, battery materials manufacturing, and battery recycling.

Along with battery storage, the IIJA develops other industries that will aid in climate change mitigation. The bill dedicates federal funding to the carbon capture and storage industry, with $4.6 billion for carbon sequestration pilot projects, as well as spending for additional research and development involving carbon capture, focusing on transforming it into usable products. Funding will also go toward research and expansion for the use of hydrogen fuel, which has the potential to be a zero-emission energy source. In addition, the bill funds the creation of at least four hydrogen fuel hubs, with a specific focus on cost reductions for hydrogen use and expanding access. Moreover, IIJA authorizes a $3.2 billion investment in nuclear energy and $150 million for the hydroelectric industry.

IIJA includes billions of dollars to expand electrical transmission lines and improve the resiliency of the electrical grid. There is $5 billion in funding for protecting the electrical grid from the negative effects of extreme weather and other climate change-driven events, while another $3 billion increases smart technology for better efficiency and resiliency. An additional $5 billion will finance a grant-matching program targeting resiliency improvements and prioritizing clean energy use by utilities, especially in rural areas. This spending will be an important step in Biden’s plan to expand renewable energy use.

Promoting energy efficiency is a key goal of the IIJA. Over $1 billion will go to states and agencies to improve building codes and provide energy efficiency knowledge and expertise for states to train and recruit professionals in the buildings industry. The bill includes $2.5 billion in grant funding for schools for energy efficiency upgrades, with an eye toward long-term cost reductions.

Funds will also be provided for expanding programs that address environmental concerns. The Army Corps of Engineers, whose mission is to deliver engineering solutions across the country, will receive an additional $11.6 billion to reduce the risk and effects of natural disasters through projects related to flood control, river dredging, and others. The Bureau of Reclamation, which oversees water management in the western US, will receive $250 million for research and development related to water desalination and another $1 billion for wastewater recycling. Wildfire protection will see a boost, including via a $500 million grant program through the Department of Agriculture to communities vulnerable to wildfires, while the National Oceanic and Atmospheric Administration (NOAA) will get an additional $50 million to model and predict wildfire patterns. NOAA will also receive $492 million to map and model coastal and inland flooding.

Social Provisions in IIJA

The White House has largely touted the IIJA as an overarching bill that will improve social outcomes and improve equity in American society. The administration cites that in conjunction with the president’s BBB Act, the bills will add approximately 1.5 million jobs annually over the next 10 years.

An important piece of the IIJA is expanding environmental justice programmes, which ensure that low-income and minority communities receive a fair and equitable share of resources in climate mitigation. The Bureau of Indian Affairs, which promotes economic growth and improving the quality of life for US indigenous populations, will receive $216 million for climate mitigation and resiliency projects for tribal nations. According to the White House, approximately 25% of Black and Hispanic Americans live within a three-mile radius of Superfund and brownfield sites, which are abandoned industrial areas containing harmful chemicals that can pose risks to surrounding communities. The IIJA will invest $21 billion to clean up these and other fossil fuel-related sites across the country, which the White House says will advance environmental justice and create jobs in these at-risk communities. The administration also says that this will be the largest investment ever in addressing legacy pollution. Additionally, the IIJA authorizes $1 billion in spending to reconnect neighborhoods, predominantly Black communities, that were separated by major roads, highways, and other large infrastructure projects. The money allocated for improvements in America’s broadband system will also target low-income, rural, and tribal areas with the goal of expanding internet access to these communities.

As mentioned, the bill includes funding for water infrastructure in the U.S., focusing on replacing lead pipes ($15 billion), as the Environmental Protection Agency approximates that there are still 6 million lead pipelines in use despite a 1986 federal ban. The bill will also dedicate $21 billion to removing pollution from the soil and groundwater with an emphasis on addressing water contamination from polyfluoroalkyl substances, chemicals formed in plastic production. Additionally, $55 billion is allocated to expand access to clean drinking water, which the White House estimates that up to 10 million households do not have access to.

Limitations of the IIJA in Climate Mitigation

Importantly, the IIJA alone will not be nearly enough for the U.S. to meet its commitments under the Paris Agreement. The White House notes that the U.S. has been paying out billions of dollars in damages every year due to natural disasters and other climate change-driven events. For example, in 2020, there were 22 disaster events in the US that cost over $1 billion in damages each. After tornadoes ravaged Kentucky and other parts of the southern U.S. in December, the US had seen 20 such billion-dollar disaster events in 2021, totaling $145 billion. Preventative measures aimed at climate mitigation, adaptation, and resiliency will be needed to avert the worst effects of climate change, encourage longer-term cost savings, and meet the goals of the Paris Agreement.

Biden’s BBB Act, described in more detail below, has more of an emphasis on emissions reductions and climate change funding, but, importantly, the bill still does not go far enough to meet the goal of a 50% reduction in emissions by 2030 relative to 2005 levels. However, analyses suggest the bill will reduce emissions by a gigaton, a significant decline that, paired with other policies, would put the US on a path to meeting the country’s emissions reduction commitments.

The BBB plan, a $1.75 trillion spending plan passed by the House, will make crucial investments in affordable housing, healthcare, childcare, education, environmental justice, and climate change mitigation that could impact the lives of millions of Americans. The BBB Act, if passed, will represent the single largest investment in fighting climate change in US history.

Build Back Better Act Overview

The roughly $1.75 trillion BBB Act, sometimes referred to as the social safety net and climate bill, specifically targets climate mitigation and social equity with an emphasis on “rebuilding the middle class.” It is unclear if the Senate will pass the BBB Act, but if it does, it is likely to make some changes to the House’s current version of the plan before passage. However, if enacted, BBB will be an important and historic source of climate and social funding.

Although the White House states the bill will be fully paid for, CBO estimates that the House’s current version of the BBB Act would increase the deficit by $160 billion over the next decade. However, proponents of the bill argue that the CBO’s assessment does not consider the bill’s ripple effects on the economy, environment, and broader society. The CBO has acknowledged the difficulty of reflecting budgetary savings from climate adaptation and mitigation efforts, as most of the benefits are realized after the spending period.

The House’s version of the BBB Act contains environmental and social spending provisions, including free universal preschool, increased affordable housing funding, clean energy projects, and investments and incentives to address extreme weather. The proposed legislation would create and support millions of jobs and invest in workforce development. The largest spending item in the bill represents the most significant federal investment in fighting climate change, amounting to $555 billion. The current version of the bill will be paid for via a mix of taxes on corporations and high-income earners, IRS enforcement, and Medicare savings.

Environmental Provisions in BBB Act

The BBB Act includes critical investments to support President Biden’s efforts to tackle climate change and further improve the resiliency of the country’s infrastructure with a $555 billion investment in clean energy and climate change mitigation. The bulk of this expenditure ($320 billion) will be spent on clean energy through a combination of new tax credits and an expansion of successful tax incentives, which will make it easier for companies and consumers to purchase solar panels and EVs while also promoting energy efficiency in homes and buildings. According to the White House, the cost of installing rooftop solar panels will be cut by about 30%. Similarly, it will reduce the cost of new US-made EVs by $12,500 for a middle-class family and provide additional tax credits for electric bike purchases. The tax incentives are also meant to encourage the use of renewable fuels to reduce further transportation emissions.

Bolstering resilience ($105 billion) is also a key component of the bill. Funding will be appropriated to increase the climate resiliency of coastal communities, protect against extreme weather, and promote reforestation on public, private, and tribal lands. This money would also create a Civilian Climate Corps to employ over 300,000 people for climate-focused public service opportunities while bolstering community resilience to climate change. The bill would also authorize money for the Clean Energy and Sustainability Accelerator, a national green bank, which would inject funding into state-level green banks and invest in sustainability-focused projects across the country. Importantly, as part of President Biden’s environmental justice strategy, 40% of Clean Energy and Sustainability Accelerator investments will go toward disadvantaged communities through the Justice40 initiative.

The bill also considers spending provisions to promote the country as a leader in green technology while reducing its carbon footprint. Investments and incentives for clean energy technology will be targeted to grow the US supply chain in wind and solar power, and to boost steel, iron, and manufactured products that are mined, produced, or manufactured in the US ($110 billion). It is expected that these incentives would also spur clean energy jobs in fossil fuel-reliant communities and coal-producing regions. Clean energy procurement funding ($20 billion) will also be allocated for fleet electrification and further expanding EV charging infrastructure to support the purchase of EVs, clean energy, and clean construction materials.

If enacted, the bill would reinstate the Superfund tax on crude oil and imported petroleum products to fund the cleanup of hazardous waste sites. An important component of the legislation is a proposed fee on methane emissions from petroleum and natural gas systems, which would help reduce GHG emissions and internalize the cost of pollution. The proceeds would be used for better monitoring of methane and other efforts to reduce emissions. However, these contentious measures may be removed during Senate discussions.

Social Provisions in BBB Act

The BBB Act also makes important investments in social programs through health, public safety, broadband, affordable housing, and education provisions. One of the most ambitious policies is the investment of nearly $400 billion for free universal preschool and affordable childcare programs. A CBO report describes the economic effects of expanding subsidized childcare and providing universal preschool. Not only would employment in the childcare industry increase, but the CBO found that, on average, parental employment would likely increase as well. These policies would most benefit mothers or primary caretakers of children. Additional funding would go toward the Family and Medical Act, which would require firms regardless of size to give employees four weeks of paid leave for family and medical caretaking.

The BBB Act would invest more than $20 billion to make high-quality education accessible and affordable, including raising the maximum award for Pell grants, which provide federal funding for college tuition for low-income students. In addition, the spending bill focuses on improving healthcare quality and reducing healthcare premiums and other health costs. It also allocates funding to improve wages for home care providers and expand affordable home care services.

Over $150 billion will go toward expansions in affordable housing, which represents the single largest investment in affordable housing in history, according to the White House. This will expand access to affordable housing by building new projects and upgrading and retrofitting existing housing units. The bill would also expand access to Housing Choice Vouchers and other rental assistance programs and promote first-generation homeownership. Proponents highlight that these housing investments, coupled with policies focused on children and families, would help reduce poverty, especially child poverty, with an expansion in child tax credits.

The legislation appropriates $1.5 billion to address national security issues, including money to prevent cybersecurity breaches, expansions in cybersecurity workforce training, and investments in cloud architecture. Importantly, this spending will help states and local governments develop resilient infrastructure networks.

Conclusion

The IIJA marks an important federal investment in America’s infrastructure system and dedicates funding to climate mitigation and resiliency. Though the fate of the BBB Act is currently unclear, when paired with the IIJA, these environmental-focused investments would put the U.S. on a path to meeting the goals of the Paris Agreement and becoming a global leader in climate mitigation and adaptation. KBRA continues to monitor country-level climate and ESG-related policy commitments to understand trends in international investment and progress on the global transition to a low-carbon economy.