RFF experts assess early committee drafts of the Build Back Better Act, a far-reaching bill designed around the Senate’s unique reconciliation process that addresses clean energy and infrastructure spending.
Editor’s note on November 8, 2021 – On Friday, November 5, the US House of Representatives passed a bipartisan infrastructure bill, giving President Joe Biden a chance to sign the landmark legislation into law as early as this week. A larger package designed around the Senate’s reconciliation process, which is still being negotiated in both houses, remains stalled.
The Senate passed a bipartisan infrastructure package last month, but “Infrastructure Week” is far from over. House Speaker Nancy Pelosi (D-CA) has committed to a vote on that bill not later than September 27, while policymakers in both chambers align around a second infrastructure package designed around the Senate's unique budget reconciliation process. House committees provided initial legislative text for that second bill this past week, with insights from Senate committees expected soon.
Passing a budget under reconciliation enables Senate Democrats to pass a budget with just a simple majority, bypassing the filibuster altogether. However, the reconciliation rules require that all provisions must relate to the federal budget, and as such, the process of converging upon a final bill is notably more complex. This week, as House committees—from Energy and Commerce to Ways and Means—released and voted on their own initial proposals of potential programs for inclusion in the final bill, Resources for the Future (RFF) experts took note. Senate committees will soon release their own marks in turn, potentially as early as this week, and could provide in some cases an approach that differs widely from the House text. Ultimately, the still-evolving legislative package could total $3.5 trillion over ten years and include significant investments in clean energy, climate change mitigation efforts, energy justice, and more.
For now, these reflections from RFF scholars are limited to the text released and passed by the House Committee on Energy and Commerce and the House Committee on Ways and Means, but as negotiations continue, and new text from the Senate emerges, this blog post will be updated with additional thoughts from RFF scholars.
Emissions Projections under Alternative Climate Policy Proposals
In response to various provisions in the House Committee on Ways and Means and the House Committee on Energy and Commerce Marks of the Build Back Better Act (draft released on September 13, 2021)
Marc Hafstead, Wesley Look, Nicholas Roy, Karen Palmer, Joshua Linn, Kevin Rennert: Energy-related carbon dioxide emissions under the Clean Energy for America Act (CEAA)/Clean Electricity Performance Program (CEPP)–only policy are projected to be about 3,700 million metric tons of carbon dioxide in 2030, or about 39 percent below 2005 levels, with most of the reductions (relative to business as usual) coming from the power sector (Figure 1).
Adding a carbon fee to those policies, with or without a gasoline tax exemption, delivers relatively few additional emissions reductions from the power sector but provides additional incentives for emissions reductions in the industrial, transportation, and buildings sectors—especially in the long run. In 2030, the central case carbon fee with no gasoline exemption, plus the CEAA and CEPP, reduces energy-related carbon dioxide emissions to 52 percent below 2005 levels, two percentage points more than the Biden Administration’s Nationally Determined Contribution target under the Paris Agreement, and over 13 percentage points more than the CEAA and CEPP alone. Most of these additional emissions reductions come from the industrial and buildings sectors.
Figure 1. Energy-Related Carbon Dioxide Emissions under Alternative Policy Options
Analysis of the CEAA includes energy efficiency incentives, the Zero Emission Vehicle Program, and state and federal plug-in vehicle subsidies.
For more thoughts from RFF scholars on the emissions-reducing potential of the Clean Energy for America Act and the Clean Electricity Performance Program, read a relatedissue brief.
In response to Section 30104 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Matthew Wibbenmeyer: In many dry western forests, vegetation has accumulated due to decades of fire exclusion, and this vegetation now fuels larger and more intense wildfires. The US Forest Service estimates that fuel treatments on 51 million acres of federal, state, tribal, and private lands could dramatically reduce risk in the highest-risk areas; however, current federal funding levels of approximately $500 million per year are not sufficient to keep pace with fuel treatment needs. A June report by The Nature Conservancy, coauthored by RFF Nonresident Senior Fellow David Wear, indicates that additional investments of $50–$60 billion over the next ten years would be needed to provide fuel treatments in the highest-risk areas and address community adaptation and infrastructure investment needs. The text provides nearly $30 billion over the next ten years for wildfire risk mitigation and resilience, including approximately $25 billion for vegetation management and forest restoration on federal and nonfederal lands. With this funding, federal agencies and their partners can make significant steps toward making forests and communities more resilient to wildfire risk.
In response to Section 30113 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Alan Krupnick: The emphasis on construction materials is helpful in that it covers cement, steel, plastics, wood, and a variety of chemicals (e.g., formaldehyde). Developing protocols for environmental product declarations (EPDs) is a necessary step toward developing green procurements, green materials markets, regulations, and more.
But is a large, new, and costly effort needed? Plenty of expertise is available in EPA’s Environmentally Preferable Products Program and at other agencies (such as the General Services Administration) to lead and staff an effort in developing such protocols, and the industrial sector probably would join voluntarily—as it has during the development of energy efficiency measurement protocols under Energy Star. The next step after the EPDs are developed, which is not mentioned in the bill, would be to develop computer programs that make it possible for manufacturers to calculate and report on the carbon footprint of their materials, as they bid for government contracts. Government subsidies would be helpful for these computational efforts, but $250 million is potentially out of scale. Indeed, paying businesses for EPDs seems wasteful, as they will report their environmental impacts anyway to compete for procurement business with the government. If money is allocated in this area, it would be more effectively allocated to a fund that would help purchasing agencies bridge the gap between bids from contractors that would have used standard construction materials and the bids from contractors that use green construction materials.
Alex Stemmers / Shutterstock
$250 million
The initial House Committee on Energy and Commerce mark of the Build Back Better Act allocates $250 million to develop the Environmental Product Declaration Assistance Program, which would “support the development, and enhanced standardization and transparency, of environmental product declarations for construction materials and products.”
Overall, the actual bidding will be for projects to construct roads and bridges and buildings—not for the purchase of construction materials, per se. Thus, assistance will be most effective if it’s focused on developing protocols to help bidders and their suppliers calculate the carbon footprint that underlies their bids, rather than on the materials themselves—or perhaps on both. While implied by the language of this section of the mark, future legislative text needs to use the term “lifecycle emissions” to make this distinction explicit.
In response to Section 30114 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Daniel Raimi: Section 30114 of Subtitle A establishes a methane fee on the oil and gas sector, which my colleague Brian Prest analyzes in a recent issue brief. Set at $1,500 per ton of methane (equivalent to about $50 per ton of carbon dioxide using a 100-year global warming potential of 30), Prest estimates that the methane fee would reduce nationwide oil and gas methane emissions from about 2.3 percent to about 0.7 percent, and increase wholesale natural gas prices by about 20 cents per million British thermal units. Facilities would be allowed to leak up to either 0.2 percent, 0.11 percent, or 0.05 percent of their natural gas, depending on the type of facility, before being charged with a $1,500 fee for each additional ton leaked. As my previous research has shown, controlling methane emissions from oil and gas systems could dramatically reduce the overall emissions footprint of the recent boom in oil and gas production in the United States, but measuring methane has been a challenge.
A couple other interesting points stand out here. First, the text instructs the US Environmental Protection Agency (EPA) to lower the threshold at which facilities are required to report their methane emissions to the Greenhouse Gas Reporting Program, which will bring a larger number of operators under the tent. Second, the text asks EPA to require those facilities to report their methane emissions based on empirical data that reflect actual emissions. This update is important, because numerous studies have shown that reporting of methane emissions under the existing Greenhouse Gas Reporting Program often is well below real-world emissions. Thankfully, recent advancements in methane detection technologies will make it much easier to implement these new requirements, and we will be watching with interest to see exactly what EPA will require of companies.
In response to Section 30433 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Kathryne Cleary and Karen Palmer: Building codes can reduce energy consumption in new and significantly modified buildings and save building owners money. Some downsides of building energy codes are that they do not address the energy usage of existing buildings, and they do not address actual energy consumption of buildings. It’s also difficult to know exactly how much energy the building codes save, because baselines for energy use are difficult to estimate.
In response to Section 30442 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Joshua Linn: The Electric Vehicle Supply Equipment (EVSE) Rebate Program appears to offer large subsidies as a fraction of investment costs. This contingency on investments increases the risk of wasteful or ineffective investments, because the company incurs a small fraction of the costs (i.e., investors might have little “skin in the game”).
The EVSE Rebate Program provides rebates based on costs, rather than on whether these investments actually reduce emissions. To maximize the impact of the EVSE Rebate Program, companies applying for subsequent rebates would need to show that their past investments were successful, or that they learned important lessons that will improve the likelihood of success for future investments.
In response to Section 367 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Joshua Linn: A similar argument as for the Electric Vehicle Supply Equipment Rebate Program applies to state energy transportation plans. To maximize the effectiveness of these efforts, states must demonstrate past success or lessons learned before they can receive multiple grants over time.
Investment in Energy Communities in a Clean Energy Transition
In response to Section 30454 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Daniel Raimi: Among the sweeping policy efforts included in the House Energy and Commerce Committee’s initial mark, several provisions seek to not only reduce greenhouse gas emissions and other pollutants, but do so in a way that advances energy equity, promotes environmental justice, and supports energy communities.
Stokette / Shutterstock
Perhaps the most direct example of such efforts appear in Section 30454 of Subtitle D in the mark, which creates a new grant program within the Department of Energy that’s funded with $2 billion to spur “low carbon reinvestment in energy communities.” These grants would help energy companies (including public utilities) invest in new clean energy projects, retrain workers, address legacy pollution issues, and deploy emissions-reducing technologies at existing energy-intensive manufacturing facilities.
The language of the mark is currently very broad—it makes eligible any community “whose members are or were engaged in providing, or have been affected by the provision of, energy-intensive goods and services.” To my amateur eye, that would include just about every community in every corner of the United States. Presumably, the Department of Energy will use discretion to funnel investments to energy communities that are most in need, such as those facing closure of coal mines, power plants, or steel mills. At $2 billion over ten years, this is a modestly sized program, and many of the details are to be worked out by the Department of Energy. But if the program demonstrates some successes, it may become the foundation for larger programs in the future.
The grant program also would complement existing efforts from the Department of Energy. For example, a brand new pilot program called Communities Local Energy Action Program takes a similar approach to deploying clean energy in disadvantaged communities. In addition, the Department of Energy is currently funding studies of how to make the energy transition at the state and community level. For instance, RFF is contributing to an analysis funded by the Department of Energy on how six states in the Intermountain West (Utah, Colorado, Arizona, New Mexico, Montana, and Wyoming) might develop a carbon, hydrogen, and biofuel economy, with an underlying commitment to improving environmental justice.
For more thoughts from Daniel Raimi on how the House Energy and Commerce Committee’s initial mark could support an equitable energy transition, read his relatedblog post.
In response to Section 30472 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Kathryne Cleary and Karen Palmer: Under the National Environmental Policy Act, the Federal Energy Regulatory Commission (FERC) must consider environmental impacts when making decisions about new infrastructure. As explained in our FERC 102 explainer, FERC is responsible for approving pipelines. Additional resources for more efficient environmental reviews could result in better environmental outcomes for pipeline projects.
The House Committee on Energy and Commerce's mark includes plans to provide $17.5 million in grants to assist federal agencies in reducing carbon emissions from federal buildings and fleets. More than 100,000 federal civilian buildings are in use in the United States, which makes such an effort challenging.
Federal Energy Efficiency Fund
In response to Section 30481 of the House Committee on Energy and Commerce Mark of the Build Back Better Act (draft released on September 13, 2021)
Kathryne Cleary and Karen Palmer: The federal government owns and operates a significant number of buildings across the country and abroad. Federal civilian buildings in the United States (which exceed 100,000) are generally old and thus could benefit from improvements in efficiency. Federal law currently requires federal buildings to report energy usage and, in some cases, to reduce energy usage—but these standards haven’t been updated in some time. In a recent report, we explore options for designing a building performance standard for federal buildings. A building performance standard is a policy that requires a reduction in energy intensity or emissions intensity over time, with options for flexible compliance, meaning that some buildings for which compliance is easier can do more, while others do less. This approach can be more efficient relative to other policies aimed at reducing total energy use from buildings and can achieve higher emissions reductions for a lower cost.
