The Department of Energy believes a modernized electricity grid is a critical component to increasing resiliency of essential services and infrastructure. To help with modernization efforts, including clean energy technologies, parts of the USD 1trn Infrastructure Investment and Jobs Act (IIJA) provide approximately USD 86bn over the next five years (FY22-FY26).
President Joe Biden (D) in April announced a goal to reduce US greenhouse gas emissions by at least 50% by 2030. This also advances Biden’s campaign pledge during the 2020 election to put the country on a path towards net-zero emissions by 2050.
Net-zero emissions means achieving an overall balance between greenhouse gas emissions produced and greenhouse gas emissions taken out of the atmosphere.
There is international consensus and focus of reaching net-zero emissions by 2050 or sooner. A December 2020 Net-Zero America study by Princeton University outlines what’s necessary to get to net-zero and actions needed to translate these pledges into tangible progress.
While the IIJA does have provisions addressing emissions from transportation, power, industry and buildings, there remain concerns within the environmental community that the current pace of clean electricity generation and high-voltage transmission development is too modest to meet the nation’s low-carbon goals. Clean electricity by 2035 is a key milestone to achieving net-zero emissions by 2050 as a long-term strategy for the US.
Municipal ‘green bond’ market in nascent stages
Navigating climate change begins at the local level. Green bonds serve as an opportunity to support projects that provide environmental benefits. It also provides investors with the ability to direct capital towards environmental, social and governance (ESG) goals.
According to Moody’s Investors Service, USD 375bn worth of bonds that fund climate- and environmental-focused municipal bond projects are likely to be issued in 2021, a 39% increase over 2020, although this represents a fraction of the USD 3.8trn municipal bond market.
Global spotlight on climate change
The United Kingdom is currently hosting the 26th United Nation (UN) Climate Change Conference of the Parties (COP26) in Glasgow, Scotland from 31 October – 12 November 2021. The COP26 summit will bring parties together to accelerate action towards the goals of the Paris Agreement (a legally binding international treaty on climate change) and the UN Framework Convention on Climate Change.
On 10 November, COP26 negotiators released a preliminary draft of an agreement on how countries will work together to curb climate change. While the draft could change, it includes the acceleration of phasing out of coal and subsidies for fossil fuels.
Below is a table with the key energy provisions in the IIJA.
Fiscal year ends 30 September
On 10 August, the US Senate passed — on a bipartisan basis — the USD 1trn IIJA, also referred to as H.R. 3684. The IIJA focuses on “hard infrastructure.” For months, the IIJA was unable to get a vote in the House of Representatives until the fate of the USD 3.5trn “soft infrastructure” legislation proposed by congressional Democrats was resolved. On 5 November, the House passed the IIJA.
On 28 October, President Joe Biden announced an agreement for USD 1.75trn on the soft infrastructure legislation (Build Back Better Framework). With passage of the IIJA, President Biden has signaled a vote will happen during the week of November 15th. There is USD 555bn allocated to clean energy in the framework.
As these negotiations continue, Debtwire Municipals, through our Bill in Brief series, will present periodic summaries on elements of the IIJA that directly affect state and local governments.
by Paul Greaves