The Fuse

$3 Trillion Infrastructure Bill to be a Major Climate Push

by Nick Cunningham | March 24, 2021

The Biden administration is putting together a proposal for a $3 trillion infrastructure package, which could be chock-full of provisions related to energy and climate change.

The details have not yet been ironed out, but coming on the heels of the successfully passed $1.9 trillion Covid-19 rescue package, the administration appears ready to go big again.

$3 trillion for infrastructure

With the American Rescue Plan Act a done deal, the next major legislative effort appears to be a sweeping infrastructure package that covers a lot of ground. According to the New York Times, the Biden administration may cut the proposal into two legislative packages. The first would cover physical infrastructure, and the second would offer a bold vision for the nation’s “human infrastructure,” as sources describe it to the New York Times, including investments in education and paid leave.

The first bill would include traditional concepts of infrastructure – roads, bridges, ports and rail – and also a long list of clean energy segments, such as affordable housing, electric vehicle recharging infrastructure, 5G telecommunications, retrofitting buildings, upgrading water infrastructure and upgrades to the electric grid.

The second bill focused on people may include free community college, universal pre-K, extending the child tax credit and national paid leave. Given the enormous popularity of the Covid-19 rescue package, which included bold steps at expanding the safety net, there appears to be less political hesitation from the White House to push big changes that would improve quality of life for millions of people than might have been the case in the past.

The White House has been careful to note that the details remain in flux. “President Biden and his team are considering a range of potential options for how to invest in working families and reform our tax code so it rewards work, not wealth,” White House press secretary Jen Psaki said. “Those conversations are ongoing, so any speculation about future economic proposals is premature and not a reflection of the White House’s thinking.”

One of the sticking points will be how to pay for the large price tag. The Biden administration is considering raising the corporate tax rate and/or the top marginal tax rate for individuals. While Congress debates the cost of the bill, it is important to note, however, that the cost of inaction is steep, and it grows over time the longer climate action is deferred. In that sense, aggressive climate action is cheaper than doing nothing even without considering new revenues to pay for it.

But the legislative process will not be easy. While the Covid-19 rescue package was passed using budget reconciliation, some Democratic senators want engagement with Republicans, which would almost certainly mean watering down the legislation substantially. Even then questions about viability remain – Republicans have already voiced opposition to the package and the process. Meanwhile, there will be no shortage of special interests weighing in. Big business groups have voiced support for infrastructure spending, but would likely balk at corporate tax hikes.

Alternatively, the Democrats could decide to use reconciliation again, and pile the entire package into one vehicle, but they’ll once again need all 50 senators on board, which may not be easy.

However, on March 24, Senator Joe Manchin (D-WV), a closely-watched swing vote on the issue, said that Congress should go big and pay for it with tax increases. “I’m sure of one thing: It’s going to be enormous,” Sen. Manchin told reporters. He said Republican resistance to tax increases was not “reasonable.”

Sen. Manchin’s early support for a big package would seem to boost support for the reconciliation route, although it is still too early to gauge which legislative strategy the Biden administration will pursue.

Climate urgency

The infrastructure bill will play out at a time when the Biden administration also nears the release of a new national climate target – with press reports suggesting he could soon announce a 50 percent greenhouse gas emissions reduction goal by 2030.

The Biden administration is trying to revive faith in the Paris climate agreement, which depends very heavily on U.S. domestic climate action.

That goal is meant to dovetail with the U.S.’ international climate efforts. The Biden administration is trying to revive faith in the Paris climate agreement, which depends very heavily on U.S. domestic climate action. Many countries are lagging in their efforts, but if the Biden administration is to have any credibility or any leverage over them, U.S. climate action is needed. In addition, the Biden administration is aiming to convene an international climate summit on Earth Day, which is April 22. A new national climate target will be vital to that process.

It is unclear how specifically the U.S. may achieve this domestic emissions target, but the one thing that is definitely not in short supply is a pile of roadmaps and strategies from think tanks and environmental outfits on how to cut emissions over the next decade.

The Biden administration will likely lean on every executive tool at its disposal, from EPA regulations to government procurement, to global climate finance to increased scrutiny over fossil fuels from financial regulators at the Federal Reserve and the Securities and Exchange Commission (although some of those regulators operate independently from the executive branch). All of those maneuvers will individually mark important but modest movement on the energy transition.

But the legislative effort embodied in the forthcoming infrastructure bill will likely be the single most ambitious effort to tackle climate change during the Biden era.

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