December 16, 2021
By any measure, the Infrastructure Investment and Jobs Act (IIJA),See footnote 1 the bipartisan infrastructure package signed into law by President Biden on November 15, represents a historic investment in the underpinnings of our economy, especially when it comes to transportation. The bill authorizes roughly $1 trillion over five years, nearly $600 billion of which is surface-transportation related.See footnote 2 That infusion of money over the next five years has the potential to catalyze transformative changes in the ways people and goods move, and to help make our transportation system safer, more reliable, more affordable and more equitable. It will also have a lasting effect on U.S. greenhouse gas emissions. The White House and congressional leaders have cited addressing climate change and equity among the goals of the IIJA.See footnote 3
To understand how the IIJA’s historic investments in transportation infrastructure could help — or hinder — efforts to achieve the GHG reduction goals that states and the federal government have set, the Georgetown Climate Center analyzed the bill using our Transportation Investment Strategy Tool and assessed the potential effects of each of the bill’s surface transportation provisions.
We found IIJA could be an important part of the U.S. response to climate change. Or it could lead to more greenhouse gas pollution than the trajectory we are currently on. Where the actual outcome falls within that range will depend on the decisions made by state, federal, and local governments about how to spend the money made available by IIJA.
But if investments instead flow mostly to adding more lanes and building more roads, the IIJA funding could result in an increase in emissions over what we’d expect without this additional investment. That’s because building more roads consistently results in more traffic — an “if you build it, they will come” effect known as “induced demand.” In short, traffic expands to fill the new lanes within a few short years, bringing with it more pollution.
The transportation sector is responsible for roughly a third of the country’s carbon dioxide pollution, with roughly 80 percent of that tally coming from cars and trucks on the nation’s roadways. Because motor vehicles (especially diesel trucks and buses) also generate other dangerous air pollution, and communities of color are disproportionately exposed to that air pollution,See footnote 4 reducing pollution from vehicles is important to achieving equity and environmental justice goals, as well as climate targets.
States and the federal government have made ambitious commitments to reducing greenhouse gas emissions and leaders have acknowledged that achieving those goals, and addressing long-standing inequities and environmental justice issues, will require real cuts in pollution from the transportation sector.See footnote 5 Transportation emission reductions are expected from federal and state emissions standards for cars and trucks, electric vehicle incentives, and from other existing policies — our baseline projects a decline in emissions due to the impacts of these efforts — but additional policies and programs will be needed to achieve federal or state climate targets.
Federal funding for highways, transit, and other transportation programs is regularly reauthorized through comprehensive, multi-year transportation legislation — a process known as “surface transportation reauthorization.”See footnote 6 These bills are the primary mechanism by which Congress shapes federal funding for transportation, including modifying, adding, or eliminating programs.
When Congress establishes a transportation funding program, it also provides a set of statutory parameters for implementing that program, including the amount of funding available under the program for each fiscal year, instructions for how those funds will be distributed, the share of project costs to be provided by the federal government, and lists of eligible recipients and uses for the money.
Under the current statutory framework, surface transportation funding for highways, transit, and other programs is distributed through “formula funded” and “discretionary” programs. Importantly, the method of distribution for a given program determines which party — often either a state or federal transportation agency — will decide how those funds are invested. For both formula and discretionary programs, a state or local government is typically required to provide matching funds.See footnote 7
Formula funded programs distribute federal transportation aid to states based on statutory formulas that apportion the funding between states. Once authorized, formula funding can be obligatedSee footnote 8 by states, subject to certain statutory and regulatory requirements, and states have long had significant flexibility to use these funds to meet their various transportation needs or priorities.See footnote 9 The National Highway Performance Program and the Surface Transportation Block Grant Program are the two largest highway formula programs and, taken together, represent more than 70% of total highway formula funding in IIJA.See footnote 10 The major transit formula programs include the Urbanized Area Formula Funding program and State of Good Repair Grants Program.
Alternatively, for discretionary programs, including competitive grant programs, federal administrators have discretion regarding how to distribute funding among states and other eligible entities, subject to statutory criteria.See footnote 11 Examples of discretionary programs include the Federal Highway Administration’s Infrastructure For Rebuilding America grant program and the Federal Transit Administration’s Low or No Emission Vehicle Program.
The split in the proportion of funding distributed to states between formula and discretionary programs varies from one transportation reauthorization to another.
The IIJA includes a five-year transportation reauthorization for 2022-2026, and significantly increases U.S. transportation investments, nearly doubling the annual amounts provided in the Fixing America’s Surface Transportation (FAST) Act of 2015, the previous transportation reauthorization.See footnote 12
As in past transportation authorizations, most of IIJA’s surface transportation funding is passed along to states and localities, and they decide what to spend it on.See footnote 13 Some funding is directed for specific investments, like EV charging infrastructure (Sec. 11401), and low- or no-emission buses (Sec. 30018). But for much of the funding — for formula-funded highway programs, in particular — state and local decision makers have significant flexibility to choose how to spend it.See footnote 14 Of the transportation reauthorization funding in IIJA, approximately 70% is formula funding, and 30% is discretionary funding.See footnote 15 Within IIJA’s formula funding programs, approximately 82% is for highway programs, while 18% is for mass transit.See footnote 16
A primary example of states’ flexibility is the Surface Transportation Block Grant (STBG) Program, through which the bill will distribute approximately $70 billion over 5 years. STBG funds can be used by states and localities for a range of projects, from road and bridge construction to transit projects. The IIJA added new eligible low-carbon uses of STBG funding (e.g., electric vehicle charging stations), but maintained state and local government flexibility regarding how the funds are spent.
If a state receives $1 billion in STBG funding through IIJA, the law allows the state to direct that funding to maintaining existing roads and the installation of electric vehicle charging stations and safer bicycle lanes — leading to GHG emission reductions. However, the state could alternatively choose to spend STBG funds primarily on highway construction and expansion, which would increase GHG emissions.
The upshot of this flexibility is that the impact of the IIJA on greenhouse gas pollution will be determined by how decision makers choose to use that flexibility, and the balance they strike among the various options before them.
To evaluate the potential impact of the $600 billion dollars in the IIJA package that is surface-transportation related,See footnote 17 GCC started by reviewing over 120 relevant IIJA bill sections and translating each into potential investment levels over 5 years, from 2022 to 2026.
|Transportation Investment Strategy Tool Documentation|
|Supplementary Slides (Inputs and Outputs)|
For each of these sections of the bill, we mapped the various ways the funds might be spent, and on what kinds of transportation projects or strategies (e.g., switching from diesel to electric transit buses, investments in biking infrastructure, or highway maintenance).The legislation funds some existing programs, so we were able to look at historical evidence when developing potential uses for these funds. The legislation also creates some new programs. In those cases, we relied on legislative text and public statements to determine what sorts of strategies and projects each is likely to fund.
To reflect the flexibility the law incorporates, we developed two scenarios for potential uses of the $600 billion. Since it is not feasible to evaluate every possible combination of choices, we designed these scenarios to approximate the upper and lower bounds for some of the options that we would expect to lead to higher or lower emissions, within the funding options permissible in the legislation’s program requirements.
Each scenario directs the funds toward a different combination of the 30 different investment strategies in our Investment tool.See footnote 18
For each investment strategy, the Transportation Investment Strategy Tool includes a unique “impact factor” that reflects the change in GHG emissions expected per dollar invested.See footnote 20 The Tool then totals those impacts for each scenario to determine the net impact in each year.
Comparing the results of these two scenarios makes it clear that the IIJA has the potential to bend the curve down on transportation emissions, but it could also result in emissions that are higher than business as usual, or “Baseline GHG.”
In the above chart, both scenarios are compared to a “Baseline GHG” scenarioSee footnote 21 — the dashed line in the chart — which projects a decline in GHG emissions through 2032. This baseline assumes that the Biden Administration’s proposed Corporate Average Fuel Economy Standards for Model Years 2024-2026 Passenger Cars and Light Trucks are fully implemented, and that current battery cost trends continue to improve the affordability of electric vehicles.
For the high-emission scenario — the red line on this chartSee footnote 22 — the first few years begin with additional emission reductions compared to the baseline, but by 2026, emissions start to trend upward relative to the baseline. This is driven by investments in highway expansion and the effect of induced demand, which becomes even more pronounced over time.
In contrast, the low-emission scenario — the blue line on this chart — could cut emissions by 1.6% below the baseline within just 5 years. This may not sound like much, but it’s roughly equivalent to the annual emissions from 4.5 million passenger vehicles.See footnote 23 It also underscores how hard it is to move the needle for transportation-sector emissions.
We are not predicting that either extreme of these bounding cases is likely, but they are certainly both possible. In the end, we expect that actual investment levels for most strategies will fall between these approaches, and will depend on the choices state, local, and federal policymakers make about how to spend these funds, given the discretion and flexibility that they are afforded under the law. Importantly, decision makers looking to achieve climate goals have the opportunity to steer decisions in the direction of the lower-emission scenario.
Looking at how the various investment strategies factor into these results, we found that the percentage of funding invested in highway expansion relative to other strategies is the main driver of emissions outcomes.
The Infrastructure Investment and Jobs Act includes hundreds of billions of dollars available for a range of low-carbon transportation investments: new and improved transit, EV charging infrastructure, highway resurfacing and other strategies can all help to reduce emissions. However, if a substantial portion of IIJA funding is directed toward highway expansion, emissions increases from induced demandSee footnote 24 associated with highway expansion have the potential to reverse the benefits of the low-carbon transportation investments. For context, according to the Federal Highway Administration, since 2010, on average roughly 15% of obligated federal funds administered by FHWA have been used for highway expansion projects.See footnote 25
Those may include structural factors: state-specific regulations or planning processes/timelines already in place, existing contracts, or statutory requirements that favor one type of investment over another. They may also include other factors: political pressures, cultural factors that favor highway investments over alternatives, institutional inertia, project backlogs, and economic pressures to invest the dollars quickly.
The IIJA makes certain pots of funding available for multistate collaborations. For example, the Nationally Significant Freight and Highway Projects program authorizes $150 million per year for competitive grants to eligible entities, including “multistate corridor organizations.”See footnote 30 Comments made by Secretary Pete Buttigieg suggest that the U.S. Department of Transportation will be looking for proposals incorporating regional collaboration when making competitive awards.See footnote 31
In the coming months, the Georgetown Climate Center looks forward to engaging with policymakers, communities, transportation experts, and other stakeholders, to explore questions related to the implementation of IIJA and other potential investments in low-carbon transportation.
2. The Georgetown Climate Center estimates $599 billion is allocated for surface transportation, based on a five-year (FY 2022 through FY 2026) transportation reauthorization spending horizon. Back to contentBack to content
3. Fact Sheet, The White House, The Bipartisan Infrastructure Deal (Nov. 6, 2021), View Source (“This Bipartisan Infrastructure Deal will rebuild America’s roads, bridges and rails, expand access to clean drinking water, ensure every American has access to high-speed internet, tackle the climate crisis, advance environmental justice, and invest in communities that have too often been left behind.”); Issue Report, Office of the House Majority Leader, The Bipartisan Infrastructure Investment and Jobs Act Bolsters Climate Resilience, Prioritizes Environmental Justice, and Advances Clean Energy Goals (Dec. 7, 2021), View Source. | Back to contentBack to content
5. See, e.g., Sam Brasch, “Polis Signs A Major Climate Bill, But Promises It Won’t Bring A Cap-And-Trade Program To Colorado,” CPR News (July 2, 2021), View Source; “McKee Drops Support for Transportation and Climate Initiative,” GoLocalProv (Nov. 20, 2021), View Source; Press Release, Office of Massachusetts Governor Charlie Baker, Governor Baker Signs Climate Legislation to Reduce Greenhouse Gas Emissions, Protect Environmental Justice Communities (Mar. 26, 2021), View Source. | Back to contentBack to content
6. Congress has enacted comprehensive surface transportation authorizations including both roads and transit since 1978. Earlier, stand-alone highway authorizations stretch back to the Federal-Aid Road Act of 1916 and the Federal Highway Act of 1921. Federal Highway Administration, Funding Federal-Aid Highways (2017), View Source. | Back to contentBack to content
7. In general, the maximum federal share for federal-aid highway projects is 80 percent. 23 U.S.C. § 120(b). In certain cases, statutory provisions may modify a program’s federal share. For example, projects located on the Interstate System have a maximum federal share between 90 and 95 percent. 23 U.S.C. § 120(a). Back to contentBack to content
8. Obligation of formula funding legally commits the federal government to pay a state for the federal share of an approved project’s eligible cost. Those funds are considered used and deducted from the apportioned funding available to a state within that fiscal year, even though no cash has yet been transferred. Federal Highway Administration, Funding Federal-Aid Highways (2017), View Source. | Back to contentBack to content
9. See Congressional Research Service, Federalism Issues in Surface Transportation Policy: A Historical Perspective (2015), View Source. In addition to discretionary authority within individual programs, federal aid highway law allows states to transfer up to fifty percent of apportioned formula funding between formula-funded highway programs. 23 U.S.C. 126. | Back to contentBack to content
13. See Congressional Research Service, Federalism Issues in Surface Transportation Policy: A Historical Perspective (2015), View Source. In addition to discretionary authority within individual programs, federal aid highway law allows states to transfer up to fifty percent of apportioned formula funding between formula-funded highway programs. 23 U.S.C. 126. | Back to contentBack to content
17. The Transportation Investment Strategy Tool is set up to model surface transportation only and does not include strategies for investments in non-surface transportation (airports, ferries, etc.). Non-surface transportation and surface transportation investments that are not expected to affect emissions—such as investments in transportation resilience and adaptation—were classified as “Other.” Back to contentBack to content
18. GCC’s Transportation Investment Strategy Tool includes GHG impact factors for 30 distinct types of transportation investments: Light duty EVs, Electric transit buses, Electric school buses, Electric trucks - MDT/urban, Electric trucks - HDT/short-haul, Hydrogen trucks - long-haul, Passenger rail electrification, Shared ride incentives, Micromobility: shared e-scooters & e-bikes, Micromobility: e-bike ownership subsidies, Land use/smart growth, Bicycle investment, Pedestrian investment, Travel demand management, System operations, Freight/intermodal, Highway preservation, Highway expansion, Bus rapid transit, Urban rail, Commuter rail, Intercity rail, Bus service: expansion, Bus service: efficiency, Electric microtransit, Transit fare reduction, SGR: Bus, SGR: Urban rail, SGR: Commuter/intercity rail, Indirect (non-GHG reducing) A detailed description of the tool’s methodology is available here: View Source | Back to contentBack to content
19. For the IIJA Low-Emission Scenario, GCC prioritized relatively cost effective low-carbon transportation strategies, including the electrification of transit and school buses, within the portfolio of transportation investments. Back to contentBack to content
21. The Georgetown Climate Center worked with Cambridge Systematics and OnLocation to develop this Baseline GHG scenario for the Transportation Investment Strategies Tool using a variety of inputs, including through modeling with the National Energy Modeling System (NEMS). Beginning with assumptions used by the Energy Information Administration for the 2021 Annual Energy Outlook, we updated battery-electric vehicle costs to be consistent with market trends and to account for the Biden Administration’s proposed Corporate Average Fuel Economy Standards for Model Years 2024-2026 Passenger Cars and Light Trucks. We also calibrated vehicle miles traveled in the Tool to VMT projections in the 2021 AEO. The baseline GHG projections only include carbon dioxide emissions of on-road diesel and motor gasoline and does not include other sources of transportation emissions, such as aviation fuel, fuel for waterborne vessels, ethanol, biodiesel, or non-road diesel applications. Back to contentBack to content
22. This chart has been scaled in a way to make it easier to read. That is why the vertical axis does not begin at zero and also why the slope looks steeper than it does in the inset graph. The inset graph shows business as usual transportation emissions scaled beginning at zero and through the year 2040. Back to contentBack to content
24. Induced Demand is the added component of traffic volume that did not previously exist in any form but that results when new or improved transportation facilities are provided. For Induced Demand, the demand elasticity measures the % change in VMT divided by the % change in lane-miles. The level of demand elasticity associated with highway expansion chosen for this study is moderate compared to the demand elasticity currently used by CalTrans. Back to contentBack to content
25. Table FA-10, FHWA Highway Statistics ("system expansion" includes new construction, relocation, reconstruction (added capacity), new bridges, and major bridge rehabilitation. Based on averages for the years 2010 through 2020; no data are available for 2015 and 2016). Back to contentBack to content
30. H.R. 3684, 117th Congress § 11110 (2021). Back to contentBack to content