Infrastructure and Climate Change – Balancing Government Dollars vs Market-Based Solutions

Infrastructure and Climate Change – Balancing Government Dollars vs Market-Based Solutions

March 01, 2019  | Brianne Eby and Hayley Burton

March 1, 2019

On February 26, the full House Transportation and Infrastructure Committee held a hearing entitled, “Examining How Federal Infrastructure Policy Could Help Mitigate and Adapt to Climate Change.” Chairman Peter DeFazio (D-OR) was not present as he was stuck in Oregon due to a major snowstorm.

In DeFazio’s place, Vice Chairman Salud Carbajal (D-CA) called the meeting to order. In his opening statement, he said that the goal of the Committee through this hearing was to find pragmatic approaches to address climate change. He explicitly stated, “we are not here today to debate the Green New Deal (GND). Its authors set an ambitious goal, but their plan encompasses issues beyond this committee’s responsibilities.” Whether the GND resolution was explicitly mentioned or not in the remainder of the hearing, elements of it – such as the emphasis on transitioning to electric vehicles, or on increasing high speed rail – repeatedly arose.

Panel 1. The first panel centered on two dominant themes related to addressing climate challenges: restructuring transportation funding, and balancing market-based and government solutions. Panelists were:

  • Daniel Sperling, Board Member, California Air Resources Board – written testimony here.
  • Vicki Arroyo, Executive Director, Georgetown Climate Center – written testimony here.
  • Professor Thomas P. Lyon, Stephen M. Ross School of Business, University of Michigan – written testimony here.
  • Ben Prochazka, Vice President, Electrification Coalition – written testimony here.
  • Nancy Young, Vice President, Environmental Affairs, Airlines for America – written testimony here.

Restructuring transportation funding in anticipation of the FAST Act reauthorization 

In his opening statement, Dr. Sperling referenced apparent shifts in “organizational culture” since the mid-20th century when state and federal DOTs were tasked with initially building today’s highway and rail infrastructure. He called for new performance standards and formulas, policies to stimulate innovation, and for silos within transportation to be broken as part of any efforts to restructure how transportation systems are funded and managed. Among the examples he listed to support these goals were federal pilot programs that drive experimentation of options like pooled ridehailing services, transit, and protected bike lanes.

In addition, Sperling suggested using transportation funding as a reward for communities who are investing in efficient, low-carbon strategies. From his written testimony, one example of this is California’s Sustainable Communities Program, SB 375, which establishes targets that metropolitan areas can use in their efforts to reduce passenger transportation emissions.

Rep. Adriano Espaillat (D-NY) asked what panelists considered to be the most effective revenue-capture mechanism to finance projects that reduce emissions and congestion. Dr. Lyon listed both a vehicle miles traveled tax and congestion pricing but indicated that congestion pricing is best suited for implementation in municipalities.

Whether to invest up front in infrastructure in anticipation of extreme weather events facing the U.S. was another recurring topic. Asked by Rep. Colin Allred (D-TX) whether investments in resilient infrastructure would create savings for the federal government, Ms. Arroyo pointed to a new study by the National Institute of Building Sciences demonstrating that every dollar spent would generate a rate of return of $6, up from the previous estimate of $4.

Balancing market-based solutions and government mandates

 Aside from funding, the most recurring theme of the first panel was determining the optimal mix of private- and public-sector investments. When questioned by Rep. Bob Gibbs (R-OH) about whether market forces or government mandates have been more instrumental in enabling certain technologies, Dr. Lyon indicated that the interplay between the market and government is “complex and intertwined.” Listing electric vehicles as an example, Lyon stated “markets have played a crucial role, but so has government with subsidies for vehicle adoption and funding. It’s hard to disentangle and say it’s all of one or the other.”

Mr. Prochazka made a similar point on electric vehicles, stating that we are just beginning to scratch the surface in terms of market opportunity – he cited recent investments by investor-owned utilities and oil companies – but incentives are still needed to encourage early stage investment. He indicated that funding is needed for alternative fuels corridors in order to expand charging infrastructure.

More than once, Ms. Young referenced airlines’ unique situation of being naturally driven to become more fuel efficient without a government mandate. Jet fuel is typically their first- or second-highest cost, so efficiency gains equate to market competitiveness. She also pointed to public-private partnerships such as the FAA’s Continuous Lower Energy, Emissions, and Noise (CLEEN) Program, which are $1 to $1 matches aimed at developing aircraft and engine technologies that reduce emissions.

Responding to a comment by Rep. Sharice Davids (D-KS) about the relationship between government decisions about which modes are given priority and where “innovation” dollars are spent, Dr. Lyon said that environmental economists think about two major ideas with respect to climate change: putting a price on carbon, and using government funds for early stage research and development into carbon reduction technologies. He claimed that rather than government delving too deeply into technology deployment, there needs to be a smooth handoff from government to the market for deployment.

Panel 2. The second panel of the hearing focused on resilient infrastructure and featured a mix of think tanks conservation groups, and private industry, represented by:

  • Kevin DeGood, Director, Infrastructure Policy, Center for American Progress – written testimony here.
  • James M. Proctor II, Senior Vice President & General Counsel, McWane Inc. – written testimony here.
  • Dr. Whitley Saumweber, Director, Stephenson Ocean Security Project, Center for Strategic and International Studies – written testimony here.
  • Lynn Scarlett, Vice President, Policy and Government Affairs, The Nature Conservancy – written testimony here.

Mr. DeGood made a natural segue into the second panel testimonies by first recognizing the limits of resilience, framing resilient infrastructure as only a Band-Aid for climate change rather than a solution – reemphasizing the first part of the hearing on mitigation.

“Going forward, infrastructure policy should be synonymous with sound climate policy,” DeGood stated, adding, “we should not treat resiliency as a universal backstop capable of saving us if the United States and other major emitting nations fail to meet their climate commitments.”

From there, using their experience in policy, water infrastructure, maritime, and nature conservation, the panelists gave their statements, with certain themes clearly taking precedence. Advice for Congress primarily dealt with: the collection and handling of data, technology and management, funding strategies, and nature-based infrastructure.

Data and Research

DeGood’s statement suggested that future resiliency projects and policies may be difficult to implement as many agencies lack the data necessary to accomplish the job. Particular to water infrastructure, federal, state, and local officials and administrators need access to accurate models for temperature, precipitation and peak storm flows, and sea level rise.

Saumwater recommended Congress invest in programs supporting risk assessment and establishing resiliency standards for port infrastructures. Rep. Rick Larsen (D-WA) questioned how infrastructure needs vary from port to port, to which Saumwater emphasized the need for any assessment of risk to be localized for each port.

Rep. Jesús García (D-IL), spurred a conversation on communicating data to the public when he asked Proctor about educating the public on water system issues. Proctor noted waters systems tend to be out of sight, out of mind for the public because water issues aren’t as apparent as something like hitting a pothole. Data, including water loss audits, should be collected and made transparent to public, including cost of the water loss. Garcia and DeGood mentioned the need not only for transparency, but increased public participation throughout the environmental review process to insure all communities reap the benefits and shoulder the burdens of infrastructure projects proportionately.

Technology and Management

The reality is that much of the U.S. municipal drinking water, wastewater and storm water infrastructure must soon be replaced. Going a step beyond simply replacing infrastructure to what it was when it was originally built, Proctor noted “we have opportunities today to make our water system smarter.” He stated that even projects that have received federal funding can only reach their full potential through more efficient management, which can be maximized through increased technologies, data-driven system management, and more resilient construction techniques.

Rep. Gary Palmer (R-AL) pressed for clarity on how water infrastructure relates to disaster preparedness. Proctor positioned water as one of the most essential services to combat disasters such as fires after an earthquake. Smarter technology and more durable construction materials can reduce risks to pipelines during floods, earthquakes and even wildfires.

Funding

While there were many mentions of funding policies in the panel’s testimonies, funding rarely came up during the question and answer portion of the second panel.

DeGood called for federal agencies to take a more selective approach to land use, providing additional funding to states and regions that increase urban density. The counter, low-density, ex-urban expansion, exasperate the global climate problem as a whole and require more dollars for a greater volume of infrastructure projects.

Proctor recognized recent strides in water infrastructure related policy, including last year’s America’s Water Infrastructure Act (“AWIA”), Water and Infrastructure Finance and Innovation Act (“WIFIA”), Disaster Recovery and Reform Act of 2018 (“DRRA”), Pre-Disaster Mitigation Grant Program (PDM), and increased authorizations for the State Revolving Funds (“SRFs”). While these are valuable funding sources, Congress must now finish the process to appropriate funds to authorized levels this year.

Natural Infrastructure  

Scarlett, and DeGood to a certain extent, focused on investing in protecting and managing natural habitats as part of resilience, calling it, “clean, green, and dollar smart.” Natural infrastructure includes green spaces and living shorelines, and can provide larger dividends than man-made infrastructure investments. (Ed. Note: Look at how all original settlements of the U.S. grew up around naturally occurring seaports or rivers – the original transportation infrastructure.)

Other times, a hybrid of natural and man-made infrastructure is most cost-effective. Specific to federal government, recommendations included: consideration of natural infrastructure in federal agency planning and community hazard mitigation planning, increasing reforestation through the U.S. Forest Service Reforestation Trust Fund, and training around natural infrastructure for transportation investments.

Rep. Larsen asked Scarlett how to overcome barriers to funding natural infrastructure. Scarlett referenced a trust fund and insurance-for-nature approach in Mexico used for reef restoration, as an example of innovative funding possibilities. Scarlett also briefly mentioned teaming up with water districts and using rate-payer fees to invest in projects.

A video recording of the hearing can be viewed here.

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