Chapter 1. Towards green growth

Abstract

This chapter provides a brief overview of key environmental trends in the United States and progress towards climate change, air, biodiversity and water management targets. It assesses selected environmental policies, including fiscal and economic instruments, regulations and investments that support progress towards green growth. Finally, it examines distributional issues through a focus on environmental justice.

1.1 Progress in decoupling environmental pressures from economic growth

The United States (US) has made progress in decoupling some environmental pressures from economic and population growth, including emissions of greenhouse gases (GHGs) and air pollutants, water abstractions and, more recently, domestic material consumption (Figure 1.1). However, high consumption levels, intensive agricultural practices, climate change, and urban sprawl and densification continue to put pressure on the natural environment, causing habitat loss, fragmentation and degradation. Further efforts are needed to achieve net-zero GHG emissions by 2050, address the growing risks of climate change, reverse the loss of biodiversity, improve water quality and ensure a more resource-efficient circular economy.

Figure 1.1. The United States has made progress in decoupling some environmental pressures from economic growth

The United States is the world’s largest economy based on nominal gross domestic product (GDP) and has one of the highest GDP per capita in the world. Between 2010 and 2019, GDP grew on average by 2.2% annually (Figure 1.1). The economic downturn caused by the COVID-19 pandemic resulted in a GDP contraction of -2.8% in 2020 (compared to -4.4% for the OECD average). In 2021, the economic recovery (+5.9%) was more rapid than in most OECD countries (+5.6%) due to unprecedented policy support combined with a rapid vaccination rollout. The surge in energy and supply disruptions arising from the Russian invasion of Ukraine, and COVID-related lockdowns in the People’s Republic of China (hereafter “China”), have put pressure on price inflation (OECD, 2022[1]). As a result, the pace of GDP growth is anticipated to weaken to 1.8% in 2022 and 0.5% in 2023 (OECD, 2022[1]).

The United States is a service-based economy, with strong wholesale and retail trade, information and communication, real estate, financial and insurance sectors (OECD, 2022[2]). The country is endowed with abundant natural resources and is one of the largest global producers of metals and minerals. It is also the leading producer and consumer of phosphates.1 The shale revolution, which began in 2005 and was led by technological breakthroughs in hydraulic fracturing and horizontal drilling, has reduced oil and gas production costs and resulted in an unprecedented increase in production. This propelled the country to become the world’s largest producer of oil and gas and has turned it into a net energy exporter (IEA, 2019[3]). The OECD Environment at a Glance country profile of the United States provides a snapshot of selected environmental indicators (Box 1.1).

Box 1.1. OECD Environment at a Glance: Country profiles

Environment at a Glance (EAG): Country Profiles feature selected environmental indicators from the OECD Core Set, including a few indicators on countries’ socio-economic context to facilitate interpretation. They show the progress of countries in addressing environmental issues, including climate change, air quality, waste and the circular economy, water management and biodiversity conservation.

The indicators presented are ones regularly used in OECD policy work and for which data are available for most OECD countries. They are used in country environmental performance reviews (EPRs) and in economic surveys and support the monitoring of progress towards green growth and sustainable development.

EAG country profiles also provide short key messages and explanations of drivers behind indicators and trends. The graphics presented in the country profiles are directly linked to OECD.stat and are updated at the same time as the underlying dataset. The EAG country profile of the United States therefore provides complementary information and context to this EPR.

Raising ambition on climate action

Mitigation: Targets and trends

Over the past decade, the United States has made progress towards its climate objectives, with a recent ramping up of ambition and notable acceleration of action. In November 2021, the government published its Long-Term Strategy (LTS) on climate-setting goals of 100% clean electricity by 2035 and net-zero GHG emissions by 2050 (Figure 1.3) (Box 1.2). The federal government also announced a National Climate Strategy (NCS) to lay out the details of national policies and actions, as well as broader non-federal and all-of-society efforts needed to reach the targets. However, the NCS has not yet been released. The LTS aims at further decarbonising the energy sector, including by reducing emissions from waste incineration; by electrifying and driving efficiency in vehicles, buildings and parts of industry; and by scaling up new energy sources and carriers (e.g. carbon-free hydrogen). In addition, the United States has taken measures targeting hydrofluorocarbons, methane and emissions from oil and gas production and distribution.

Box 1.2. United States reaffirmed commitment to the Paris Agreement in 2021

In 2016, the United States ratified the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) along with nearly 200 other countries. The goal of this legally binding international treaty on climate change is to limit global warming to well below 2.0 degrees Celsius, and preferably to 1.5 degrees, compared to pre-industrial levels. The Paris Agreement is a landmark in the multilateral climate change process as, for the first time, a binding agreement brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects.

After leaving the Paris Agreement in 2020, the United States officially re-joined it on 19 February 2021. In line with its Long-Term Strategy, it submitted a Nationally Determined Contribution (NDC) to the UNFCCC, setting an economy-wide target of reducing its net GHG emissions by 50-52% below 2005 levels in 2030 (Figure 1.3). The National Climate Task Force, which developed the NDC, laid out sectoral pathways to achieve the objective. The National Climate Advisor and the White House Office of Domestic Climate Policy also conducted an interagency process across the federal government and consulted a range of other stakeholders.

The economy is becoming less carbon intensive

The US gross 2 GHG emission intensities per capita and per GDP are among the highest in the OECD. This is due to the dominance of fossil fuels in the energy mix, which account for a larger share than in most other OECD countries (OECD, 2023[4]). The United States has achieved an absolute decoupling of GHG emissions from GDP growth over the past decade. This is mainly due to the continued shift from coal towards less carbon-intensive energy sources (i.e. natural gas and renewables) in the electric power sector, as well as improved energy efficiency (US EPA, 2022[5]).

The United States has met and surpassed its 2020 target of net economy-wide GHG emissions reduction of 17% below 2005 levels (Figure 1.3). Since a peak in 2007 and until 2019, gross GHG emissions decreased by 12%. An additional 9% reduction in 2020 was mainly due to the slowdown in economic activity related to the COVID-19 pandemic (Figure 1.2). As economic activity rebounded in 2021, emissions have risen as well. Carbon dioxide (CO₂) emissions from energy use, which represent about 75% of total GHG emissions, rose by 6% in 2021. They are projected to increase another 2% in 2022 and remain virtually flat in 2023 (EIA, 2022[6]). This would still be 3% below 2019 levels and 17% below the peak in 2007.

Figure 1.2. Energy industries generate the most GHG emissions, but their share is declining

Energy industries are the largest source of GHG emissions followed by transport, manufacturing industries and construction, agriculture, the residential sector, industrial processes, fugitive emissions and waste. Through its land use, land-use change and forestry (LULUCF) activities, the United States removed about 12% of gross GHG emissions in 2021 (Figure 1.2). Emissions from transport have remained relatively stable since 2000 due to increased demand for travel, partly offset by improvements in average new vehicle fuel efficiency since 2005. Emissions from industry have declined, due to structural changes in the economy (i.e. shifts from a manufacturing-based economy towards one based more on services), fuel switching and energy efficiency improvements. Emissions from the residential and commercial sector have remained relatively stable since 2005. Although houses are becoming more energy efficient, household energy use has not declined overall due to increased population, expanding use of information technologies and low electricity prices. Emissions from agriculture increased along with cattle populations. Emissions from waste decreased due to increased landfill gas collection and control systems, and a reduction of decomposable materials discarded in municipal solid waste landfills (US EPA, 2022[5]).

The United States relies on a broad range of policies at federal, state and local levels to mitigate climate change. Examples include non-trade distorting subsidies for low emission technologies and the incorporation of climate change mitigation measures into public investments. The country also uses regulatory instruments such as air pollution emission standards of coal-fired power plants, minimum energy performance standards for electric motors, electric appliances, passenger cars and heavy-duty vehicles, energy efficiency mandates for large energy consumers, and efficiency labels for electric appliances and passenger cars. To mitigate emissions from agriculture, the country mainly relies on voluntary approaches (Toman et al., 2022[7]).

Action at the regional and state level also contributes to climate goals. In 2021, 24 states and the District of Columbia had established economy-wide GHG targets (C2ES, 2022[8]). The Regional Greenhouse Gas Initiative (RGGI) established in 2009 is a cap-and-trade carbon markets agreement between 11 Eastern states that aims at curbing CO₂ emissions in the electric power sector. RGGI helped reduce emissions in 2021 by 50% relative to 2005 in these states (RGGI, 2021[9]). California and Quebec have also joined forces and maintain a multi-sector cap-and-trade market.

Projections and pathway to net-zero emissions in 2050

The United States is broadly on track to reduce emissions by 26-28% below 2005 levels in 2025 (Figure 1.3). However, further efforts will be needed to achieve the target of 50-52% below 2005 by 2030 and of net-zero GHG emissions in 2050.

Figure 1.3. The United States is making progress towards climate goals, but additional actions are needed

The Clean Power Plan rule promulgated by the US Environmental Protection Agency (EPA) in 2015 set performance standards to regulate power plant emissions. These standards aim to reduce the share of coal in electricity generation from 38% in 2014 to 27% by 2030. The US Supreme Court ruling in June 2022 held that EPA did not have authority under the Clean Air Act to set emissions standards for existing power plants that would entail broad-based measures to shift the country's electricity generation mix (from coal to natural gas and renewables). However, EPA can still regulate individual power plants through emissions limits that reduce pollution by causing the regulated source to operate more cleanly.

In August 2022, landmark legislation to advance climate action, the Inflation Reduction Act (IRA), was passed. With total investments in programmes aimed at enhancing energy security and tackling climate change of at least USD 369 billion,3 the Act set out an expansive set of policies that should play a significant role in promoting clean energy and reducing GHG emissions. The legislation gives a boost to a large array of clean energy technologies – from solar, wind and electric vehicles to carbon capture and hydrogen. It includes a set of subsidies for clean energy, clean manufacturing credits, and a dedicated funding programme to reduce GHG emissions and agricultural conservation (Congress, 2022[10]).

By 2030, annual solar and wind capacity additions in the United States are expected to grow two-and-a-half-times over 2022 levels, while electric car sales will be seven times larger (IEA, 2022[11]). IEA projects these measures will result in around 40% fewer CO₂ emissions in 2030 relative to 2005 levels (IEA, 2022[11]). Preliminary projections from the US Department of Energy (DOE) suggest the IRA and Infrastructure Investment and Jobs Act (IIJA), in combination with current policies and past actions, will drive 2030 economy-wide GHG emissions to 40% below 2005 levels (Department of Energy Office of Policy, 2022[12]). However, emissions reductions are all contingent on the capacity of the private sector to rapidly scale investments. Additional actions at federal and/or state, Tribal and local levels will be required to reach the 2030 target of 50% below 2005 and keep the net zero by 2050 target within reach.

Exposure and vulnerability to climate risks are inequal and growing

The 2018 United States fourth National Climate Assessment confirmed the country is experiencing widespread changes in its climate. In 2010, the annual surface temperature was +0.28°C above the 1981-2010 average. It jumped to +1.73°C in 2016 and was +0.85°C in 2021 (OECD, 2022[13]). Annual precipitation has increased by 4% on average since 1901, with strong regional variations and expected increases in the severity and frequency of heavy precipitation events. Episodes of extreme heat are also becoming more frequent. By 2050 (relative to a 1986-2015 baseline), the average temperature is projected to increase by at least 1.4°C. At the same time, extreme weather events, coastline erosion, ocean acidification and warming, and forest fires are all projected to continue increasing (US Global Change Research Program, 2018[14]).

The National Oceanic and Atmospheric Administration (NOAA) recorded 341 separate weather and climate disasters between 1980 and January 2023, where overall economic costs reached or exceeded USD 1 billion. More than half (55%) of them have occurred since 2010, driven by the increasing number of severe storms, tropical cyclones and floods (Smith, 2021[15]) (Figure 1.4). NOAA estimates that related costs have exceeded USD 2 475 trillion since 1980, of which USD 1 371 trillion since 2010 (values at 2022 prices) (Figure 1.4). The South, Central and Southeast regions experienced higher costs.

Figure 1.4. The number of climate-related disasters in the United States and the related economic costs are rapidly increasing

While climate change affects the whole population, non-white and poor communities are the most affected. EPA estimates that 41% of non-white and poor communities are more likely than white people to live in an area affected by global sea level rise and other disparate impacts (US EPA, 2021[16]). These communities also face challenges to access federal assistance to address environmental threats (US GAO, 2022[17]).

In 2014, EPA developed its first Climate Change Adaptation Plan (CCAP) followed by 17 Climate Change Adaptation Implementation Plans (one for each Office and region). The CCAP was updated in May 2021. Adaptation takes place at national and regional levels but is mainly local. Since the third National Climate Assessment, the scale and scope of adaptation implementation have increased, but it is not yet commonplace (US Global Change Research Program, 2018[14]). There have been some actions, notably in disaster risk management. These include building resilience of the agricultural sector to extreme floods (Gray and Baldwin, 2021[18]), creation of a Drought Resilience Interagency Working Group (The White House, 2022[19]), and initiatives by municipal, state or Tribal communities initiatives. However, overall progress in planning and delivering adaptation is not keeping up with increasing risk and no monitoring is in place to track progress. The US Government Accountability Office (GAO) recommended improving disaster assistance, and enhancing climate resilience of federal fisheries and the DOE response to power outages caused by natural disaster (US GAO, 2022[20]; US GAO, 2022[21]; US GAO, 2021[22]).

Atmospheric emissions and air quality

Most of the 2020 air pollutant emission reduction targets have been met

Emissions of most major air pollutants have decreased since 2010 (Figure 1.5). Except for carbon monoxide (CO), all pollutant emission intensities per capita and per unit of GDP are below the OECD average (OECD, 2022[13]). Nevertheless, the rate of reduction has slowed down for some pollutants in recent years (Figure 1.5). The United States reached its 2020 Gothenburg Protocol objectives 4 for sulphur dioxide (SO₂), nitrogen dioxide (NO₂) and non-methane volatile organic compound (NMVOC) emissions. Fine particulate matter (PM_2.5)emissions have been declining but remain above the 2020 target.5

Large reductions of emissions are due to implementation of Clean Air Act regulations, which was most recently amended in 1990. Emissions control technologies used in on-road vehicles since the mid-1990s, helped reduce CO, NO₂ and NMVOC emissions. SO₂ emissions have decreased in recent years, mainly due to electric power generators switching from high to low-sulphur coal and installing flue gas desulphurisation particulate control equipment. Ammonia emissions, which mainly come from agricultural livestock and fertiliser application, peaked in 2019 and have remained stable since. PM_2.5 is emitted primarily from agriculture, dust arising from paved and in particular unpaved roads, industrial processes, residential combustion and waste management (Figure 1.5). While PM_2.5emissions from nearly all sectors have decreased since 2010, those from waste management have increased by 14%.

Figure 1.5. Emissions of most major air pollutants have decreased, but progress has stalled

Exposure to pollutant concentrations has decreased

National average population exposure to PM_2.5 concentrations is among the lowest in the OECD. However, in most states, it remains above the new guideline value of 5 microgrammes per cubic metre (µ/m³) recommended by the World Health Organization (OECD, 2022[13]). There are significant disparities in population exposure to air pollution, but national averages of ozone, PM₁₀, PM_2.5, CO, NO₂ and SO₂ concentrations are below national standards (US EPA, 2022[23]). The number of days reaching “unhealthy for sensitive groups”6 level or above was significantly reduced from 1 112 in 2010 to 799 in 2018 (among 35 major cities for ozone and PM_2.5 combined) (US EPA, 2019[24]). However, certain areas fail to reach annual PM_2.5standards, with Los Angeles, the South Coast air basin and San Joaquin Valley in California in non-attainment (US EPA, 2022[25]). The GAO recommended that EPA collect more information to better understand health risks from air pollution (US GAO, 2020[26]). In 2019, premature deaths attributed to ambient PM_2.5 exposure was at 145 deaths per million inhabitants, well below the OECD average of 275. Meanwhile, related economic costs represented 1.3% of GDP-equivalent, also well below the OECD average of 2.4% (OECD, 2022[13]).

The United States is part of the Arctic Council, which promotes co-operation, co-ordination and interaction in sustainable development and environmental protection. In April 2015, ministers of the Arctic Council adopted “Enhanced Black Carbon and Methane Emissions Reductions: An Arctic Council Framework for Action”. This set the collective objective to reduce black carbon emissions by 25-33% in 2025 compared to 2013 levels. By 2025, most Arctic Council countries are projected to be close to meeting their emission reduction potential for several pollutants. However, methane emissions are increasing, and will likely continue to do so until 2025 (Arctic Council, 2021[27]; OECD, 2021[28]). OECD analysis projects that deployment of best available techniques could reduce 36% of pollution-driven mortality by 2050 in most Arctic Council countries. All these countries benefit economically from reduced air pollution when the maximum technically feasible reductions are achieved. However, these benefits are higher in the three largest countries – the United States, Canada and the Russian Federation (OECD, 2021[28]).

Biodiversity

Urban sprawl and agriculture are the main drivers of land-use change

The United States is a large and diverse country, resulting in a wide range of ecosystems and biodiversity. Pressures from land conversion, wildfires, floods and droughts intensified by climate change, intensive agricultural practices, pollution, invasive species and climate change are increasingly threatening biodiversity and altering ecosystems. In the past two decades, about 70 200 square kilometres (km²) of natural and semi-natural vegetated land were converted, mainly into cropland (62%) and artificial surfaces 7 (31%) (OECD, 2022[13]). Projections show this trend will continue with suburban and exurban areas 8 projected to expand by 15-20% by 2050 (compared to 2000). Meanwhile, cropland and forest areas are projected to decline by 6% and 7%, respectively, by 2050 (compared to 1997) (IPBES, 2018[29]).

The network of protected areas has increased, but more is needed to achieve the 2030 target

The United States has a long tradition of protection and conservation of land and waters. In 1872, it became the first country to establish and protect a national park. It has since designated 79 national parks (UNEP-WCMC, 2022[30]). In 2021, the president set the national goal to conserve at least 30% of land, freshwater bodies and ocean areas by 2030. This is a significant increase in ambition and the first quantitative target on protected areas adopted at federal level 9 (The White House, 2021[31]).

In 2022, 13% of US land was designated as protected areas, less than the OECD average of 16%. About 6.4% of land is designated as “strict nature reserve”, “wilderness area” or “national park” (International Union for Conservation of Nature [IUCN] categories I-II) and 3% as “Natural monuments” or “Species Management areas” (IUCN categories III and IV). However, only about 1.6% of land has management effectiveness evaluations 10 (UNEP-WCMC, 2022[30]). An additional 17% of land and inland waters is protected for multiple uses.11

Marine protected areas cover 19%12 of the US exclusive economic zone (EEZ), less than the OECD average of 21%. The US classification includes the Great Lakes in marine waters, which increases the share of marine waters that are protected to 26%. Most of these marine protected areas are near remote Pacific Islands and have strict designation objectives (IUCN categories I-IV), as well as management effectiveness evaluations (UNEP-WCMC, 2022[30]). Given its size, the United States has the second largest (after Australia) protected areas network in terms of total area covered among OECD countries. It covers about 1 million km² of land and 1.7 million km² of waters.

Species are increasingly threatened

The United States is a megadiverse country, hosting more than 60 000 species but about one-third of plant and animal species are at risk of extinction. More than 1 670 species are listed as either endangered or threatened under the Endangered Species Act (ESA). In 2005, states and territories identified 12 351 species of greatest conservation need; ten years later, this number increased to 13 544 (The White House, 2021[31]). Habitat loss and degradation are the main threat to birds, mammals and fish.

Under the shared responsibility of the US Fish and Wildlife Service (USFWS) and the National Marine Fisheries Service, the 1973 ESA is the main policy tool to protect species. It sets legal restrictions on activities that would harm species or the ecosystems on which they depend. Individual recovery plans for endangered and threatened species include habitat-related goals. Despite its successes, the ESA has proven challenging to implement partly due to funding limitations and workload backlog. Attempts by the USFWS to streamline ESA decisions include multispecies recovery plans and habitat conservation plans. The ESA’s regulatory mechanisms are complemented by a variety of federal statutes that contain conservation-focused elements, such as laws governing protection of specific types of species and management of habitats on federal lands.

Water management

Main policies and measures

While states manage water quantity, water quality is under the purview of EPA. The Clean Water Act (CWA) establishes the structure for regulating discharges of pollutants into waters, as well as quality standards for surface waters. States also play a key role in managing water pollution from non-point sources (e.g. runoff from farms, parking lots or streets), which is the leading cause of pollution of US waters. States set water quality standards (WQS) and monitor water quality. They also identify water bodies that do not meet their WQS, for which they must develop a pollutant budget (Total Maximum Daily Loads, or TMDL, see Chapter 2) which EPA approves. However, the TMDL programme relies on voluntary measures, leaving many of the waters impaired and CWA goals unmet. In addition, the federal WQS regulation was last updated in 2015. In 2014, the GAO recommended that EPA develop and issue new regulations requiring that TMDLs include additional elements, such as comprehensive identification of impairment and plans to monitor water bodies (US GAO, 2014[32]).

Overall, freshwater abstractions are decreasing

Generally, the United States has abundant freshwater resources. In 2015, agriculture accounted for the greatest share of freshwater abstractions (45% of the total), followed by electricity production for cooling (34%), public water supply (14%), manufacturing industries (5%) and mining (1%) (OECD, 2022[13]). Since 2010, all sectors have contributed to the overall decrease, due to less water-intensive industries and broad efficiency gains in water use. However, per capita total abstractions and abstractions for public supply remain among the highest in the OECD (OECD, 2022[13]).

However, national trends mask important subnational differences. In the Midwest, major river systems (including the Mississippi, Missouri and Ohio rivers), provide abundant water supply and drain about 40% of the continental land area. In many parts of the West and Southwest, water scarcity is a pressing issue, with water demand for irrigation exceeding available resources. This generates additional pressure on groundwater resources, already declining in many major aquifers supporting irrigation (Hrozencik and Aillery, 2021[33]). In the East, thermoelectric power generation is by far the dominant user of freshwater for two reasons. First, agricultural needs are largely met by precipitation. Second, abundant water supply has led to slower adoption of more efficient cooling technologies among eastern power plants (Warziniack et al., 2022[34]).

More needs to be done to achieve good water quality

Water quality has improved over the last 50 years but remains an issue in the United States. Up to date, comprehensive information to monitor water quality is also lacking. Water quality monitoring occurs at various levels, which can make it difficult to report at a national scale. EPA developed the National Aquatic Resource Surveys (NARS) in the early 2000s, in co-operation with state and Tribal partners, using a statistical survey design and consistent monitoring methods to report on the condition of the nation’s waters (US EPA, 2022[35]). Overall, almost 70 000 water bodies nationwide do not meet water quality standards (US GAO, 2022[36]). High nutrient levels, in particular excess phosphorous, are one of the main threats to water quality (Figure 1.6), with approximately 40% of rivers, stream miles and inland lakes in poor condition for phosphorus (US EPA, 2022[35]) (US EPA, 2022[37]). Excess nutrients also lead to harmful algal blooms, which are an environmental problem in all states. Reflecting the progress made, the National Rivers and Streams Assessment showed a significant decrease (-17.7 percentage points) in the number of river and stream miles in poor condition for phosphorus between the 2013-14 and 2018-19 assessments (US EPA, 2022[37]). The main sources of pollution are agricultural and industrial activities, in particular petroleum and natural gas production (including hydrologic modifications), atmospheric deposition and municipal industrial discharges/sewage (US GAO, 2022[36]).

A recent study on US rivers and streams reported that 17 pesticides were responsible for the EPA aquatic-life benchmark exceedances.13 Many of these were herbicides, which frequently occurred at relatively high concentrations. Others were insecticides, which occurred at lower concentrations, but which are much more toxic to aquatic invertebrates than herbicides (USGS, 2021[38]).

Figure 1.6. A high share of US water bodies is in poor condition

Access to and quality of water supply and sanitation services

As of 2020, 97% of the population used a safely managed drinking water service (UNSTAT, 2022[39]). Nevertheless, 489 836 households lacked complete plumbing, 1 165 community water systems were in Safe Drinking Water Act Serious Violation and 21 035 CWA permittees were in significant non-compliance. The data also show that high levels of hardship-related water services are associated with the social dimensions of rurality, poverty, indigeneity, education and age (Mueller and Gasteyer, 2020[40]). Safe drinking water supplied by community water systems is under great stress from water quality challenges, ageing infrastructure and climate change (Riggs et al., 2017[41]) (Section 1.2).

Some measures have been taken to improve the monitoring of drinking water quality. In 2021, for example, the Lead Copper Rule was revised, while in 2019 a web-based application for Underground Injection Control programmes was launched. However, more efforts are needed to collect data on unregulated contaminants; to reflect the frequency of health-based and monitoring violations by community water systems or the status of enforcement actions. In addition, more data are needed on water utility management (US GAO, 2022[42]; US GAO, 2021[43]). To address some of these issues, EPA is proposing the first-ever national drinking water standard to limit six per- and polyfluoroalkyl substances (PFAS) – the latest action to combat PFAS pollution under the PFAS Strategic Roadmap (US EPA, 2023[44]). This is a good step forward – three of these substances are banned internationally under the Stockholm convention (US participates in this convention but is not a signatory). However, there are thousands more PFAS on the market.

In 2020, 98% of the population used a safely managed sanitation service,14 as defined by the UN Sustainable Development Goals. Latest data show that, in 2012, about 28% of the population was connected to a wastewater treatment plant with at least secondary treatment and about 41% benefited from tertiary (advanced) treatment. However, about one of every five housing units is not connected to a community sewer system or does not have access to wastewater treatment and relies on other forms of facility such as a private septic system (US EPA, 2021[45]). A significant share of these private systems has failed to keep contaminants away from individuals and the nearby environment. Evaluating the extent of this challenge is difficult, as nationwide census data on household sanitation have not been gathered since 1990 (Riggs et al., 2017[41]). In addition, in 2018, nearly 11 000 of the 335 000 facilities with active National Pollutant Discharge Elimination System permits (used to regulate wastewater discharges under the CWA) significantly exceeded their permit limits and illegally discharged pollutants into nearby waters (US GAO, 2021[46]).

Box 1.3. Distributional issues related to access to safe drinking water, sanitation and wastewater treatment

Many individuals facing water access challenges are low income and many are minorities. For instance, in New Mexico, 40% of the Navajo residents lack running water and instead get their water from monthly deliveries. In Texas, 15% of counties still lacked access to basic infrastructure in 2014. In Lowndes County, Alabama, which is 74% African American and where almost a third of the population lives below the poverty line, hookworm (a disease thought to have disappeared by the 1980s), reappeared mainly due to lack of sanitary waste disposal.

In 2012, EPA put together a compendium for community leaders to address decentralised wastewater treatment issues. It lays out 14 case studies of communities that have overcome a wide range of wastewater treatment issues. They provide guidance on how others can use the valuable lessons learnt to address their own problems. Additionally, the Decentralized Water Resources Collaborative was created with EPA funding to support research and development projects that can address knowledge gaps in decentralised wastewater and stormwater treatment.

Source: GWC-UNC (2017), An Overview of Clean Water Access Challenges in the United States, www.urbanwaterslearningnetwork.org/wp-content/uploads/2019/05/UNC-Clean-Water-Access-Challenges2017.pdf.

1.2. Investments in green growth

The United States is pursuing a historic acceleration in infrastructure investment

In November 2021, Congress passed the IIJA, which provided around USD 550 billion of additional infrastructure spending over the next five years. This was on top of USD 650 billion related to the Reauthorization of Existing Transportation Programs. The legislation included new spending on a broad range of infrastructures from road and rail to water and waste. In total, the additional annual spending is equivalent to over 15% of pre-pandemic public infrastructure spending (OECD, 2022[47]). Alongside the IRA, the IIJA provides the largest and most comprehensive funding for infrastructure in its recent history. This includes investments to contribute to environment and climate objectives with around USD 190 billion for clean energy and mass transit (IEA, 2022[11])

Prior to the IIJA and IRA, the American Society of Civil Engineers (ASCE) assessed the quality of infrastructures in the United States across a range of sectors to rate as “D” (poor, and at risk) to “C” (mediocre, requires attention) (Figure 1.7). Based on the ASCE reporting, the total investment needs for major infrastructures are estimated at USD 5 937 billion cumulatively for 2020-29 (ASCE, 2021[48]). About 56% (USD 3 350 billion) are funded, while a funding gap of around 44% (USD 2 588 billion) remains (Figure 1.7). Funding from the IIJA and IRA will contribute to close the significant portion of infrastructure funding gap in the United States.

Figure 1.7. Additional funding from the IIJA and IRA will fill a significant portion of funding gap

The IIJA and IRA help reverse the trend of underfunding infrastructure

The need to upgrade infrastructure in the United States has long been recognised. Demand for infrastructure has been increasing due to economic and population growth, as well as shifting patterns of urbanisation. At the same time, investment by government and government enterprises in infrastructure as a share of GDP (excluding national defence) decreased slightly over 2010-21 with a small increase in 2020 (Figure 1.8). For basic infrastructure (e.g. transportation and utilities), the share decreased for all infrastructure types except transportation, with the most decrease in the power sector where private investment plays an increasing role. For basic infrastructure, real net investment per capita declined after the 2008-09 financial crisis until 2019, hovering close to its lowest level since the 1950s (Bennett et al., 2020[49]). The 2019 World Economic Forum Global Competitiveness Report ranked the United States 13thoverall for infrastructure quality; it was 23rd for utility infrastructure where the score for “reliability of water supply” (ranked at 30th) brought down the aggregate score (WEF, 2019[50]).

Figure 1.8. Public investment in infrastructure decreased slightly over 2010-19

A decade of chronic underfunding of infrastructure capital investment and operation and maintenance prior to the IIJA contributed to accelerated ageing. Among basic infrastructures, the water sector experienced the most rapid ageing over 2010-20 (BEA, 2021[51]). Underground pipes for drinking water and wastewater are estimated to be 45 years old on average, with some system components more than 100 years old (ASCE, 2021[48]). Ageing water infrastructure also increased operation and maintenance costs, leading to a need to raise water bills to recover costs across the country.

The consequences of ageing infrastructure generate a multitude of socio-economic impacts, ranging from public health to environmental pressures to economic challenges. Up to 10 million households connect to water supply through lead pipes and service lines (US EPA, 2019[52]), compounding risks from 24 million housing units with significant lead-based paint hazards (HUD, 2021[53]). The COVID-19 pandemic revealed the harms caused to businesses and families without access to quality broadband (McClain et al., 2021[54]). In many US cities, roads are congested for more than four hours each day (FHWA, 2019[55]), aggregated cost for commuters reached almost USD 160 billion as of 2017 (Schrank, Eisele and Lomax, 2019[56]). Congestion also contributes to GHG and air pollutant emissions, with transportation accounting for 26% of GHG emissions in the country in 2020 (Figure 1.2). The United States is among the OECD countries with the lowest rail investment as a share of GDP compared to roads (ITF, 2022[57]).

In addition to the need for renewing ageing infrastructures, climate change impacts increase the need for resiliency. For example, climate change exacerbates pressures on water resource management, including stormwater. Stormwater funding from Clean Water State Revolving Funds (CWSRF) (Box 1.4) increased from 2011 to 2019. However, with its growing funding for green infrastructure, CWSRF funding allocation to stormwater was only 3% of its total budget in 2019 (US EPA, 2019[58]). The increased frequency and severity of extreme events highlight the need for more resilience in the electricity grid as well, which experienced more power outages over time. For hazardous waste, around 60% of all non-federal Superfund sites are in areas that may be impacted by flooding, storm surge, wildfires or sea level rise related to climate change (US GAO, 2019[59]). A clear demonstration of this risk occurred in 2017, when Hurricane Harvey unleashed nearly 50 inches (127 cm) of rain over the greater Houston area. The downpour damaged several Superfund sites that contain hazardous substances in addition to affecting power supply (ASCE, 2021[48]). The IIJA, alongside the IRA, is expected to help renew ageing infrastructure and to advance progress towards environmental objectives, including climate resiliency if projects are well-designed.

The IIJA and IRA contribute to advancing environmental objectives

The IIJA emphasises various environmental objectives, through funding for environmental remediation, modernising the electricity grid and for low-emission public transportation. Following the passage of the IIJA, EPA is making significant investments in the health, equity and resilience of communities, allocating more than USD 60 billion of funding. IIJA funding to EPA is composed of four categories: water infrastructure (USD 50.4 billion); clean-up, revitalisation and recycling (USD 5.4 billion); cleaner school buses (USD 5 billion); and pollution prevention (USD 0.1 billion) (Figure 1.9).

Figure 1.9. The IIJA funds USD 550 billion for new infrastructure projects, with substantial funding for EPA

EPA allocation of the IIJA largely focuses on water infrastructure, leveraging State Revolving Funds

Capital investment in water infrastructure in the United States has been decreasing over 2010-17, while operating and maintenance costs have increased (CBO, 2018[60]). Water utility maintenance costs reached an estimated USD 50 billion in 2017, in part due to deferred projects (ASCE, 2021[48]). The United States has established dedicated financing mechanisms to fund investment in water infrastructure,15 notably the Drinking Water and Clean Water State Revolving Funds (collectively, the DWSRF, CWSRF or SRFs), which are federally sponsored and state-administered (Box 1.4). For more than 30 years, the SRFs have provided low-cost financing for state and local water infrastructure investments. In 2014, the Water Infrastructure Finance and Innovation Act (WIFIA) established the EPA-administered direct financing programme to mobilise capital for large-scale water infrastructure projects (Box 1.4). These programmes deliver capital cost subsidies that incentivise project owners and accelerate project completion timetables (Gebhardt, Zeigler and Mourant, 2022[61]).

The IIJA funding represents the country’s single largest investment in water in recent history, with more than USD 50 billion to EPA to improve drinking water, wastewater and stormwater infrastructure. Most of the funding allocated will be disbursed via SRFs. The DWSRF will channel USD 11.7 billion to safe drinking water and an additional USD 15 billion specifically for lead service-line replacement and USD 4 billion specifically to address emerging contaminants (Figure 1.9). The CWSRF will channel USD 11.7 billion for clean water and an additional USD 1 billion specifically for addressing emerging contaminants.

Replacing lead service lines is a centrepiece of the IIJA as lead in service lines delivering drinking water threatens the health of communities across the country. The population served by community water systems (CWS)16 with no reported violations of health-based standards has increased. Still, roughly 8% of communities reported violations in 2021 related to contamination from lead, arsenic and nitrate, among others (US EPA, 2022[62]). Low-income communities are disproportionately exposed to health risks arising from lead pipes in drinking water systems due to inequitable infrastructure development and chronic underfunding of water systems.

Despite the availability of financing mechanisms, water quality and access to safe drinking water remain issues in certain communities. Many vulnerable communities facing water challenges struggle to access federal funding. In response, EPA allocated USD 7.4 billion in 2022 to states, Tribes and territories out of the IIJA allocation to the SRFs of about USD 44 billion. Nearly half of this USD 7.4 billion must be provided as grants or principal forgiveness loans, which will assist in removing barriers to investing in essential water infrastructure in disadvantaged communities across rural and in urban centres.

Box 1.4. State Revolving Funds (SRFs) and WIFIA facilitate water infrastructure investment

The Clean Water SRF (CWSRF) was created by the 1987 amendments to the Clean Water Act (CWA) as a financial assistance programme for water infrastructure projects. Using a combination of federal and state funds, CWSRF programmes function like environmental infrastructure banks that fund grants and provide low-interest loans. Under the CWSRF, EPA provides grants to all 50 states plus Puerto Rico to capitalise state CWSRF loan programs. CWSRF grants generally require states to provide an additional 20%17 to match the federal capitalisation grant received from EPA. The Drinking Water SRF was created in 1996 with a similar structure as the CWSRF.

Repayments of loan principal and interest earnings are recycled back into individual state CWSRF programmes to finance new projects that allow the funds to “revolve” at the state level over time. Broad project eligibilities allow states to fund projects that best meet needs and address emerging issues such as climate change. From 2009 to 2019, CWSRFs have provided over USD 9.4 billion to projects that promote green infrastructure, energy and water efficiency, and other environmentally innovative activities.

The 2014 Water Infrastructure Finance & Innovation Act (WIFIA) established a national direct financing programme to complement the SRFs to mobilise financing for large-scale water projects (generally over USD 20 million). WIFIA provides statutory authority to on-lend at the US government’s cost of funds. By securing funds at the US Treasury rate, WIFIA loan recipients avoid higher borrowing costs typically imposed by investors for credit risk. The government absorbs the premium, takes the credit risk and passes the interest cost savings on to the WIFIA loan recipients.

Source: (ASCE, 2021[48]); EPA (2022), “Water Infrastructure Investments”, website; (Gebhardt, Zeigler and Mourant, 2022[61]).

IIJA funding to accelerate pollution clean-up with an environmental justice focus

EPA’s Superfund is responsible for cleaning up some of the United States’ most contaminated land. In a response to increasing national attention to the toxic waste dumps, Congress established the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in 1980, informally called Superfund. The National Priorities List 18 (NPL) identifies sites of national priority among the known releases or threatened releases of hazardous substances, pollutants or contaminants throughout the United States and its territories. CERCLA provides EPA with authority to address contaminated sites, and/or require responsible parties to pay for or address the pollution. Resources from Superfund can be used for clean-up only at the NPL sites.

The total number of active NPL sites has remained steady over the past three decades. The rate of completion and deletions from the NPL has been close to the rate at which new sites have been added to the NPL (US EPA, 2022[63]) (Figure 1.10). The distributional issues related to hazardous waste sites being located disproportionately close to low-income communities and communities of colour raise environmental justice (EJ) concerns. More than one in four Black and Hispanic Americans live within 3 miles (5 km) of a Superfund site (US EPA, 2021[64]). The IIJA funds USD 3.5 billion (Figure 1.9) for the Superfund site remediation, with its initial USD 1 billion invested to initiate clean up the backlog of previously unfunded Superfund sites.

Figure 1.10. An increasing number of National Priority List sites have completed clean-up interventions

There are an estimated 450 000 brownfield sites in the United States, where state and Tribal programmes play a significant role in clean-up and revitalisation. Clean-up activity not only improves the environment but can also increase local tax bases and facilitate job growth (Howland, 2007[65]). Over five years, EPA intends to award USD 1.2 billion in grants and technical assistance to brownfield projects through the appropriation received from the IIJA (Figure 1.9). An additional USD 300 million is allocated to the State and Tribal Response Program for building programme capacity, assessing and cleaning up sites, and training for environmental jobs (US EPA, 2021[66]).

EJ is considered in clean-up priorities among brownfield projects. During the national grant competitions for brownfields, CERCLA requires that EPA considers the extent to which a grant would address the identification and reduction of threats to the welfare of vulnerable populations. Community residents must receive their fair share of the benefits of redevelopment (e.g. jobs and housing) to avoid unintended impacts on communities with EJ concerns, such as economic pressures from increased property value due to remediation (Howland, 2007[65]).

The Superfund programme takes actions “necessary to protect the public health or welfare or the environment” and ensures fair treatment and meaningful participation in environmental decision making for communities with EJ concerns. The Hazard Ranking System (HRS) is the principal mechanism EPA uses to place hazardous waste site on the NPL. It uses numerical inputs to assess the relative potential of sites to pose a threat to human health or the environment (US EPA, 2022[67]). To the extent EJ issues and cumulative impacts and risks can be quantified, such matters may be considered in the scoring of the site by ensuring that overburdened communities are properly identified and documented. EJ should be considered more systematically in listing decisions, either by quantifying EJ considerations to integrate them into the HRS, or by requiring EJ to be considered in addition to the HRS scoring.

The IIJA advances pollution prevention and promotes funding for Tribal communities

The IIJA provides USD 100 million for the Pollution Prevention (P2) Grant Program, which delivers technical assistance for businesses to adopt pollution prevention as source reduction practices. States and Tribal communities are eligible for P2 grants. Many Tribal communities have successfully implemented P2 practices to prevent waste and protect natural resources. Based on the EPA reporting, the P2 Grant Program issued grants for USD 54 million between 2011 to 2021. Its benefits were estimated as USD 2 billion savings for business, 369 million kg of hazardous materials reduced and 18.6 million tonnes of GHG emissions eliminated (US EPA, 2022[67]).

The IIJA considers EJ, including in Tribal communities. Overall, the IIJA provides more than USD 13 billion to Tribal communities across all categories of infrastructure investment (OCL-DOI, 2022[68]). This includes resources to expand access to high-speed Internet (USD 1.15 billion Re-Connect rural broadband program under US Department of Agriculture) for Tribal communities. Through EPA, Tribal communities receive funding for clean water, pollution clean-up and prevention as described above. Moreover, Tribal communities are eligible for USD 5 billion EPA funding for decarbonising the school bus fleet (Figure 1.9). Indeed, EPA can consider prioritising Tribal communities to replace school buses that serve children who reside on Tribal land.

The IRA accelerates the green transition with an EJ focus

The IRA expanded tax credits for renewable energy. Prior to the IRA, the primary support for renewable energy in the United States was 30% investment tax credits (ITC 19) for solar energy installations, established under the Energy Policy Act of 2005 (IEA, 2019[69]). Subsequent changes extended the ITC and phased down the level of support.20 For wind energy, in addition to the ITC, policy support has been in place since 1992 through production tax credits (PTC 21) of 1.5 cents per kilowatt hours (kWh) of electricity produced.22 As part of the 2015 legislation that extended the solar ITC, Congress agreed to phase out the PTC by the end of 2019.23

The IRA revives the original rate structure of these tax credits (ITC of 30%, PTC of 1.5 cents per kWh of electricity produced) and extends them until 2024 for solar, wind, geothermal and hydropower projects. As the ITC and PTC had already begun to phase down, the new rate structure by the IRA allows those renewable projects to immediately enjoy a higher tax benefit than previously expected. For those extended tax credits, additional 10% bonus credits are applied for meeting certain domestic manufacturing requirements,24 and another 10% for facilities in brownfield and fossil fuel communities,25 to promote economic revitalisation and green transition. The Act will replace those extended tax credits with new ITC and PTC starting from 2025, which are neutral and flexible between clean electricity technologies (Bipartisan Policy Center, 2022[70]). The new tax credits also have incentives from an EJ perspective: additional 10% bonus credits for projects in low-income communities and on Tribal land.

In addition, the IRA establishes new PTCs for qualifying clean hydrogen,26 nuclear power and eligible clean energy technology components produced in the United States.27 Moreover, the Act includes clean vehicle tax credits and fuel tax credits such as for low-carbon transportation fuel production. With these new tax credits, the US annual solar and wind capacity additions are expected to more than double from 2021 to 2030, while electric car sales will expand around seven‐fold (IEA, 2022[11]).

The IRA also upgraded the quality of these tax credits by making them refundable and transferable (Pomerleau, 2022[71]). Before the IRA passed, clean energy credits were non-refundable, and not necessarily attractive to entities in the emerging technology market. With refundability, entities can receive direct payments from the federal government. In addition, transferability allows project developers to sell their tax credits to other entities for cash. This change allows companies to fully use the tax subsidy benefits and incentivise investment in clean energy effectively by matching the tax benefits with the timing of the economic activity.

In addition to tax credits, the IRA provides funding to EPA to establish a Greenhouse Gas Reduction Fund grant programme, a portion of which will be used to capitalise financing entities to deploy funds for projects that reduce air pollution. EPA will provide grants to these entities to fund projects, activities and technologies that reduce GHG emissions, such as low- and zero-carbon technologies. A total of USD 27 billion is provided to EPA to grant before September 2024. Over half of the funding is dedicated to investment in low-income and disadvantaged communities, which will advance EJ objectives (US EPA, 2023[72]).

The IIJA and IRA promote innovation for clean energy

The IIJA represents a significant injection of stimulus funds into energy innovation. DOE created an Office of Clean Energy Demonstrations to select, fund and manage demonstration projects, and co-ordinate government activities to bring them to market. By May 2022, the office had funded USD 21.5 billion for 2022-25, of which 37% has been allocated for hydrogen hubs and 22% for grid and energy storage (IEA, 2022[73]).

The IRA increases loan and loan guarantee authority under the DOE Loan Programs Office, notably by USD 40 billion for the Innovative Energy Loan Guarantee Program. This expansion accelerates deployment of innovative clean energy technologies, including renewable energy systems, carbon capture and critical minerals processing (The White House, 2022[74]).

Challenges facing successful implementation of the IIJA and IRA

Massive investments in a short timeframe face capacity challenges

The wave of massive investment in a short timeframe arising from the IIJA (five years), alongside the IRA (ten years), could accelerate competition in supply chains and the labour market. It could also crowd out other sources of financing for infrastructure. Supply chain challenges are especially prominent for stable and resilient supply of critical minerals with increasing demand due to the low-carbon transition (IEA, 2022[75]). In response, Executive Order 14017 on America’s Supply Chains strengthened processing capacity and stockpiling of critical minerals in the United States (The White House, 2022[76]). Moreover, supply chain challenges are compounded by the domestic content requirements for federally funded infrastructure brought about by the Build America, Buy America Act passed concurrently with the IIJA (The White House, 2022[77]). In addition, the 2021 changes to the Buy American Act of 1933 28 increase the minimum threshold of domestically sourced components for government purchases (DoD, GSA and NASA, 2022[78]).

Since 2009, after the financial crisis, the US labour market has experienced increasing tightening with the gap widening between job openings and the unemployment rate (Adhikari and Mickle, 2022[79]). In the context of recovery from the COVID-19 pandemic, the labour market rebound has been particularly robust in the United States, with the unemployment rate back to its pre-crisis level in early 2022 (OECD, 2022[80]). Projections indicate that construction, maintenance and repair will be one of the sectors to experience the most job growth in the United States over 2021-31 (BLS, 2022[81]).

This situation creates a challenge to ensure adequate capacity and human resources to successfully implement the IIJA, within federal agencies, as well as within local authorities and the private sector. The American Recovery and Reinvestment Act (ARRA) of 2009 presented challenges for several states and federal agencies with limited resources for oversight and distributing funds to each recipient in a timely manner (US GAO, 2014[82]). Moreover, adequate technical assistance needs to be accessible to local authorities to implement IIJA projects. However, an increasingly tight job market makes it challenging to fill the positions needed. In May 2022, the federal government announced it was hiring for over 8 000 essential roles to implement the law, including scientists and engineers (The White House, 2022[83]). The resource shortage was pointed out even before the IIJA, when the full-time equivalent of EPA declined over 2017-19 (US EPA, 2020[84]). EPA’s 2020-21 top management challenges highlighted the necessity of appropriate workforce planning based on projected workload to accomplish the agency’s mission (US EPA, 2020[85]).

The scale of investments and their rapid deployment could lead to crowding out of alternative sources of finance, such as the private sector. Abundant grant funding for infrastructure may reduce demand for below-market rate financing from existing EPA financing facilities, as well as crowd out opportunities to mobilise commercial finance. However, even after completion of IIJA capital investments, reliable capacity funding must be assured at local level to operate and maintain the infrastructure over operational lifetimes.

Successful implementation of large-scale investments requires better governance

In the United States, there is potential for substantial positive productivity benefits from adequate infrastructure investment (CBO, 2021[86]). Even so, the productivity payoff highly depends on how infrastructure projects are selected and implemented (OECD, 2022[47]). Improving infrastructure governance could bring significant productivity gains, with notably an expected better return in the United States compared to G7 countries (with the exception of Italy)29 (Demmou and Franco, 2020[87]).

A number of infrastructure governance challenges in the United States have been identified. The OECD Infrastructure Governance Indicators highlight some US shortcomings related to “long-term strategic vision for infrastructure” and “efficient and effective procurement”, given often decentralised planning and implementation (OECD, 2022[88]). Among OECD countries, the United States ranked the lowest in those two indicators. This was due to absence of a long-term national cross-sectoral infrastructure plan, as well as of a public procurement plan for major infrastructure projects at the national level,30 on which the indicators’ measurement are based (OECD, 2022[88]).

A sound long-term strategic vision required for infrastructure involves rigorous planning aligned with strategic objectives, and co-ordination mechanisms considers synergies across sectors (OECD, 2020[89]). In the United States, sectoral plans tend to be shorter than ten years with no explicit alignment with other strategic objectives, such as addressing climate change (OECD, 2022[47]). Without a standing institution to oversee intergovernmental co-ordination, the federal government relies heavily on state and local governments to implement national policies, including infrastructure investment (LPSA, 2022[90]).

The United States has traditionally not made use of national cross-sectoral infrastructure plans. Such plans recognise the interlinkages between different types of infrastructure (i.e. transport, water, energy) and align infrastructure project decisions. The need for such plans at the national level reflects the presence of interjurisdictional spill overs, which state-level authorities are unlikely to consider (OECD, 2022[47]). Various OECD countries have established independent infrastructure advisory bodies to take an ongoing role in national cross-sectoral infrastructure planning (ITF, 2021[91]). For instance, Infrastructure Australia, an independent government advisory agency, updates the Australian Infrastructure Plan every five years. It also regularly publishes a shortlist of priority investments based on consultation with local governments and the private sector. In addition, it develops research and interactive data to support better infrastructure decision making (Infrastructure Australia, 2023[92]).

There is also scope for improving the mechanisms used to ensure open, neutral and transparent procurement processes and identifying proposals offering the best value for money (OECD, 2022[88]). There is evidence of relatively high costs of infrastructure projects in the United States, such as in rail. Various factors contributed to inflating costs, including poor procurement practices, poor project management and regulatory constraints such as “Buy American” laws (Levy, 2021[93]).

The successful implementation of the IIJA and IRA will require robust cross-sectoral (interagency) and multi-level collaboration (between federal, states, and Tribal and local levels). Positive developments in this regard include establishment of the Interagency Federal Infrastructure Implementation Task Force in 2021, and the appointment of a senior adviser in the White House for co-ordinating implementation of the IIJA. The taskforce led by the White House co-ordinator provides guidance from the Centre of Government,31 alongside the heads of different federal agencies 32 (The White House, 2021[94]). Infrastructure co-ordinators have also been appointed in 53 states and territories as a single point of contact for the taskforce (The White House, 2022[83]). This followed the model of the ARRA in 2009, when state representatives functioned as recovery co-ordinators (LPSA, 2022[90]). The White House has also produced a guidebook, rural playbook, factsheets and videos to help local communities understand how they can benefit from funding under the IIJA. There is value in retaining some of these institutional arrangements beyond the remit of the IIJA. They could be tasked with cross-sectoral and cross-state advisory about infrastructure priorities and best practices (OECD, 2022[47]).

Further reform of permitting process is needed, without undermining the review quality

In addition to co-ordination issues, the permitting process has historically been cited as the primary cause of why some types of infrastructure projects in the United States take so long. The process is complicated and lengthy for interstate electricity transmission projects in particular. In most of these cases, permits are required from local (e.g. land-use permit), state and interstate (e.g. connection to the regional transmission network) authorities. In addition, a wide range of federal authorities are involved, including wildlife protection, air and water protection, federal land-use protection, and National Environmental Policy Act (NEPA) review (Sud and Patnaik, 2022[95]). For the first half of 2022, approximately 20% of planned projects for solar photovoltaics (PV) were delayed, with this delay rate increasing since 2018 (EIA, 2022[96]). Various factors contribute to delays, including supply chain constraints, labour shortages, high prices of components and obtaining permits. Permitting is a common challenge in developing renewable energy in other OECD areas such as the European Union and Japan (IEA, 2021[97]).

The government has taken a number of steps to address bottlenecks related to the infrastructure permitting process. It released a Permitting Action Plan to accelerate and deliver infrastructure projects on time. In addition, it set up the Federal Permitting Improvement Steering Council to serve as a co-ordinating body for infrastructure projects, with the 13 agency members 33 (The White House, 2022[98]). The council also maintains the Federal Permitting Dashboard on its website that tracks progress on projects with the permitting timetable. Moreover, the action plan aims to make permitting processes more efficient and transparent by improving technical assistance and agency resources for the process (The White House, 2022[98]).

Existing policy actions on permitting reforms have made a welcome start. They have improved co-ordination under the IIJA, increased federal authority over transmission,34 allocated funding for reviewing agencies via the IRA and accelerated grid interconnections by clustering nearby proposed applications to be considered together (Sud and Patnaik, 2022[95]). Nevertheless, to implement the visions of the IIJA and IRA and meet time-bound climate, environmental and social objectives, further streamlining of the permitting process is needed without undermining the integrity of the process.

1.3. Selected policy instruments to support green growth

Selected regulations to align finance infrastructure investments with environmental objectives

Federal environmental review supports environmental objectives, although climate impacts should be more systematically considered

Major federal infrastructures programmes, such as those funded by the IIJA, need to undergo federal environmental review 35 (Box 1.5), a key provision of the NEPA established in 1970. Federal agencies are required to prepare an Environmental Impact Statement (EIS) if a proposed major federal action is determined to significantly affect the quality of the human environment. Importantly, the EIS must (1) explain the reason the agency is proposing the action and what the agency expects to achieve, (2) consider a reasonable range of alternatives that can accomplish the purpose and need of the proposed action, (3) describe the environment of the area to be affected by the alternatives under consideration, and (4) discuss the environmental effects and their significance. Other federal agencies with relevant expertise are consulted when needed (US EPA, 2022[99]). Projects requiring EIS are a small portion (only around 1%) of projects subject to NEPA review (CEQ, 2020[100]). However, those projects requiring EIS are likely to be complicated and expensive, including most interstate renewable energy projects (Sud and Patnaik, 2022[95]). Among the 1 276 EISs completed over 2010-18, the average completion time was four and a half years (CEQ, 2020[101]).

The considerable time required for robust environmental diligence is widely assumed as a cause of delay. However, an evidence-based study found that less rigorous analysis often fails to deliver faster decisions. It points out that timeline delays are often caused by factors only tangentially related to the Act (Ruple, Pleune and Heiny, 2022[102]). Such factors include changes in the proposed action, funding, community concerns (CEQ, 2020[101]), compliance with other laws (US GAO, 2014[103]), unstable funding and insufficient staff capacity (Ruple, Pleune and Heiny, 2022[102]). Regardless of the cause, a lengthy review can impact the implementation and performance of federal policy, as it did for ARRA in 2009. About 193 000 of 275 000 projects funded under ARRA were subject to NEPA review, about 850 projects were required for the EIS process and about 200 projects were still pending as of September 2011 (CEQ, 2011[104]).

Despite the rigorous process required by the environmental review, the NEPA does not mandate the preparation of a cost-benefit analysis of significant proposed actions, including a monetary assessment of the climate damages (or benefits) associated with a proposed project. The lack of a mandate for such analyses results in the inconsistent application of the social cost of GHGs (SC-GHGs)36 across projects. The absence of consistent consideration of climate change impacts risks locking in high emissions infrastructure inconsistent with the goal of reaching net-zero emissions by 2050. The IIJA allocates funding to a broad range of infrastructures, not only focused on environmental goals but also other objectives. Consequently, mainstreaming climate considerations in all projects will be critical to avoid undermining progress towards the climate targets.

Numerous legal challenges regarding NEPA analyses have argued that quantifying GHG emissions alone fails to convey the climate impacts of projects (Sarinsky et al., 2021[105]). Specifically, they argue that NEPA analyses should go beyond merely quantifying expected impacts on emissions. Rather, they should also present information about projected climate impacts by applying estimates of the SC-GHGs. Though not every reviewing court has concluded the need to use the SC-GHGs, no court has prohibited applying it under the NEPA either. Applying SC-GHGs may not only provide the best analytical method to assess the climate impacts of a policy proposal but also reduce an agency’s legal risk (Sarinsky et al., 2021[105]). Increasingly lengthy EISs increase the administrative costs of the NEPA review. However, incorporating the SC-GHGs can make the process more efficient without compromising quality. Following the NEPA guidance of January 2023, EPA and the Council on Environmental Quality (CEQ) recommend that agencies provide additional context for GHG emissions. This includes through use of the best available SC-GHG estimates (CEQ, 2023[106]).

Similarly, in procurement choices and in selection of infrastructure projects more broadly, impacts on climate should be systematically considered (OECD, 2022[47]). The federal government plays a major role in funding infrastructure investments, but project selection decisions are largely the purview of state governments. Though SC-GHG estimates are regularly incorporated into regulatory cost-benefit analysis, federal grants to states for infrastructure projects do not have to consider climate impacts through the SC-GHGs estimates in the project selection phase (OECD, 2022[47]). In January 2021, an Executive Order announced the re-establishment of the Interagency Working Group on the SC-GHGs. This group was tasked with updating estimates of the social cost of carbon, nitrous oxide and methane. The group will also provide recommendations to the president about where these estimates should be applied in decision making, budgeting and procurement. Decisions related to infrastructure projects should be one such area.

There are multiple guidance documents on how to incorporate EJ perspectives into analysis for NEPA reviews. In 1998, EPA issued its original Guidance for incorporating EJ Concerns in EPA’s NEPA Compliance Analyses (US EPA, 1998[107]). The guidance calls for EPA to analyse the cumulative impact of the action from EJ perspectives, as well as the reasonable alternatives that address disproportionate impacts. EPA must also provide a public review on the draft assessment. In 2012, the Interagency Working Group on Environmental Justice (EJ IWG) established the NEPA Committee to improve consideration of EJ issues in the NEPA process. In 2016, this committee developed a compilation 37 of methodologies on applying EJ considerations throughout the NEPA process (EJ IWG, 2016[108]).

Box 1.5. Environmental review under NEPA and recent changes

Congress enacted the NEPA in 1969, and it entered into force in January 1970. The NEPA was one of the first major environmental laws in the United States. In 2020, the federal government, citing a desire to create jobs and to accelerate infrastructure projects, made a variety of substantive and procedural changes to the NEPA implementing regulations. This included narrowing the scope of the required review to the “direct effects” of the proposed project. This resulted in downplaying certain cumulative effects of a project, including climate change.

In April 2022, the government finalised a new rule rolling back portions of the 2020 changes. The new rule re-establishes the prior broader scope of NEPA review, requiring consideration of indirect and cumulative impacts in addition to direct impacts, including effects on climate change. Unlike the 2020 rule, which narrowed the factors an agency could consider in defining the “purpose and need statement” of a project, the 2022 rule provides more flexibility and discretion to consider a variety of factors on assessment, including impacts on vulnerable populations.

Source: Council of Environmental Quality (2007), A Citizen’s Guide to the NEPA; Gupta and Unger (2022), New NEPA rule restores demanding environmental review practices for major federal projects, website; Crowell & Moring LPP (2022), Small changes to NEPA rules expected to have major impacts on federal environmental reviews of infrastructure projects, website.

Key statutes regulate and guide infrastructure investments

In addition to the overarching national environmental review, multiple statutes regulate various environmental domains (Table 1.1). These statutes authorise EPA to set corresponding national standards and monitor respective compliance through inspections. Moreover, some of them set legal basis for state-level standards. For instance, the CWA requires each state to establish WQS for all water bodies in the state. Many states have established narrative criteria for trash or floatables, which inherently include plastic waste.

Table 1.1. Selected regulations administered by EPA form the basis for environmental regulation and compliance monitoring
	Enacted year	Regulatory roles/objectives
Clean Air Act (CAA)	1970	Regulates air emissions from stationary and mobile sources Establishes National Ambient Air Quality Standards (NAAQS) to protect public health and public welfare and to regulate emissions of hazardous air pollutants
Clean Water Act (CWA)	1972	Regulates discharges of pollutants into waters, set wastewater standards for industry Regulates quality standards for surface waters, develop national water quality criteria recommendations for pollutants
Safe Drinking Water Act (SDWA)	1974	Establishes minimum standards to protect tap water and requires all owners or operators of public water systems to comply Establishes minimum standards to protect underground sources of drinking water
Resource Conservation and Recovery Act (RCRA)	1976	Controls hazardous waste over the process from generation to transportation, treatment, storage and disposal Sets framework for the management of non-hazardous solid wastes
Toxic Substances Control Act (TSCA)	1976	Requires reporting, record-keeping and testing requirements, and restrictions relating to chemical substances and/or mixtures. Addresses the production, importation, use and disposal of specific chemicals
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or Superfund)	1980	Provides a Federal Superfund to clean up uncontrolled or abandoned hazardous waste sites, as well as accidents, spills and other emergency releases of pollutants and contaminants into the environment
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)	1996	Provides for federal regulation of pesticide distribution, sale and use. Requires all pesticides distributed or sold in the United States must be registered (licensed) by EPA
Note: Selected regulations relevant to infrastructure and marine litter discussions in the United States; the basis of the CWA was enacted in 1948 as the Federal Water Pollution Control Act, significantly reorganised and expanded in 1972.
Source: EPA (2023), Laws and Executive Orders website.

The CWA, under its Section 303(d), requires states to list waters impaired by pollutants. EPA's National Pollutant Discharge Elimination System (NPDES) regulates some stormwater discharges from municipal separate storm sewer systems, construction activities and industrial activities. Operators of these sources might be required to obtain an NPDES permit before they can discharge stormwater. A large number of NPDES permits address the stormwater nexus for trash entering waterways (Chapter 2).

Statutes relevant to infrastructure and marine litter (Chapter 2) provide a basis to guide IIJA investments under EPA authority. For instance, the CWA and SDWA are the legal basis for the respective SRFs, which receive significant funding from the IIJA. Superfund investment is based on CERCLA, with increasing consideration of EJ. Aside from waste-related regulations, the Pollution Prevention Act provides a basis for grants to states to promote source reduction by businesses.

While those statutes are effective for existing activities, challenges lie in their application to emerging issues, such as marine litter. For instance, WQS related to trash under the CWA are often narrative, relying on local states for how to interpret them and establish quantified TMDLs. Moreover, due to lack of defined methodologies to assess trash, local states do not regularly monitor trash for 303(d) purposes, resulting in few waters listed as impaired for trash (Chapter 2).

Monitoring compliance and enforcement to enhance conformity with regulations

EPA and its regulatory partners in states and Tribes monitor compliance of programmes authorised by seven statutes (Table 1.1). Monitoring includes conducting inspections and investigations, overseeing imports and exports of environmental substances, and training federal, state and Tribal personnel (US EPA, 2021[109]).

Over the past decade, the rate of violations declined for wastewater and hazardous waste but remained steady or increased in other domains (air, drinking water and pesticides) (Figure 1.11). The non-compliance rate for drinking water has been stable at around 25% of total facilities. The largest reason for violations related to monitoring and reporting (19.8% in 2021), while health-based violations accounted for 4.5% in 2021 (US EPA, 2022[110]). The number of CWS identified as serious violators decreased more than 60% from 2011 to 2020 (US EPA, 2022[111]).

SDWA compliance challenges are more prevalent in communities facing financial challenges. In such communities, limited utility revenue derived from a smaller rate-payer base leads to less funding for operations and maintenance. Some struggling CWSs found fruitful partnerships with larger utilities to access the capital and expertise needed to reach SDWA compliance. As part of the national compliance initiative in 2021, EPA issued 47 SDWA orders in vulnerable or overburdened communities. It also performed offsite compliance monitoring at 239 CWSs (more than double the 109 in 2020). Finally, it led or accompanied communities to implement and enforce the public water system programme on 58 onsite inspections.

Figure 1.11. Violation rate declined in wastewater and hazardous waste but not in other domains

For wastewater, the share of facilities with CWA violations out of national total facilities has been steadily decreasing – from 22.1% in 2013 to 15.4% in 2021 (Figure 1.11). As part of a national compliance initiative, EPA succeeded in reducing significant non-compliance with NPDES permits. To that end, it provided compliance assistance such as advisory and enabling early detection of non-compliance via warning dashboard.

For hazardous waste, the RCRA Corrective Action (CA) Program data show that about 94% of RCRA CA facilities 38 in 2021 have controls in place that prevent human exposure to toxic chemicals (US EPA, 2022[112]). Complete construction of remediation systems has been achieved at about 72% of RCRA CA sites, and about 40% achieved environmental performance goals in 2021. The violation rate out of all sites with onsite compliance monitoring activities decreased slightly from 2013 to 2021 but still remains high rate at 30% (Figure 1.11).

The Framework for Protecting Public and Private Investment in CWA Enforcement Remedies captures climate impacts on water systems. The goal of this framework is to ensure water enforcement remedies lead to long-term compliance with the CWA in the face of climate impacts. EPA provides tools for vulnerability assessment and runs initiatives such as Creating Resilient Water Utilities (CRWU) (US EPA, 2022[113]). Despite these efforts, Congress has not required incorporation of climate resilience in planning of all water projects that receive federal financial assistance (US GAO, 2020[114]). Failure to systematically incorporate climate resilience in water systems can result in costly exposure and vulnerability to climate risks. This may lead to premature obsolescence where systems are maladapted to future climate conditions (Brown, Boltz and Dominique, 2022[115]).

For the waste sector, EPA has taken some actions to manage climate risks, including integrating climate information into site-level decision making. In 2021, EPA provided direction on integrating information on the potential impacts of climate change effects into risk assessments and risk-response decisions at non-federal Superfund sites (US EPA, 2021[116]), responding to the recommendation by the GAO (US GAO, 2019[59]). Leveraging IIJA funding, the waste sector has potential for further improvement, especially in climate adaptation.

Selected economic instruments and financial mechanisms to support the green transition

In the United States, environmentally related taxes accounted for 0.7% of GDP in 2020, which is the lowest among the G7 and lower than OECD average 1.4% (Figure 1.12). Environmentally related taxes are minor sources of tax revenue in the United States in international comparison. Their share of total tax revenue is lowest among the G7 and lower than OECD average (Figure 1.12). Similar to other OECD countries, energy and transport account for most environmentally related taxes. Among categories, climate- and air pollution-related taxes dominate, while taxes related to biodiversity and oceans are relatively few (OECD, 2023[117]). Pesticides are taxed in a limited number of states such as California but not at the federal level.39 Environmentally related tax revenue showed real growth from 2010 to 2019. This growth, driven by both energy and transport from increased fuel use and vehicle sales, dropped in 2020 due to the pandemic. Still, this growth has not kept pace with GDP growth in the same period. This led to the decline of the US environmental tax revenue share of GDP over 2010-20.

Figure 1.12. The US environmental tax revenue share of GDP has been declining and is lowest among the G7

The IIJA and IRA made some progress on environmentally related taxes. The IIJA reinstated the excise taxes imposed on certain chemicals and imported chemical substances (known as the Superfund chemical taxes) beginning 1 July 2022 (Internal Revenue Service, 2022[118]). The IRA reinstated the excise taxes imposed on certain petroleum products to fund the Superfund Trust Fund. It also authorised a new methane fee that will start at USD 900 per metric tonne of methane in 2024 and reach USD 1 500 per metric tonne of methane in 2026 (IEA, 2022[119]).

Several market-based instruments contribute to nature restoration and biodiversity protection

In the United States, most biodiversity-related economic instruments are at the subnational level. The total count of biodiversity-related economic instruments in the United States outnumbers other countries. However, after weighting 40 the number of subnational instruments by the number of large regions (territorial level 2), the count is lower than the OECD average (OECD, 2021[120]). Considering the type of economic instruments for biodiversity, tradeable permit systems are particularly common in the United States. Examples include transferable rights of wetlands conservation (national mitigation banking), tradeable development rights and transferable fishing quota (OECD, 2021[121]).

National mitigation banking (Box 1.6) is the largest environmental restoration programme, contributing to biodiversity and water resource management objectives. The market has been growing rapidly since its inception in the 1990s, in terms of both the number of transactions and price per credit (US Army Corps of Engineers, 2022[122]). The programme restored over 2 800 km² of private land from 1995 to 2021 (Davis and Johnson, 2022[123]). It has improved environmental outcomes while providing efficient compliance options for developers, creating a market for outsourced compliance with the CWA. Assigning the right number of credits, however, is difficult. Evaluation can be conservative in rewarding credits, if not fully capturing the benefits of mitigation (Eco-Asset Solutions and Innovations, 2022[124]). Evaluation metrics should reflect the scientific understanding of ecological improvements such as desired biological outcomes and need to be applied in a consistent manner to incentivise investment (Davis and Johnson, 2022[123]).

Box 1.6. National mitigation banking programme

National mitigation banking is a system of credits and debits developed by regulatory agencies. It aims to ensure that environmental impacts from development are compensated by the preservation and/or restoration of areas of similar ecological value. In this way, there is no net loss to local ecosystems. All restoration projects must meet standards through a review process by a federal agency, such as the US Army Corps of Engineers.

The ecological credit system allows for the transfer of liability from permittee to the mitigation banker. This is an attractive feature for permit holders, who would otherwise be responsible for design, construction and long-term protection of the site. Since the programme’s inception in the 1990s, it has approved about 750 000 credits for mitigation banks. Their total credit value is estimated to be USD 100 billion nationwide (Eco-Asset Solutions and Innovations, 2022[124]).

Source: Davis and Johnson (2022), Financing Investment in Water Security, Chapter 14 Mobilising private capital for large-scale ecological restoration and conservation: Insights from the US experience; Eco-Asset Solutions and Innovations website.

Water tariffs increased but are not sufficient for cost recovery

Water and wastewater tariffs are key instruments for the cost recovery of the services provided. Water tariffs are typically set at the municipal level: the United States has the largest variance of tariffs among cities compared to other G7 countries, ranging almost ten-fold in 2021 (Figure 1.13). Across the country, the tariff increased significantly from 2012 to 2021 on average, experiencing increase faster than other household utility bills (Bluefield Research, 2021[125]). This increasing trend can be observed regardless of the city size.

Figure 1.13. Water tariffs increased significantly in the United States, with large variation across cities

Nevertheless, water tariffs are still insufficient to achieve full cost recovery. Ageing drinking water infrastructure, declining water use and stagnant funding for the best part of the 2010s resulted in water utilities struggling to fund the cost of operations and maintenance (O&M). Nearly half of maintenance by utilities reacts to systems failure (AWWA, 2019[126]).

The situation is worse for vulnerable communities, including communities with EJ concerns, with a trilemma among sustaining financial viability for utilities, maintaining infrastructure and ensuring water affordability (Bash et al., 2020[127]). This is particularly acute for cities experiencing depopulation. As the population shrinks, fixed costs are redistributed among fewer ratepayers (Bash et al., 2020[127]). Since infrastructure capacity cannot easily be adjusted, utilities often try to recapture lost revenue by raising tariffs, exacerbating water affordability.

One measure to improve O&M is asset management programmes, which shift decision making from reactive to proactive. An amendment to the SDWA in 2018 requires states to include asset management in their capacity development strategies. Nearly a third of drinking water utilities had a robust asset management plan in 2019, an increase from 20% in 2016 (ASCE, 2021[48]). However, there is no federal requirement for drinking water systems to implement asset management. EPA works to promote effective utility management, providing tools such as a guidebook (US EPA, 2022[128]). EPA also encourages water system partnerships, which is beneficial for the small water utilities struggling to afford necessary O&M. Such partnership can leverage economies of scale to reduce O&M cost by contracting with a shared O&M programme (US EPA, 2022[129]).

Tariffs are best designed to secure sustainable financing for service provided and complemented by targeted social measures to address affordability issues. Otherwise, attempts to adjust tariff structures themselves usually fail to combine efficiency and equity objectives (Leflaive and Hjorti, 2020[130]). There are some innovative approaches to address water affordability issues with different types of customer assistance programmes in the United States (Bash et al., 2020[127]). Some, such as Pittsburgh, provide an annual grant for lower-income households with outstanding balance. Another approach is to lower or remove fees for late water bill payments, as late fees disproportionately affect low-income households (Bash et al., 2020[127]). Expansion of these approaches to struggling communities is a central focus of EPA’s expanded technical assistance programmes under the IIJA. It works with states to update definitions of disadvantaged communities and to leverage grant and forgivable loan funds. In this way, it can maximise water infrastructure improvements in disadvantaged communities, while mitigating rate impacts.

Financial mechanisms mobilise private capital for green investments

Although only a third of GHG emissions is subject to a positive carbon price (OECD, 2022[131]), a variety of tax incentives mobilise private capital for investment in renewable energy. One such example is a federal tax reduction in capital expenditure for recycling (Staub, 2017[132]). This allows companies to deduct the cost of new equipment purchases from their taxable income, which is especially effective for an equipment-heavy sector, such as recycling.

The most prominent and recent examples are tax credits for renewable energy, which the IRA will further expand. Over 2010 to 2020, renewable sources showed strong growth in the United States, in terms of both electricity installed capacity and energy production. This growth was strongly driven by solar PV and wind (Figure 1.14). These two renewable sources, supported by the ITC and PTC, nearly doubled in terms of real growth of private investment over 2010-20 (BEA, 2021[51]).

Figure 1.14. US renewables have expanded in both capacity and energy production over 2010-20

Capital markets are commonly used to finance a wide range of infrastructures in the United States, mobilising private capital. Green bonds, whose proceeds are used for environmental objectives, have been rapidly growing. The global market size for green bonds exceeded USD 500 billion in 2021 (Harrison, MacGeoch and Michetti, 2022[133]). The United States was the most prolific source of green bonds in 2021 (Climate Bonds Initiative, 2022[134]), with the cumulative total at USD 304 billion, which is 50% larger than the next largest country (China). In the United States, almost half of the municipal green bonds proceeds benefit the water sector (Forsgren, 2016[135]). Novel Environmental Impact Bonds have been pioneered by DC Water, using a “pay for success” model (Box 1.7).

Box 1.7. Environmental Impact Bond (EIB)

EIBs are bonds whose proceeds are directed towards environmental goals, with an innovative finance mechanism of “Pay for Success”. The bonds’ returns depend on whether the pre-agreed environmental and social outcomes are achieved. If they are achieved, the issuer will repay the investors their initial capital and a return (interest); if not, the investors will lose the interest payment and all or part of the capital.

Pay for success models can be applied to a wide range of environmental and social issues. This model shifts the risk of meeting the environmental and social outcomes from the bond issuer to private investors. It also allows for the more efficient use of public capital, as the government pays only if outcomes are achieved.

DC Water issued the first EIB in the United States in 2016, as part of a legally mandated green infrastructure strategy. Structured as a 30-year tax-exempt municipal bond, the bond totalled USD 25 million with an initial coupon of 3.43% for the first five years. The proceeds were allocated to the construction of green infrastructure on public properties that absorbs and slows stormwater surges during heavy rainfall. This aims to reduce the incidence and volume of sewer overflows that pollute waterways around the city.

The project achieved the goals set in 2016, reducing stormwater runoff by nearly 20% from previous levels. According to this result, no outcome payment is due to the investors and no risk share or underperformance penalty is due from the investors. Now other cities use the EIB to finance green infrastructure, including the case in Chesapeake Bay Watershed.

Source: EPA (2017), DC Water’s Environmental Impact Bond: A First of its Kind; OECD (2022), Financing a Water Secure Future; DC Water (2021), DC Water Environmental Impact Bond Results – Successful (fact sheet); Ocean Conservancy (2021), Financing Waste Management and Recycling Infrastructure to Prevent Ocean Plastic Pollution.

1.4. Addressing distributional issues through a focus on environmental justice

In the United States, EJ is defined as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin or income, with respect to the development, implementation and enforcement of environmental laws, regulations and policies”. EJ is a complex issue arising at the intersection of disproportionate burden and excess vulnerability to environmental harms related to the socio-economic and demographic characteristics of communities (e.g. in terms of race, ethnicity, income, Indigenous population), as well as issues of disparate access to environmental amenities and the cumulative nature of such burdens, vulnerabilities and disinvestment experienced by these communities over time. The pursuit of EJ in the United States spans several decades, with actions at the federal level guided by a series of Executive Orders.41 Most recently, in 2021, the government gave further impetus to address EJ as an integral part of the missions of federal agencies.

Distribution of exposure to environmental burdens

Uneven distribution of environmental burdens in the United States calls for accelerated action on environmental justice

Decades of research have established that low-income households, Indigenous communities and people of colour in the United States are disproportionately exposed to pollution and other environmental risks (Mohai, Pellow and Roberts, 2009[136]; Banzhaf, Ma and Timmins, 2019[137]). Figure 1.15 maps US counties according to the Environmental Justice demographic index. This was developed by EPA as part of EJScreen, an EJ mapping and screening tool. The map illustrates the distribution of communities with characteristics that heighten their susceptibility to environmental harms.

Figure 1.15. Distribution of communities with low-income and minority populations as defined by the Environmental Justice demographic index

Exposure to potential environmental harms and related health risks are unevenly distributed across the United States. Figure 1.16 illustrates this with a series of bivariate maps. They highlight the communities facing relatively higher potential exposure to different combinations of pollutants compared to the average population. Each unit represents a US county, with each bivariate map presenting two environmental indicators and the relative level of potential exposure to each indicator.

Figure 1.16. Distribution of potential exposure to a range of environmental harms, with a focus on air pollution and related health risks

Despite overall declines in air pollution, racial-ethnic and socio-economic disparities in exposure to such pollution have persisted. For PM_2.5, evidence shows that racial-ethnic minorities are exposed to disproportionately high levels. These exposure disparities arise in the case of most types of PM_2.5 sources, resulting in higher-than-average exposures for people of colour and lower- than-average exposures for white people (Figure 1.17) (Tessum et al., 2021[139])

Figure 1.17. Racial-ethnic minorities in the United States are disproportionately exposed to PM2.5 air pollution

Figure 1.18 further illustrates the uneven distribution of exposure to pollution. It highlights the communities facing relatively higher potential exposure to a range of environmental harms, drawing on indicators related to proximity to hazardous waste and Superfund sites, traffic, wastewater discharge and lead pollution (in housing).

Figure 1.18. Distribution of potential exposure to a range of environmental harms, with a focus on proximity to hazardous waste, Superfund sites, traffic, wastewater discharge and lead pollution

An analysis of the spatial correlation of the indicators concludes there is a global spatial autocorrelation for key demographic and environmental indicators that should be considered in EJ assessments (see Annex A.). Communities consisting of people of colour, low-income people and linguistically isolated populations tend to live close to each other. At the same time, on average, there is a higher chance that a county with higher traffic and hazardous waste facilities density will be adjacent to counties with the same characteristics. This also applies to a lesser degree to densities of Superfund and hazardous waste sites. Moreover, due to the chemical and physical properties of air pollutants, it is not surprising these indicators show a higher spatial autocorrelation between counties. This means that counties with higher exposure to these pollutants are closer in proximity to others with high exposure levels.

Initiatives, programmes and tools to advance environmental justice

Increased impetus to mainstream EJ across government agencies, although approaches differ

At the federal level, the focus on EJ has been progressively strengthened and mainstreamed across government agencies, driven by a series of Executive Orders.42 Most recently, in 2021, the government gave further impetus to address EJ as an integral part of the missions of federal agencies, including to address historical disparities.43 Achieving EJ objectives requires effective collaboration across the federal government, between federal, state, Tribal and local governments, and with community partnerships, including with Indigenous communities. To raise the visibility of EJ issues and to facilitate collaboration across the federal government on EJ, the White House Environmental Justice Advisory Council was established in 2021. It advises the White House Environmental Justice Interagency Council and the Chair of the CEQ to strengthen federal government efforts to address current and historical environmental injustice. It also serves as a partner to EPA’s National Environmental Justice Advisory Council.

To support a whole-of-government approach to EJ, the Justice40 initiative is a major recent development to help steer the benefits of relevant federal programmes towards disadvantaged communities (Box 1.8). Ensuring that benefits are targeted to address the disparities experienced by the most overburdened and disadvantaged communities is critical to achieving EJ goals. However, there are multiple challenges inherent in identifying and defining such communities. There are various approaches to defining disadvantaged, underserved or overburdened communities across federal agencies and states, creating a patchwork of diverse approaches to identify and address communities with EJ concerns.

Box 1.8. Steering the benefits of federal programmes towards disadvantaged communities: The Justice40 Initiative

The 2021 Executive Order (EO) 14008 Tackling the Climate Crisis at Home and Abroad created the government-wide Justice40 Initiative. This aims to deliver 40% of the overall benefits of relevant federal programmes (including climate, clean energy and water) to disadvantaged communities. The White House Council for Environmental Quality has developed the Climate and Economic Justice Screening Tool (CEJST) to provide a uniform geospatial mapping tool for identifying geographically defined disadvantaged communities for purposes of the Justice40 Initiative.

As set out in the EO, disadvantaged communities are those that have been historically marginalised, underserved and overburdened by pollution. The first version of the CEJST uses a methodology and datasets that identify economically disadvantaged communities overburdened by pollution and underinvestment in housing, transportation, water and wastewater infrastructure, and health care. A community qualifies as “disadvantaged” if the census tract is above the threshold for one or more environmental or climate indicators and the tract is above the threshold for the socio-economic indicators (low income and low education).

While the CEJST aims to provide a consistent approach to determining disadvantaged communities and targeting investments, there are a number of limitations. The climate and environment indicators are wide-ranging and require the use of nationally consistent data, which may exclude relevant or more appropriate indicators only available for certain regions. Some indicators (such as agricultural losses or expected population loss rates from natural disasters) are less relevant to determining disadvantaged communities. Race is not included in the socio-economic indicators, despite its relevance for identifying potentially disadvantaged communities. The variation of household incomes within communities is not distinguished. For these reasons, some communities with EJ concerns (notably many Tribal and rural areas) may be overlooked. Combining the CEJST with community-level analysis based on the most relevant indicators for that particular area could help address some of the limitations. Further ensuring the meaningful involvement of communities in the development and application of the tool is critical.

Source: Climate and Economic Justice Screening Tool (2022), https://screeningtool.geoplatform.gov/en/#3/33.47/-97.5.

A major step-change in recent years places environmental justice firmly at the core of EPA’s strategic objectives

Over the past decade, a series of EJ Plans to mainstream EJ concerns across the EPA’s core functions have guided EPA actions on EJ with varied degrees of success. Recent years have seen a major step-change in the priority placed on EJ and the proactive directive to mainstream EJ across the federal government. For the EPA, EJ is now firmly at the core of the agency's work, including setting standards, permitting facilities, awarding grants, issuing licences, promulgating regulations and reviewing proposed actions by federal agencies.

For the first time, the EPA Strategic Plan (2022-26) has an explicit strategic goal on EJ, equity and civil rights, supported by specific objectives and targets.44 Prior EJ plans and strategies have lacked quantified targets with specific timeframes and indicators to measure progress, impeding transparency and accountability. To improve accountability, the agency has set an ambitious priority goal to develop tools and metrics for EPA and its Tribal, state, local and community partners to advance EJ and external civil rights compliance. Specifically, EPA aims to develop and implement a cumulative impacts framework, issue guidance on external civil rights compliance and establish at least ten indicators to assess EPA’s performance in eliminating disparities in environmental and public health conditions. It will also train staff and partners on how to use these resources. The development of robust tools and metrics is a commendable and important step.

Another major milestone was the creation in 2022 of the Office of Environmental Justice and External Civil Rights (EJECR) to meet increased ambitions to mainstream EJ through agency activities in a more systematic manner. The EJECR represents a tripling of staff focused on delivering on the agency’s EJ objectives. Specific EPA offices have also developed action plans to detail how EJ considerations can be mainstreamed in their core functions. For example, the December 2021 EJ Action Plan 45 developed by the EPA Office of Land and Emergency Management sets out a broad set of actions under its purview to increase benefits of its activities for communities with EJ concerns. This has implications for waste management, including the disposal and storage of hazardous waste, the clean-up and redevelopment of contaminated sites through the brownfields programme and Superfund.

Over the years, various activities and programmes have been developed to promote EJ throughout the EPA’s core functions. For example, to strengthen EJ considerations in regulatory development, technical guidance 46 provides recommendations to encourage consistency across EPA assessment of potential EJ concerns for regulatory actions. For permitting, guidance on enhanced outreach to communities and EPA regional offices aims to ensure EJ concerns are considered in all EPA permitting activities. However, most permitting in the United States is done at the state and local level. Permitting approaches have generally focused on the impacts of one pollutant from one facility on the average American, neglecting cumulative impacts. Further, despite numerous programmes and initiatives to improve community engagement, a persistent challenge has been to ensure meaningful public participation of communities at early stages in programme and project development. Systematically reporting back to communities on if and how community input was integrated into a final decision would also enhance meaningful engagement.

Compliance and enforcement activities seek to address violations of environmental laws in the most overburdened communities and direct more resources to these communities. However, more can be done to prioritise such communities effectively. On average, between 2014 and 2021, less than 20% of funding commitments for pollution abatement activities were in areas of potential EJ concern (Figure 1.19). The year 2019 was exceptional, with two large cases (in Guaynabo, Puerto Rico and in the Fort Berthold Indian Reservation in North Dakota) accounting for nearly 80% of the results related to EJ that year. Mandated actions that a regulated entity must perform, or refrain from performing, to comply with environmental laws is known as “injunctive relief”. The cost of such actions in areas of potential EJ concern account for around 10% of the total between 2014 and 2021.

Figure 1.19. Areas of potential EJ concern account for a relatively modest share of funding commitments for pollution abatement and estimated value of injunctive reliefs, 2014-21

EJ screening and mapping tools are powerful means to identify areas for further action, although there is scope for improvement

The United States has developed screening and mapping tools to support action on EJ. EJScreen, for example, is a nationally consistent geospatial mapping tool that combines environmental and demographic indicators to enable users to better consider EJ issues. Its main purpose is to screen for and identify potential areas for further investigation, which need to be reconciled with realities on the ground.

As a screening tool, EJScreen is not equipped to measure progress over time in meeting EJ objectives. Nor can it solely guide EPA’s policy, regulatory or permitting decisions. Given the requirement of nationally consistent data, EJScreen does not cover all relevant EJ issues but can serve as a basis for more context-specific state or local EJ screening and mapping tools (EJSMTs). Proxies are used for actual exposure or risk to environmental harms, but better data for indicators may be available for certain regions, states or communities at a more granular level. Moreover, the selection of specific demographic characteristics may gloss over multi-dimensional vulnerabilities (Ravichandran et al., 2021[140]; Zeise et al., 2021[141]).

The EPA’s EJScreen and the White House CEQ’s Climate and Economic Justice Screening Tool (CEJST), developed specifically to support the Justice40 Initiative, are prominent examples of EJSMTs available with a national scope. Given the need for such tools to use nationally consistent data, these tools do not cover all relevant EJ issues and indicators as such data do not exist for all EJ issues. However, they can serve as an important starting point for more context-specific, state-level EJSMTs. In addition, EJScreen is designed to allow the user to incorporate additional data that do not have to be national in scope, which can enhance the utility of the tool. Several states have developed their own tools, such as California’s CalEnviroScreen, Maryland (MD) EJScreen, the Florida Department of Environmental Protection Map Direct Tool, the New Jersey EJM tool and the Washington Environmental Health Disparities Map. These tools help assess cumulative exposures and impacts at a higher granular scope.

For example, the CalEnviroScreen uses a cumulative score for a given place relative to other places in California by computing and combining “pollution burden” and “population characteristics” scores. Although it does not include race and ethnicity factors, the tool has the advantage of including indicators for which the data are not comprehensive at the national level (e.g. drinking water contaminants or asthma emergency department visits). This adds context-specific data on cross-border environmental burdens with Mexico. Figure 1.20 illustrates the application of CalEnviroScreen for Los Angeles County.

Figure 1.20. Los Angeles County census tracts with EJ cumulative burdens

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Annex 1.A. Global Spatial Autocorrelation Analysis

In the literature on spatial statistical analysis, spatial autocorrelation is a paramount concept. It is divided into two categories: global or overall spatial autocorrelation and local spatial autocorrelation. Global spatial autocorrelation measures the extent to which a set of geographic regions are interdependent. It is a multi-directional and multi-dimensional analysis that allows determination of data dispersion patterns. In turn, local spatial autocorrelation evaluates local spots showing high spatial autocorrelation. This annex will be focused on the first category.

Testing for overall spatial autocorrelation of the dataset allows to measure how one object (in this case “county”) is similar to others surrounding it. If counties are attracted (or repelled) by each other for a given variable, it will translate into a non-independency between them. This means a county’s characteristics will depend on its neighbours.

Moran’s I Statistic for Global Spatial Autocorrelation

Fundaments of Moran’s I

Moran’s I Statistic is similar to correlation coefficients lying within the range [-1,1]. However, due to the more complex computations and spatial calculations, it measures clustering patterns rather than perfect correlation/no correlation:

- 1 indicates perfect clustering of dissimilar values or perfect dispersion.
0 shows there is no autocorrelation and therefore perfect randomness of spatial distribution.
+1 indicates perfect clustering of similar values.

Overall, when a positive (negative) value of Moran’s I is observed, this indicates a spatial autocorrelation of the same order of magnitude existing across counties. That is, the counties neighbouring a county with high (low) value show simultaneously a high (low) value.

Evaluating Moran’s I

The formula of Moran’s I is given by

$I = \frac{\sum_{i = 1}^{n} \sum_{j = 1}^{n} w_{i j} z_{i} z_{j}}{\sum_{i = 1}^{n} z_{i}^{2}}$ (1)

Where $n$ is the number of counties, $z_{i}$ is the value of county $i$ of variable $z$ , which is standardised and $w_{i j}$ is the $i j$ th element of the row-standardised spatial weight matrix $W$ .

Another way to compute Moran’s I (still based on a weighted matrix $W$ ) is by calculating the product of the differences between $z_{i}$ and $z_{j}$ with the overall mean, divided then by the sample variances.

$I = \frac{1}{s^{2}} \frac{\sum_{i = 1}^{n} \sum_{j = 1}^{n} (z_{i} - \bar{z}) (z_{j} - \bar{z})}{\sum_{i = 1}^{n} \sum_{j = 1}^{n} w_{i j}}$ (2)

With $s^{2} = \frac{\sum_{i = 1}^{n} {(z_{i} - \bar{z})}^{2}}{n}$

However, unlike most correlation coefficients, the Moran’s index cannot be taken at face value. It is rather an inferential statistic, for which the statistical significance needs to be determined. This is done with a simple hypothesis test based on a z-score and its associated p-value. The test statistic $z (I)$ is computed as follows:

$z (I) = \frac{I - E (I)}{\sqrt{V a r (I)}}$ (3)

Where $E (I)$ is the expected value of $I$ and $V a r (I)$ is the variance of $I$ under the spatial randomisation (Kondo, 2021[142]). The null hypothesis for the test is the existence of perfect randomness of spatial distribution for the studied data. The alternate hypothesis is that the data are more spatially clustered than expected with two possible outcomes:

1. A positive z-value: data are spatially clustered. Values of the same order of magnitude are attracted by each other.

2. A negative z-value: data are clustered in a competitive way. Values of the same order of magnitude are repelled by each other.

Spatial Weight Matrix

The matrix that expresses spatial structure is called the spatial weight matrix, which is key when carrying out spatial analysis. The spatial weight matrix $W$ takes the following form:

$W = (\begin{matrix} 0 & \begin{matrix} w_{1,2} & \dots \end{matrix} & w_{1, n} \\ \begin{matrix} w_{2,1} \\ ⋮ \end{matrix} & ⋱ & \begin{matrix} w_{2, n} \\ ⋮ \end{matrix} \\ w_{n, 1} & \begin{matrix} w_{n, 2} & \dots \end{matrix} & 0 \end{matrix})$

Diagonal elements take the value of 0, and the sum of each row takes the value of 1 (i.e. row standardisation). Various types of spatial weight matrices are proposed in the literature (Kondo, 2021[142]). Here, the power functional type is privileged, and it is set as follows:

$w_{i j} = \{\begin{matrix} \frac{d_{i j}^{- δ}}{\sum_{j = 1}^{n} d_{i j}^{- δ}}, i f d_{i j} < d, i \neq j, δ > 0 \\ 0, o t h e r w i s e \end{matrix}$ (4)

Where $d$ is a threshold distance and $δ$ is a distance decay parameter set at 2.

Results and conclusion

Underlying data

The sample data are taken from the latest version of the US Environmental Protection Agency (EPA) EJScreen Mapping tool. Data are cross-sectional and divided into two main categories: demographic and environmental indicators.

Demographic Indicators (US Census Bureau, 2023[143]):

˗ People of colour: the percentage of individuals in a block group who list their racial status as a race other than white alone and/or list their ethnicity as Hispanic or Latino. That is, all people other than non-Hispanic white-alone individuals.

˗ Low-income: the percentage of households whose income is less than or equal to twice the federal poverty level.

˗ Linguistic isolation: percentage of people living in linguistically isolated households. A household in which all members aged 14 years and over speak a non-English language and speak English less than "very well" (have difficulty with English) is linguistically isolated.

Environmental Indicators: particulate matter 2.5 (2018), ozone (2018), diesel particulate matter (2017), air toxics cancer risk (2017), air toxics respiratory hazard index (2017), traffic proximity and volume (2019), lead paint (2019), National Priorities List (NPL) superfund proximity (2021), Risk Management Plan (RMP) facility proximity (2021), hazardous waste proximity (2021), underground storage tanks and leaking (UST & LUST) (2021) and wastewater discharge (2019).

Statistical Outputs

In this case, the Moran’s I is statistically significant at 1% level for the following indicators:

For an index between [0,0.3]: superfund (NPL) proximity, RMP facility proximity and underground storage tanks and leaking
For an index between [0.3, 0.5]: people of colour, low-income, linguistic isolation, proximity to traffic and volume, diesel particulate matter and hazardous waste proximity
For an index between [0.5, 0.7]: air toxics cancer risk, air toxics respiratory hazard index, ozone and particulate matter 2.5.

This means that for each one of them, the null hypothesis of perfect spatial randomness is rejected. Thus, for all the previous mentioned variables, and to the extent of their respective index value, there is a cluster phenomenon. For wastewater discharge variable, the p-value is higher than 0.05, which means the null hypothesis of perfect spatial randomness is not rejected.

Concluding remarks

Given the statistical outputs, the United States has a global spatial autocorrelation for key demographic and environmental indicators that should be considered when conducting EJ assessments. People of colour, low-income and linguistically isolated populations tend to some extent to be neighbouring each other. At the same time, on average, there is a higher chance that a county with higher traffic and hazardous waste facilities density will be next to other counties with the same characteristics. This also applies in a lesser degree to NPL, RMP, UST & LUST densities. Moreover, due to the chemical and physical properties of air pollutants, it is not surprising they show a higher spatial autocorrelation between counties. This means that counties with higher exposure to these pollutants are closer in proximity to others with high exposure levels.

Notes

← 1. A key ingredient in fertilisers used in agricultural production.

← 2. Excluding emissions from LULUCF.

← 3. The US Congressional Budget Office’s original estimate was USD 369 billion. As the IRA investment amount is not capped, it can become larger with more businesses using IRA tax credits.

← 4. The United States has defined different pollution management areas (e.g. states covered) for each pollutant target. For SOx, NOx and NMVOC, the reduction target applies to all US states except Hawaii. For PM_2.5, the emission reduction target applies to Alaska, Connecticut, Delaware, District of Columbia, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

← 5. Based on OECD calculations using state emissions data.

← 6. Sensitive groups for ozone and PM_2.5 include people with heart or lung disease, older adults, children and teenagers, and people who are active outdoors.

← 7. Artificial surfaces defined by the EEA (2018): Continuous and discontinuous urban fabric (housing areas), industrial, commercial and transport units, road and rail networks, dump sites and extraction sites, but also green urban areas. Defined by the SEEA Central Framework (UN, 2014[147]) any urban or related feature, including urban parks, and industrial areas, waste dump deposit and extraction sites.

← 8. Suburbs lie just outside of the city, whereas exurbs are areas farther out, beyond the suburbs. Exurbs tend to be situated in more rural areas. They can be near farmland or even the beach.

← 9. The United States is not party to the United Nations Convention on Biological Diversity (CBD), although it helped to develop and endorsed the 2010 Aichi targets. US policy often tracks and reflects global treaties to which it is not a party (e.g. the Convention on Migratory Species and portions of the CBD itself such as the Cartagena Protocol on Biosafety).

← 10. Protected Area Management Effectiveness evaluations can be defined as: “the assessment of how well protected areas are being managed – primarily the extent to which management is protecting values and achieving goals and objectives" (Hockings et al., 2006[146]).

← 11. Areas managed for conservation and activities such as forestry, energy, grazing and motorized recreation (extraction permitted).

← 12. The US classification includes the Great Lakes in marine waters, which increases the share of marine waters that are protected to 26%.

← 13. An EPA chronic aquatic-life benchmark estimates of the concentrations below which pesticides are not expected to represent a risk to aquatic life. In all, 17 pesticides were detected at least once at the 74 river and stream sites sampled 12 to 24 times per year during 2013-17. Such exceedances indicate the potential for harmful effects to aquatic life such as fish, algae and invertebrates like aquatic insects.

← 14. Population using an improved sanitation facility that is not shared with other households and where excreta are safely disposed of in situ or treated off site.

← 15. National-level programs supporting investments in the water sector in the United States include the Clean Water and Drinking Water State Revolving Funds, the financing program established under WIFIA, the Community Development Block Grant Program administered by the US Department of Housing and Urban Development; and the US Department of Agriculture Water Environment Program, which generally provides financial assistance to rural communities with populations of no more than 10 000.

← 16. A community water system supplies water to the same population year-round. It serves at least 25 people at their primary residences or at least 15 residences that are primary residences.

← 17. The state cost share is waived for some of the appropriations under IIJA, such as lead service line replacement. In other cases, for the IIJA appropriations, the state cost share is 10%.

← 18. The NPL is intended primarily to guide the EPA in determining which sites warrant further investigation.

← 19. The investment tax credit reduces the federal income tax liability for a percentage of the cost of an eligible energy system that is installed during the tax year.

← 20. Planned phase down was to 26% for property beginning construction in 2020, 22% in 2021 and 10% in 2022 (10% for the investment tax credit for commercial and utility-scale solar installations, 0% for residential solar installations).

← 21. The production tax credit (PTC) is a per kilowatt-hour (kWh) tax credit for electricity generated by eligible technologies for the first ten years of a system’s operation. It reduces the federal income tax liability and is adjusted annually for inflation.

← 22. Investors and producers may choose between ITC and PTC.

← 23. PTC for the wind energy ratchets down by 20% in 2017, 40% in 2018 and 60% in 2019, until it expires entirely for projects beginning construction after 2019.

← 24. Requirements are that all iron and steel products that are part of the project at the time of completion are produced in the United States, and that manufactured products that are part of the project satisfy a domestic content threshold of 40% (or 20% in the case of offshore wind facilities).

← 25. Include areas in which a coal mine has closed after 1999 or a coal-fired power plant has closed after 2009, or areas that have 0.17% or greater direct employment or 25% or greater local tax revenues related to the extraction, processing, transport or storage of coal, oil or natural gas, and now face an unemployment rate at or above the national average unemployment rate for the previous year.

← 26. Qualified clean hydrogen is defined as hydrogen produced through a process that results in a life cycle greenhouse gas emissions rate not greater than 4 kg of CO₂e per kg of hydrogen. In addition, the facility’s construction must begin before 1 January 2033.

← 27. Eligible components include solar components, wind turbine and offshore wind components, inverters, many battery components, and the critical minerals needed to produce these components.

← 28. Scheduled increase of the domestic content threshold is from the original 55-65% for items delivered by 2024 and 75% by 2029.

← 29. Canada is not included in the scope of the analysis in Demmou and Franco (2020[87]).

← 30. The United States does not traditionally rely on public procurement of major infrastructure at the federal level. Such projects are instead carried out at the subnational level and subject to the legal frameworks and requirements of those subnational jurisdictions.

← 31. National Economic Council Director as co-chair, the Office of Management and Budget (OMB), the Domestic Policy Council and the Climate Policy Office in the White House.

← 32. This includes the departments of Transportation, Interior, Energy, Commerce, Agriculture and Labor, as well as the Environmental Protection Agency and Office of Personnel Management.

← 33. This includes the departments of Agriculture, Commerce, Interior, Energy, Transportation, Defence, Homeland Security, and Housing and Urban Development.

← 34. The Federal Energy Regulatory Commission can intervene and issue permits for transmission lines in certain National Interest Electric Transmission Corridors over the objections of state authorities. It can also use the power of eminent domain to take over the necessary lands for a transmission line except when those lands are owned by a state.

← 35. In additional to federal environmental review, several jurisdictions have established state or local environmental review requirements, such as California Environmental Policy Act (CEQA).

← 36. The SC-GHG is the monetary value of the net harm to society associated with adding a small amount of that GHG to the atmosphere in a given year, estimated by using the best available science and economics. The SC-GHG includes estimates of the social cost of carbon (SC-CO₂), social cost of methane (SC-CH4), and social cost of nitrous oxide (SCN₂O) to understand the social benefits of reducing emissions of each of these GHGs, or the social costs of increasing such emissions, in the policy-making process.

← 37. Report entitled Promising Practices for EJ Methodologies in NEPA Reviews.

← 38. RCRA Corrective Action facilities include current and former chemical manufacturing plants, oil refineries, lead smelters, wood preservers, steel mills, commercial landfills, federal facilities and a variety of other types of entities. Facilities are generally brought into the RCRA Corrective Action process when there is an identified release of hazardous waste or hazardous constituents, or when EPA is considering a treatment, storage and disposal facility (TSDF) RCRA permit application.

← 39. As of March 2023, the rate is USD 0.021 per dollar of sales, set by California Department of Pesticide Regulation.

← 40. For instance, a subnational policy for a country with four regions of territorial level 2 is weighted by 0.25.

← 41. In 1994, EO 12898 Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations focused attention on environmental justice across the entire federal government for the first time.

← 42. In 1994, EO 12898 Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations focused attention on environmental justice across the entire federal government for the first time.

← 43. In 2021, the EO 13985 Advancing Racial Equity and Support for Underserved Communities Through the Federal Government and EO 14008 Tackling the Climate Crisis at Home and Abroad were issued. The latter directs agencies to advance EJ “by developing programs, policies and activities to address the disproportionately high and adverse human health, environmental, climate-related and other cumulative impacts on disadvantaged communities, as well as the accompanying economic challenges of such impacts.”

← 44. The strategic goal 2 is “Take decisive action to advance environmental justice and civil rights” with objective 2.1 “Promote environmental justice and civil rights at the federal, Tribal, state and local levels”; objective 2.2. “Embed environmental justice and civil rights into EPA programs, policies and activities”; and objective 2.3 “Strengthen civil rights enforcement in communities with environmental justice concerns”.

← 45. EPA OLEM (2021) EJ Action Plan.

← 46. EPA (2016) Technical Guidance for Assessing EJ in Regulatory Analysis.

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