Decarbonizing U.S. transportation: Progress and opportunities 

Nearly one third of U.S. greenhouse gas emissions come from the transportation sector, making it a key sector to decarbonize to meet U.S. climate goals. Fortunately, there are efforts underway to achieve those goals, including by the Biden administration, which released a national inter-agency strategy in January 2023 to cut all greenhouse gas emissions from the transportation sector by 2050.  

Congress has also taken action to decarbonize transportation. Between the CHIPS and Science Act, the Infrastructure Investment and Jobs Act (IIJA), and the catalytic tax credits and funding in the Inflation Reduction Act, there are more resources than ever before being invested in transportation infrastructure and decarbonization. These investments are already benefiting communities across the country by reducing harmful emissions and improving air quality, saving consumers money, giving them options in their transportation choices, and building U.S. manufacturing and supply chains. And while we have already seen great progress, the window for taking advantage of current federal investments is rapidly closing.  

How is the U.S. doing in decarbonizing its transportation sector? 

There is tremendous opportunity to invest in a modernized transportation system that yields better climate, health, and economic outcomes. Since the passage of IIJA, states and communities have leveraged federal investments to lay the foundation for a more equitable transportation future. This work will require significant investments to decarbonize on-road vehicles, aviation, maritime, rail, and more. Much of this work will also require rapid electrification, and the remainder will require low-carbon fuels and other technologies to fully decarbonize. While current progress is promising, we are not on track to meet national goals, and we must ensure that investments are directed to the highest impact opportunities. 

Federal activities  

We have seen strong goal-setting and commitments to advance decarbonization through new federal policies and investments over the past few years, including: 

• The U.S. National Blueprint for Transportation Decarbonization which sets the first interagency federal strategy for ensuring the future of transportation is convenient, efficient and clean. The U.S. Department of Transportation released its report to Congress documenting its actions in support of the blueprint goals for a clean, efficient, and convenient transportation sector, and specific action plans to implement this blueprint are expected by fall 2024. 

• A suite of grants, loans, and tax credits to advance sustainable aviation fuels (SAF) and alternative fuel production, and the buildout of electric and alternative fuel corridors and infrastructure, including decarbonized ports.  

• Aviation: The Federal Aviation Administration (FAA) released an Aviation Climate Action Plan in 2021, which describes a whole-of-government approach to decarbonization. Congress also recently passed the Hydrogen Aviation Strategy Act through the FAA reauthorization, requiring the agency to complete its strategy on the safe use of hydrogen for civil aviation. 

• On-road: The Federal Highway Administration continues to make announcements building out new clean infrastructure for EV and hydrogen alternative fuel corridors, utilizing programs including the National Electric Vehicle Infrastructure (NEVI) Formula Program and Charging and Fueling Infrastructure (CFI) Discretionary Grant Program. The Joint Office of Energy and Transportation released a new national strategy this spring to accelerate zero emission freight infrastructure deployment. deployment.  

• Maritime: The U.S. is collaborating with international partners on a zero-emission shipping mission, aiming to demonstrate commercially viable zero-emission ships by 2030, and the U.S. is planning to release a maritime decarbonization action plan later this year. 

These strategies and funding have already helped manifest project announcements across the country. Additionally, federal standards for GHGs and criteria pollutants from light-, medium-, and heavy-duty vehicles are simultaneously driving emissions reductions.   

The chart below depicts some of the key federal grant programs aimed at transportation decarbonization, their total funding amounts (“Funds Allocated”), and funds remaining to be spent (“Funds Remaining”). In addition to these programs, the Loan Program Office at DOE administers the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, with billions in loans allocated to date. As shown in the chart, programs are at various stages of implementation. For example, the application deadline for the Clean Ports Program was at the end of May 2024 and the Environmental Protection Agency is in the process of reviewing applications. Other programs, like the National Electric Vehicle Infrastructure (NEVI) Formula Grant Program and the Low or No Emissions Vehicle (Bus) Program have been making steady progress. 

Figure 1. Federal funding for transportation decarbonization 

In addition to incentivizing the decarbonization of the transportation sector, the federal government is investing in clean energy manufacturing supply chains and the creation of good-paying jobs. The U.S. Department of Treasury (Treasury) has been soliciting comments and developing regulations and guidance on eligibility requirements for federal clean energy tax incentives in the transportation sector (e.g., 40B, 45V, 45Z) to provide accessibility and clarity to eligible taxpayers. In addition to these technology-specific incentives, Treasury released final rules in June 2024 on additional incentives taxpayers can claim if they pay their employees prevailing wages and hire registered apprentices. Climate Power analysis cited by Treasury found that these investments are benefiting union workers and creating new jobs in transportation subsectors, including 117,975 new jobs in batteries, 54,385 jobs in electric vehicles, and 8,315 jobs in hydrogen as of February 2024. 

Federally funded projects in states and communities 

States and communities need flexibility to design transportation solutions that will meet the needs of their unique communities, economies, and decarbonization goals. Federal investments provide flexibility through formula grants and competitive funding. From investments in electrification, charging stations, and corridors, to supporting workforce development and new jobs, states and communities are already benefiting from federal investments to decarbonize transportation sectors across the country. These investments follow new state policies that are also driving local investments.  

• West Coast/Western U.S.: The California-Oregon-Washington region is emerging as a leader in the deployment of electric vehicle (EV) charging stations and corridors for hydrogen and alternative fuels, including expansion of a clean West Coast freight network linking the ARCHES and PNW Hydrogen Hubs. These investments are located near other projects that will support this infrastructure, including hydrogen production (ARCHES and PNWH2) and new EV battery manufacturing facilities. Efforts to decarbonize marine shipping, such as those at the port of Los Angeles, are further transitioning the West Coast to a zero emissions future. 

• Midwest/Plains: Federal investments have significantly expanded EV and battery manufacturing supply chains in the Midwest, in turn securing the manufacturing workforce in states like Michigan. Because the Midwest is a critical region for linking transportation nodes across the country, regional planning efforts are emphasizing strong freight network through the region, including the I-80 corridor across Illinois, Indiana, and Ohio and stretching to Pennsylvania. Coupled with the Midwest hydrogen hub’s (MachH2) plans to support decarbonization of SAF, the Midwest is poised to support emissions reductions across multiple transportation sectors.  

• Gulf Coast: The Gulf Coast, as a key player in energy production and shipping, has an outsized opportunity to contribute to transportation decarbonization. Houston is a strong candidate to support low-emissions shipping and aviation as well as hydrogen trucking, given its location at the end of the I-10 corridor, proximity to shipping in the Gulf, and support of the selected HyVelocity hydrogen hub currently in negotiations with DOE. In addition, the Federal Highway Administration awarded Texas with a $70 million grant to build up to five hydrogen fueling stations for medium- and heavy-duty freight trucks in Dallas-Fort Worth, Houston, Austin, and San Antonio to help create a hydrogen corridor from southern California to Texas. 

• East Coast: Federal incentives have spurred substantial buildout of the EV and battery manufacturing industry in the Southeast, supporting economic, workforce, and supply chain development. Through the new National Zero-Emission Freight Corridor Strategy and plans for an I-95 freight corridor from Georgia to New Jersey, the Northeast and Mid-Atlantic regions are poised to play a significant role in freight decarbonization and have already seen investments in supportive charging infrastructure.  

Under the Fixing America’s Surface Transportation Act, and amended by IIJA, the USDOT is required to designate national alternative fueling corridors. These corridor designations identify near- and long-term needs and support installation of EV charging, hydrogen, propane, and natural gas fueling infrastructure at strategic locations along major national highways. The map below depicts the progress made on designated alternative fueling corridors for hydrogen. 

Figure 2. FHWA designated hydrogen alternative fuel corridors

(Source: DOT/FHWA)

2025 and beyond: What comes next? 

The transportation sector needs to rapidly bolster its workforce, supply chains, and critical infrastructure to meet decarbonization goals. The connective nature of this sector necessitates coordinated planning across regions in collaboration with the public and private sectors. Technologies and fuels that will have both the highest decarbonization impact and the lowest environmental impact must be prioritized for funding, investment, and legislation. 

Federal actions 

A carefully designed federal clean fuel standard applied to the entire transportation sector would promote the development of low-carbon energy carriers—electricity, liquid fuels, and gaseous fuels –that we need to decarbonize the entire transportation sector. Other useful policies could include clean fuel mandates or production subsidies; policies designed to boost supply of climate-friendly feedstocks for clean fuels; and policies that help accelerate commercialization of nascent transportation decarbonization technologies by investing in research and development. Any of these federal policies would spur related policies and investments at state and local levels.  

In addition, federal agencies implementing transportation policy need to improve coordination, transparency, and accessibility to federal investments so that stakeholders can reap the maximum benefit. This includes modernized procurement and grant processes that address critical implementation challenges and siting needs; stronger community engagement that meaningfully accounts for local challenges during planning and deployment; robust action plans that enable greater coordination across stakeholders; and support of and participation in regional convenings to unify federal, state, and local government and community members. 

State and local actions 

State and local governments and community leaders can play an important role in centering equity in transportation projects that lower emissions while providing local environmental and health benefits. State leadership is particularly critical in supporting workforce growth and development and coordinating across local communities to create new models for addressing community needs.  

States are bolstering these efforts with their own planning and roadmaps for electrification and decarbonization, policies and regulations supporting advanced clean trucks, and collaboration with other states to plan and deploy investments such as through the Multi-State Medium- and Heavy- Duty Zero-Emission Vehicle Action Plan. Additional federal funding is spreading across the country to many states from programs like EPA’s Climate Pollution Reduction Grants (CPRG) program and the recently announced $1.7 billion in conversion grants supporting EV manufacturing at closed or at-risk domestic automotive facilities. 

Project developers must promote greater transparency, listen to communities when designing projects, and consider innovative ways of communicating with stakeholders. This may include other opportunities for engaging beyond required public involvement processes, like sharing real-time emissions data with local communities. Developers should also align their project planning with ongoing initiatives at the federal and state levels, as well as other nearby projects. This will maximize the opportunities to take advantage of the many active transportation decarbonization programs, build out mutually beneficial infrastructure along important corridors, expand relevant supply chains, and reduce emissions. 

Although there is a long way to go to meet U.S. emissions reductions targets, there is a path forward with many available options and steps already in progress. To learn more about opportunities to decarbonize transportation sectors, and where investments are landing in states, visit CATF’s U.S. Implementation Resource Hub.