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The Transportation and Infrastructure Committee released a budget proposal that attempts to claw back nearly $9 billion in grants.

The House Transportation and Infrastructure Committee released the first draft of its portion of Trump’s big budget bill on Tuesday, and it includes the first official swipe at the Inflation Reduction Act of the months-long process ahead.
Remember, the name of the game for Republicans is to find ways to pay for Trump’s long list of tax cuts. The budget framework Congress passed two weeks ago assigned eleven House committees to craft proposals that would each raise or reduce revenue by a specific amount to accomplish Trump’s agenda.
The Transportation Committee proposal contains one new revenue-generating program, placing a $200 annual fee on electric vehicles and $100 fee on hybrid vehicles, alongside a $20 fee on conventional cars. The money would go into the Highway Trust Fund, which is currently financed mostly by the gas tax — and which, of course, EV owners don’t pay.
But the draft also includes a list of “rescissions” of unobligated funds from seven IRA grant programs. While the Biden administration awarded the vast majority of the money allocated to the programs listed, in many cases the recipients never reached a final project agreement with the government. That means a lot of the funding can, in fact, be clawed back.
Take the first item on the list, the Alternative Fuel and Low Emissions Aviation Technology Program. The IRA allocated $291 million for grants to support producing sustainable aviation fuel and developing low-emission aviation technologies, and the Biden administration awarded the full amount to 36 recipients in August of last year. It’s not clear how many reached final project agreements with the Federal Aviation Administration, however. A quick scan of the government’s database of awards is missing a $25.7 million grant to oil giant BP to produce sustainable aviation fuel at its refinery in Washington State, but it does include the full obligation of $240,000 to the City of Atlanta to conduct a study on deploying SAF at Hartsfield-Jackson Airport.
Grants aren’t always logged in USASpending.gov in a timely manner, so it’s possible BP does have an agreement in place. Among the other awardees that I could not find listed in the database were World Energy, which was awarded nearly $22 million to install infrastructure enabling Los Angeles International Airport to get deliveries of SAF, and Buckeye Terminals, which got $24 million to upgrade four SAF storage facilities in the midwest. Republicans tend to support biofuels, so it’s somewhat surprising they went after this program — especially since $291 million is chump change on the scale of a multi-trillion-dollar budget.
We know a bit more about the second item on the list, the Neighborhood Access and Equity Grant Program. This one allocated just over $3.2 billion to the Federal Highway Administration to award state and local governments with grants to improve walkability and transportation access, to mitigate transportation-related pollution in disadvantaged communities, and to improve transportation equity. The advocacy group Transportation for America found that of the nearly 100 awards the Biden administration announced from this program in 2023, totaling more than $3.1 billion, only 25 projects may have reached a final project agreement, per USASpending.gov. The group says this means it’s possible that nearly the entire $3 billion is up for grabs.
Other funding targeted includes more than $3.3 billion across three allocations to the General Services Administration to improve the efficiency of government buildings, prioritize lower-carbon building materials, and invest in other “emerging and sustainable” building solutions. The Government Accountability Office published a well-timed report about these three programs today, noting that while 99% of the money has been awarded, only half has been obligated, leaving more than $1.7 billion for Congress to take back.
Lastly, the proposal lists $2 billion in grants for states and local governments to use low-carbon materials in road projects. The Department of Transportation awarded $1.8 billion of the money to 39 states last year, although again, it's unclear how many of these awards have been obligated.
Having said all that, let’s assume for a moment that the full amount allocated to each of the programs was available to Congress to claw back. That would come to just under $9 billion of the $10 billion of deficit reductions the Transportation and Infrastructure Committee is required to find under the special rules governing the budget bill.
But the draft bill also contains huge amounts of new spending, including allocating more than $20 billion to the United States Coast Guard for border security and $15 billion for upgrades to Air Traffic Control systems. The nonprofit Union of Concerned Scientists estimates that the new fees on EVs and other vehicles could raise between $7 and $33 billion over the lifetime of the bill, which is not enough to pay for all of that. (They also note that it would barely make up for the more than $200 billion deficit in the Highway Trust Fund.) So if Republicans want to keep those provisions, they may have to find more cuts. They’ll likely have to find more anyway, depending on how much of the IRA money has been obligated.
I’ll leave you with a reminder that I’ll be repeating ad nauseam over the next few weeks or months as Congress hammers out its budget bill: This is just a first pass, and this is all subject to change. The Transportation and Infrastructure Committee will be holding a markup of the proposal on Wednesday, where it will debate each line and make changes before voting on whether to advance it.
Most of the Inflation Reduction Act programs come under the aegis of the Energy and Commerce and Ways and Means committees, neither of which have published any bill text yet. But we’ll be here for you when they do.
Editor’s note: This story has been updated to remove a reference to Gevo, a sustainable aviation fuel producer, which told Heatmap that it declined its awarded grant due to changed business priorities. It has also been update to include the Union of Concerned Scientists’ revenue estimate.
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Current conditions: Wildfire smoke tinted the skies orange across the Northeastern United States, rendering the air on New York’s Long Island thick and hazy all afternoon • London is a balmy 83 degrees Fahrenheit today, but new research shows that the number of days topping 86 degrees has quadrupled since the 1980s • Chile declared a state of emergency across 10 regions ahead of a series of major storms.
The resumption of fighting between the United States and Iran over the Strait of Hormuz could hammer energy markets harder than the previous phase of the conflict, as the crude stockpiles governments tapped at a record volumes to avert the worst economic impact of the war are now depleted. That’s the warning oil traders issued to the Financial Times on Wednesday. “We’ve burned through all of the buffers we had. Everything,” one trader said. “All of that’s now gone.” The gloomy assessment came as The Wall Street Journal reported that President Donald Trump has weighed expanding the U.S. military operation in Iran.
The U.S. Energy Information Administration, meanwhile, released its short-term energy outlook for July, in which the agency estimated that global crude oil inventories declined by 5.1 million barrels per day throughout the second quarter of this year, marking a decline above the seasonal average for that period over the past five years. Even before the conflict picked up again, my colleague Matthew Zeitlin wrote that it would be a long time before the Strait of Hormuz returned to normal operations. Don’t hold your breath.

In the steamy final weeks of August 2019, I found myself on Puerto Rico’s southeast shores. Set against the backdrop of the island’s central mountain range with streams that quench its underground aquifers, this sun-soaked coastal plain was coveted by Spanish and American sugar barons for centuries before transforming into a hub for U.S. agribusiness in recent decades. By the time I arrived, the aquifer was facing threats on multiple fronts. The Puerto Rico Aqueduct and Sewer Authority — known as PRASA or AAA in its Spanish acronym — was losing, by some estimates, more than half the water in its system to leakage, forcing the state-owned utility to draw more from aquifers. With the island’s electrical system still in tatters from Hurricane Maria and its debt at crushing levels, PRASA had little capacity to make the upgrades needed to prevent further decline. Meanwhile, local environmentalists accused regulators of providing little to no oversight of how much water industrial facilities drew from their wells. The story I ultimately reported suggested that water would follow electricity as the next major infrastructure crisis. It was just being felt first, at that time, in places like the town of Salinas, where people like Manases Vega — then a 65-year-old with a chronic respiratory illness — lost access to water every two weeks due to rationing.
Now the crisis has indeed spread. Last month, I told you when Governor Jenniffer González Colón called in the National Guard to help after a major water pipeline cracked. More than a month later, El Nuevo Día reported that the ongoing shortages are forcing residents to pay up to $700 per week for water. Businesses are paying up to $3,500 per week to buy enough bottles to cook, clean, and flush toilets. Hotels are spending up to $100,000, the island’s newspaper of record also reported last week. “We were without water for more than 50 days here on Calle Loíza,” Jonathan Collazo, a restaurant owner, said, referring to the popular street with bars and restaurants in Santurce, roughly the equivalent of San Juan’s Williamsburg.
For 12 years, Péter Szijjártó served as Hungary’s top diplomat in the government of former Prime Minister Viktor Orbán. On Wednesday, he announced his resignation from parliament to take a job at China’s top electric automaker. “I have received an extremely honorable offer to fill an international position from one of the world’s leading companies,” he wrote in a post on Facebook. “BYD is one of the greatest automotive success stories of the past twenty years and is also the world’s leading manufacturer of new energy vehicles.” His critics may quibble with the word “honorable.” Szijjártó established his relationship with the company while serving as foreign minister, and his government had planned to provide subsidies to BYD to open its new hub in Budapest. Just a few months ago, CNBC reported that the European Union was investigating labor violations at BYD’s factory in Szeged. Last month, the Hungarian investigative site 444 reported that a worker died at the plant.
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The Department of Energy has granted the startup SuperCritical Materials an exclusive license to commercialize patented technology to extract uranium from seawater. The deal requires the Austin-based company to manufacture and deploy the technology in the U.S. before exporting to allied nations, according to The Northern Miner. The concept of drawing uranium out of seawater has existed for years, an idea that took root before the vast new reserves of the metal were discovered on land. But seawater extraction remained on the agenda in countries without access to mines. When I visited the Philippines in 2024 to report on the country’s nuclear ambitions, I met scientists at the state atomic energy agency who were researching methods to secure a uranium supply from the water. But Ted Garrish, the assistant U.S. secretary of nuclear energy, said “this technology represents a potentially significant contribution to America’s long-term fuel security and industrial competitiveness.”
On Tuesday, New York Governor Kathy Hochul signed an executive order enacting the nation’s first statewide moratorium on data centers. On Wednesday, Michigan Governor Gretchen Whitmer, a fellow Democrat, staked out a different position, unveiling what E&E News called a “package of 10 commitments to ensure companies pay the full cost of construction, operation, power, and water” from new data centers for artificial intelligence. “On my watch, Michiganders have been protected from any rate increases due to data center development and we adopted some of the strongest protections for people and communities, but we need to do more,” Whitmer said in a statement.
“It’s been exciting to see different states — and, to be blunt, to see Democratic-governed states, particularly those in the Northeast and Mid-Atlantic — try to take on the data center boom. It’s good to see them test out ideas, solve problems through legislation, and harness this moment for the public good without strangling the buildout entirely,” my colleague Robinson Meyer wrote yesterday. “For too long, blue states have leaned into a particular economic model, one in which states want to attract varying forms of development but in fact succeed only in creating new suburbs, office buildings, and warehouses.”
It is, according to Bloomberg, “the plastic America loves to hate.” But a new industry group wants to save polystyrene by convincing lawmakers to stop targeting styrofoam. Formed by 17 companies that produce the material, the Polystyrene Recycling Alliance aims to forestall bans by making sure styrofoam is treated as recyclable under state packaging laws. “There’s the narrative that polystyrene is not part of the circular future,” Justin Riney, chair of the alliance and an executive at manufacturer Ineos Styrolutions, told the newswire. “We are adamant that we have the data, and we know that our products are part of the future.”
Proposed reforms to Europe’s Emissions Trading System could see the EU itself become a carbon credit customer.
The European Union is on the verge of making major changes to its carbon market, including integrating carbon removals into the scheme for the first time.
The bloc’s highest governing body, the European Commission, is expected to publish a proposal on Friday to reform the EU Emissions Trading System, or ETS, to align it with the EU’s 2040 emissions target. Under the current rules, companies cannot use carbon credits of any kind to comply with the regulations. But as 2040 grows closer, the EU plans to rely on carbon removal to offset some of the residual emissions from industries that are the most difficult to decarbonize.
Friday’s proposal will cover which types of carbon removal will be accepted, how many carbon removal credits can enter the market and when, and who will be allowed to buy them. One leading approach would have the EU government buy carbon removal directly, which would give the industry unprecedented market certainty.
“The ETS could be the single biggest driver of demand for carbon removal for the next decade,” Felix Grey, a policy manager for the carbon registry Isometric, told me.
The ETS enforces a cap on emissions that declines over time. Large emitters located in the EU must buy “allowances” for each ton of carbon they release, while the pool of available allowances shrinks apace with the emissions cap. Last year, the EU set a new target to reduce emissions 90% below 1990 levels by 2040, building off its earlier target of a 55% reduction by 2030. The upcoming proposal will address how the market should operate between 2030 and 2040 to achieve that goal.
There are many contentious questions surrounding this next phase, including how quickly the cap should decline over the decade. Another question is how many free allowances the EU should give to energy-intensive facilities such as steelmakers and fertilizer producers, which it does to prevent them from leaving Europe due to higher operating costs. Now that the EU has launched its carbon border adjustment mechanism, which taxes higher-carbon imports of these goods, free allowances may not be as necessary.
The integration of carbon removal is also controversial. At best, it could be an opportunity to improve and scale up nascent technologies that take carbon out of the atmosphere. At worst, it could enable polluters to avoid cutting their own emissions by purchasing carbon credits that don’t represent real climate benefits. Then there’s the possibility that removals will be so expensive that their integration into the ETS will have no effect at all — that is, it will be less expensive for companies to pursue emissions reductions than to buy their way out. The outcome will depend on the rules the EU Commission proposes and what its member states ultimately agree to.
Today, most carbon removal efforts are supported by research grants and voluntary carbon credit purchases from companies like Microsoft. A common mantra in the industry is that it will never reach a meaningful scale without government backing. Carbon removal startups aren’t selling a product with inherent value, they are selling a waste management solution. Unless governments require polluters to clean up their carbon waste, or else handle the job themselves as a public good, carbon removal will never take off.
Some governments have already dabbled in state-sponsored removals. Under the Biden administration, the U.S. launched a carbon removal purchase pilot prize, dedicating $35 million to buy carbon removal from a handful of promising companies. It never got past the initial award phase, however, and the Trump administration has not continued the program. A number of cities and counties across the U.S. have set up their own, much smaller purchasing programs in an effort to support the industry. Making carbon removal part of a regulatory program like the EU’s ETS could open the industry to a much bigger market.
As of today, there are a few knowns and a few unknowns about what the Commission plans to propose. For example, it’s relatively clear what methods of carbon removal the European Commission will allow into the market. Earlier this year, the EU finalized regulations for certifying three kinds of carbon removal under its official Carbon Removal and Carbon Farming scheme — direct air capture, biomass with carbon capture, and biochar projects — laying out criteria for quality as well as monitoring and reporting rules. For now, only these three project types can be considered.
Here’s the problem: Direct air capture and biomass with carbon capture are two of the most expensive project types. The average carbon removal credit from these methods costs hundreds of dollars. The average price of an allowance in the ETS, by contrast, has hovered between $70 and $90 over the past few years. Depending on how the Commission chooses to incorporate the credits into the market, it’s possible that no one will buy them.
The European Commission has said it is considering three options. The leading proposal is for the EU to create a central purchasing authority that buys removals using revenues from the ETS. For each removal credit the government acquires, it would issue an additional allowance into the market on top of the established cap. This would enable regulated facilities to emit a bit more than they could otherwise — a tradeoff that Grey argued would help them stay competitive. At the same time, it would also ensure that there’s demand for carbon removal regardless of the price.
The second option is to leave it to the market, giving emitters the option to purchase carbon removal credits as an alternative to purchasing allowances. In this version, similar to the first, the carbon removal credits would enter the market as an addition to the established amount of allowances. Whether or not anyone actually buys carbon removal will depend on how tight the allowance market is.
In the third option, emitters would be able to use carbon removal credits in lieu of allowances, but those credits would operate “below the cap,” so to speak. For every credit counted toward the ETS, regulators would reduce the number of allowances available to purchase by the same amount. It is hard to see why any company would purchase carbon removal in this version unless and until the price of a credit drops below the price of an allowance, however.
Carbon Market Watch, a nonprofit watchdog group, isn’t excited about any of these options. In a recent white paper on ETS reforms, it argued that Europe should support carbon removal separate from the ETS. “Direct integration of CDR in the ETS is either a dead end, or the start of a slippery slope,” the group warned. Carbon Market Watch also has concerns about the integrity of the EU’s carbon removal certification scheme. The group has formally challenged the methodologies for certifying biochar and biomass with carbon capture projects, arguing that they do not account for all the emissions associated with these processes, lack sustainable biomass sourcing safeguards, and in the case of biochar, are missing monitoring requirements. If ETS credits are built on faulty science, the EU could end up spending billions of dollars to little climate benefit.
The other big question about the integration is the amount of carbon removal the EU will allow into the market. Even if the bloc decides to create a central purchasing authority, its potential to help the industry scale will depend on how much it commits to buying. Grey, of Isometric, argued that staying on course for net zero by 2050 would require the EU to remove about 100 million metric tons of carbon per year by 2040.
“A strong proposal on Friday will confirm carbon removal’s integration from 2031, commit to buying removal at the scale required to meet net zero, and treat every credible method equally rather than picking winners,” he said.
New York, New Jersey, and Pennsylvania advance a flurry of new ideas to manage the boom.
We know a little bit more about New York’s AI data center moratorium than we did yesterday. Here’s what stands out to me:
Governor Kathy Hochul says this won’t become a ban. “I’m not expecting the need for a ban. I want [the AI companies] to work with us,” she told Bloomberg’s “Odd Lots” podcast. “I understand how important AI is.”
The moratorium isn’t enough for some left-wing groups. As I wrote on Tuesday, Hochul’s order allowed her to avoid signing a more stringent moratorium that included wage requirements and renewable energy mandates for a much wider scope of projects. Kristen Gonzalez, a democratic socialist and a cosponsor of that bill, hailed Hochul anyway for “protecting everyday New Yorkers with a first in the nation moratorium on new large data centers.”
Some New York City progressive groups, while endorsing that more restrictive bill, suggested that she should have gone much further. The New York City chapter of the Sunrise Movement and other left-wing organizations, for instance, posted an Instagram carousel that said: “The dream isn’t better data centers. The dream is no data centers at all.”
New York is also exploring a grid acceleration fund. The governor’s order hints that a few policies should be in place by the time the moratorium ends. These include a new rule that data centers either bring their own power or “pay their fair share” for electricity, and a new state program to help local governments negotiate for community benefits with developers.
But it also opens the door for requiring projects to pay into a grid modernization fund. Such a fund could finance upgrades, set up new virtual power plants, or pay for new sources of zero-carbon energy, the order says. That idea — which resembles proposals from the Searchlight Institute and Groundwork Collaborative — suggests that the state is exploring ways to harness the AI boom for the public. “We want to make sure [data center developers] are investing in the grid,” Hochul said on Tuesday, “but they’re not being asked.”
Which brings me to my larger point. We’re seeing an efflorescence of interesting policymaking on data centers from Democratic governors and state legislators. New York has now enacted this moratorium, of course. Pennsylvania, a true national epicenter of data center construction, has passed new disclosure requirements, and Governor Josh Shapiro has pushed for serious reforms in the country’s largest electricity market.
In New Jersey — where surging power prices were central to last year’s gubernatorial election — the data center buildout has already produced a flurry of new laws. In its most recent session, the state legislature pared back tax incentives for data centers, required utilities to offer a rate for large electricity users, and required data center operators to publish water and energy data. It also set up a novel program that will let data centers pay to reduce electricity demand elsewhere on the grid, such as by setting up virtual power plants (or paying those who participate in them).
It’s been exciting to see different states — and, to be blunt, to see Democratic-governed states, particularly those in the Northeast and Mid-Atlantic — try to take on the data center boom. It’s good to see them test out ideas, solve problems through legislation, and harness this moment for the public good without strangling the buildout entirely. For too long, blue states have leaned into a particular economic model, one in which states want to attract varying forms of development but in fact succeed only in creating new suburbs, office buildings, and warehouses.
Soon after Democrats passed the Inflation Reduction Act, observers noticed that the law’s fruits — and notably its manufacturing investments — were sprouting in red or purple states, particularly in the Southeast and Sun Belt. The so-called Battery Belt bloomed in the Mid-South, for instance, not the Rust Belt. As I discussed with the political scientist Alexander Gazmararian on Heatmap’s podcast Shift Key, that was often due (counterintuitively, I think, for liberals) to a failure of governance: It is GOP-governed states that have the local expertise, institutional capacity, and political muscle memory to attract big new economic development projects.
If Democrats want to see their states do big things — build new housing and transit, decarbonize their power grids, or give birth to new industries — then they will need to develop the same kind of capability. That’s why I’ve so relished seeing blue states reckon with the data center boom. It should be encouraging that New Jersey policymakers, for instance, have to figure out how to manage a new and fast-growing industry on the technological frontier. Even questions that may seem troublesome right now — around land use, for instance, or how to relieve a congested power grid — will likely lead to policies that improve the state.
This kind of policymaking helps the Democratic Party, too. After all, the party’s future national leaders — its members of Congress, cabinet secretaries, and even presidents — are currently serving at the state and local level. The data center boom’s lessons — for good and ill — will resound among the party’s leadership for a long time.