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Wednesday, administration rolled out a new federal program to fund clean school buses in what could be an inflection point for its adoption. The first wave of grants, issued by the Environmental Protection Agency, will buy about 2,500 buses nationwide. The result of electrifying the remaining half a million school buses of our country will require carefully designed incentives that give the industry a boost until it can stand on its own.

Last November’s bipartisan infrastructure law created a $5 billion pot of money to help schools buy clean school buses over the next five years. The grant will cover the full cost of the new electric bus, which is between $300,000 and $400,000. (For comparison, a new diesel school bus is around $200,000.) School districts can decide to buy electric buses from traditional makers like Blue Bird or new electric-only companies like Lion Electric.

While federal programs and similar small-scale state programs have fueled demand, Duncan McIntyre, CEO of electric school bus fleet operator Highland Electric Fleets, said he expects per-bus incentives to decrease over time. He said it would extend the grant by another $1 billion and “force the industry to stand on its own two feet.”

“In five years, our goal is for the industry to reach a point where all new vehicles purchased are electric without subsidies,” added McIntyre, referring to the timeline of our infrastructure law. “What we don’t want is a program where everyone gets used to free buses, and at the end of five years go back and buy diesel again.”

It’s a delicate dance, though, showing how small the market is today. According to a World Resources Institute analysis in June, the US has only 767 electric school buses delivered or in operation, although this number is expected to swell before the infrastructure law fund is disbursed. As of June, school districts have committed to a total of 12,720, or about 3% of the state’s total fleet. A December 2021 contract between bus dealer Midwest Transit Equipment and commercial EV company SEA Electric covers 10,000 of them.

Greater demand is clearly there, though; The EPA initially offered $500 million in grants in May, but increased the amount to $965 million due to the overwhelming number of applications.

States are increasingly funding clean school bus transitions as well. Sue Gander, director of WRI’s Electric School Bus Initiative, said states have budgeted about $2 billion to help districts clean up their fleets. He said that in the short term, the combined incentives should support school districts’ large demand and encourage manufacturers to equip their supply chains and facilities to meet it.

In fact, he said there is room for further federal incentives, particularly for infrastructure charging specifically for school bus fleets. Doing so not only keeps the bus on the road; it can help fortify the grid. A The bill was introduced last month by Sen. Angus King will create a program to equip electric school buses with bidirectional vehicle-to-grid charging capabilities. That will allow the bus to serve as backup power for the grid, and even potentially offset their upfront costs for school districts (assuming local utilities are amenable, that is).

However, in the long run, he echoes McIntyre’s concerns that the market must eventually scale on its own.

“As the market matures, as we approach this total cost of ownership parity [with diesel buses], we will need fewer incentives,” Gander said. WRI’s analysis found that parity is expected at roughly the end of this decade, even without factoring incentives, due to the drop in battery prices.

Beyond incentives, stricter diesel bus regulations could spread the adoption of electric school buses. EPA is weighing new tailpipe emission standards for medium- and heavy-duty vehicles, which will include buses. California is also implementing rules that will limit the sale of diesel buses and trucks, and other states are following suit. Gander said it’s a “key example” of the role regulations can play in promoting more widespread adoption of clean bus technology. Fixing can help cut more than 5 million tons carbon pollution that pumps school buses into the atmosphere every year.

Another important element is structuring incentives so that buses go to communities that need them the most. The White House said that school districts with low-income, rural, or tribal students represented 99% of the grant winners in this latest round, though it was unclear how the funding would be arranged in the future. At this point, the program makes good in our administration Justice40 initiative to ensure at least 40% of the benefits of the federal climate, environment, and energy investments accrue in marginalized communities that have historically borne the brunt of pollution.

Taking diesel buses off the road is critical to reducing transportation carbon emissions. But it will be electric too reduce air pollution which disproportionately affects low-income communities and communities of color. Children in low-income communities tend to have higher than the average rate of asthma, and both Black and Hispanic children are at higher risk of developing it than white children, regardless of their family’s income level. Exposure to diesel exhaust – such as riding the school bus twice a day – exacerbates asthma and other respiratory problems.

“We want to approach this transition in a fair way,” Gander said. “How should the incentives be prioritized for disadvantaged communities? They are the people who will have the hardest time trying to invest, but they are the ones whose children are more dependent on buses and also exposed to the worst air quality and the worst climate impacts.

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