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On Wednesday, the administration introduced a new federal program to fund clean school buses, which could be a turning point for their adoption. The first wave of grants, administered by the Environmental Protection Agency, will buy about 2,500 buses across the country. Successfully electrifying the nation’s remaining half a million school buses will require carefully crafted incentives before the industry can get a boost.

Last November, a bipartisan infrastructure bill created $5 billion over the next five years to help schools buy clean school buses. The grants will cover the full cost of the new electric buses, which range from $300,000 to $400,000. (By comparison, a new diesel-powered school bus costs close to $200,000.) School districts can decide to buy electric buses from traditional manufacturers like Blue Bird or new electric-only companies like Lion Electric.

While the federal program and similar smaller-scale state programs have already fueled demand, Duncan McIntyre, CEO of electric school bus fleet operator Highland Electric Fleets, said he hopes per-bus incentives will decrease over time. He said it would extend the next $1 billion in grants and “force the industry to stand on its own two feet.”

“Within five years, our goal should be for the industry to get to a point where all new vehicles that come in are subsidy-free electric,” McIntyre added, referring to the infrastructure law’s timeline. “What we don’t want is a program where everyone gets used to free buses and after five years goes back to buying diesel.”

Given how small the market is right now, it’s a delicate dance. A total of 767 electric school buses were delivered or in service in the U.S., according to an analysis by the World Resources Institute in June, although that number was expected to increase until infrastructure law funds are released. As of June, school districts had committed a total of 12,720, or about 3% of the nation’s total fleet. A December 2021 deal between bus dealer Midwest Transit Equipment and commercial EV company SEA Electric is for 10,000 of those.

Although there is a greater demand; The EPA initially offered $500 million in grants in May, but increased the amount to $965 million due to an overwhelming number of applications.

States are also increasingly funding clean school bus transit. Sue Gander, director of WRI’s Electric School Bus Initiative, said states have budgeted about $2 billion for districts to clean up their fleets. In the short term, he said, the combined incentives should support strong demand from school districts and encourage manufacturers to ramp up their supply chains and capacity.

In fact, he said, there is room for additional federal incentives, particularly for infrastructure replenishment for school bus fleets. Doing so will not only keep buses on the road; can help strengthen the network. A bill introduced last month by Sen. Angus King would create a program to equip electric school buses with two-way vehicle-to-grid charging capabilities. This would allow the buses to serve as backup power for the grid and could even offset their initial costs for school districts (assuming local utilities are eligible).

However, in the long term, he echoed McIntyre’s concerns that the market should eventually expand on its own.

“As the market matures, it approaches that total value of ownership parity [with diesel buses]we’re going to need less and less incentives,” Gander said. WRI’s analysis found that even without incentives, parity is expected by the end of this decade due to falling battery prices.

In addition to incentives, stricter diesel bus regulations could further expand electric school bus adoption. The EPA is measuring new tailpipe emissions standards for medium- and heavy-duty trucks, including buses. California also has a rule restricting the sale of diesel-powered buses and trucks, and other states are following suit. Gander said it’s a “prime example” of the role clean bus technology can play in more widespread adoption. Getting it right could help reduce the more than 5 million tons of carbon pollution that school buses put into the atmosphere each year.

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

Removing diesel buses from the road is critical to reducing carbon emissions in transport. But going electric would also reduce air pollution, which disproportionately affects low-income communities and communities of color. Children in low-income communities have a higher risk of asthma on average, and both black and Hispanic children have a higher risk of developing asthma than white children, regardless of family income. Twice-daily exposure to diesel fuel, such as school bus rides, exacerbates asthma and other respiratory problems.

“We want to approach this transition fairly,” Gander said. “How are incentives prioritized for disadvantaged communities? They are the ones who have the most difficulty investing, but whose children are most dependent on buses, and who suffer the worst air quality and the worst climate impacts.”

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