(a) Definitions.—In this section:

(1) Metropolitan planning organization; urbanized area.—The terms "metropolitan planning organization" and "urbanized area" have the meaning given those terms in section 134(b).

(2) Transportation emissions.—The term "transportation emissions" means carbon dioxide emissions from on-road highway sources of those emissions within a State.

(3) Transportation management area.—The term "transportation management area" means a transportation management area identified or designated by the Secretary under section 134(k)(1).

(b) Establishment.—The Secretary shall establish a carbon reduction program to reduce transportation emissions.

(1) In general.—Subject to paragraph (2), funds apportioned to a State under section 104(b)(7) may be obligated for projects to support the reduction of transportation emissions, including—

(A) a project described in section 149(b)(4) to establish or operate a traffic monitoring, management, and control facility or program, including advanced truck stop electrification systems;

(B) a public transportation project that is eligible for assistance under section 142;

(C) a project described in section 101(a)(29) (as in effect on the day before the date of enactment of the FAST Act (Public Law 114–94; 129 Stat. 1312)), including the construction, planning, and design of on-road and off-road trail facilities for pedestrians, bicyclists, and other nonmotorized forms of transportation;

(D) a project described in section 503(c)(4)(E) for advanced transportation and congestion management technologies;

(E) a project for the deployment of infrastructure-based intelligent transportation systems capital improvements and the installation of vehicle-to-infrastructure communications equipment, including retrofitting dedicated short-range communications (DSRC) technology deployed as part of an existing pilot program to cellular vehicle-to-everything (C–V2X) technology;

(F) a project to replace street lighting and traffic control devices with energy-efficient alternatives;

(G) the development of a carbon reduction strategy in accordance with subsection (d);

(H) a project or strategy that is designed to support congestion pricing, shifting transportation demand to nonpeak hours or other transportation modes, increasing vehicle occupancy rates, or otherwise reducing demand for roads, including electronic toll collection, and travel demand management strategies and programs;

(I) efforts to reduce the environmental and community impacts of freight movement;

(J) a project to support deployment of alternative fuel vehicles, including—

(i) the acquisition, installation, or operation of publicly accessible electric vehicle charging infrastructure or hydrogen, natural gas, or propane vehicle fueling infrastructure; and

(ii) the purchase or lease of zero-emission construction equipment and vehicles, including the acquisition, construction, or leasing of required supporting facilities;

(K) a project described in section 149(b)(8) for a diesel engine retrofit;

(L) a project described in section 149(b)(5) that does not result in the construction of new capacity; and

(M) a project that reduces transportation emissions at port facilities, including through the advancement of port electrification.

(2) Flexibility.—In addition to the eligible projects under paragraph (1), a State may use funds apportioned under section 104(b)(7) for a project eligible under section 133(b) if the Secretary certifies that the State has demonstrated a reduction in transportation emissions—

(A) as estimated on a per capita basis; and

(B) as estimated on a per unit of economic output basis.

(d) Carbon Reduction Strategy.—

(1) In general.—Not later than 2 years after the date of enactment of the Surface Transportation Reauthorization Act of 2021, a State, in consultation with any metropolitan planning organization designated within the State, shall develop a carbon reduction strategy in accordance with this subsection.

(2) Requirements.—The carbon reduction strategy of a State developed under paragraph (1) shall—

(A) support efforts to reduce transportation emissions;

(B) identify projects and strategies to reduce transportation emissions, which may include projects and strategies for safe, reliable, and cost-effective options—

(i) to reduce traffic congestion by facilitating the use of alternatives to single-occupant vehicle trips, including public transportation facilities, pedestrian facilities, bicycle facilities, and shared or pooled vehicle trips within the State or an area served by the applicable metropolitan planning organization, if any;

(ii) to facilitate the use of vehicles or modes of travel that result in lower transportation emissions per person-mile traveled as compared to existing vehicles and modes; and

(iii) to facilitate approaches to the construction of transportation assets that result in lower transportation emissions as compared to existing approaches;

(D) at the discretion of the State, quantify the total carbon emissions from the production, transport, and use of materials used in the construction of transportation facilities within the State; and

(E) be appropriate to the population density and context of the State, including any metropolitan planning organization designated within the State.

(3) Updates.—The carbon reduction strategy of a State developed under paragraph (1) shall be updated not less frequently than once every 4 years.

(4) Review.—Not later than 90 days after the date on which a State submits a request for the approval of a carbon reduction strategy developed by the State under paragraph (1), the Secretary shall—

(A) review the process used to develop the carbon reduction strategy; and

(B)(i) certify that the carbon reduction strategy meets the requirements of paragraph (2); or

(ii) deny certification of the carbon reduction strategy and specify the actions necessary for the State to take to correct the deficiencies in the process of the State in developing the carbon reduction strategy.

(5) Technical assistance.—At the request of a State, the Secretary shall provide technical assistance in the development of the carbon reduction strategy under paragraph (1).

(e) Suballocation.—

(1) In general.—For each fiscal year, of the funds apportioned to the State under section 104(b)(7)—

(A) 65 percent shall be obligated, in proportion to their relative shares of the population of the State—

(i) in urbanized areas of the State with an urbanized area population of more than 200,000;

(ii) in urbanized areas of the State with an urbanized population of not less than 50,000 and not more than 200,000;

(iii) in urban areas of the State with a population of not less than 5,000 and not more than 49,999; and

(iv) in other areas of the State with a population of less than 5,000; and

(B) the remainder may be obligated in any area of the State.

(2) Metropolitan areas.—Funds attributed to an urbanized area under paragraph (1)(A)(i) may be obligated in the metropolitan area established under section 134 that encompasses the urbanized area.

(3) Distribution among urbanized areas of over 50,000 population.—

(A) In general.—Except as provided in subparagraph (B), the amounts that a State is required to obligate under clauses (i) and (ii) of paragraph (1)(A) shall be obligated in urbanized areas described in those clauses based on the relative population of the areas.

(B) Other factors.—The State may obligate the funds described in subparagraph (A) based on other factors if—

(i) the State and the relevant metropolitan planning organizations jointly apply to the Secretary for the permission to base the obligation on other factors; and

(ii) the Secretary grants the request.

(4) Coordination in urbanized areas.—Before obligating funds for an eligible project under subsection (c) in an urbanized area that is not a transportation management area, a State shall coordinate with any metropolitan planning organization that represents the urbanized area prior to determining which activities should be carried out under the project.

(5) Consultation in rural areas.—Before obligating funds for an eligible project under subsection (c) in a rural area, a State shall consult with any regional transportation planning organization or metropolitan planning organization that represents the rural area prior to determining which activities should be carried out under the project.

(6) Obligation authority.—

(A) In general.—A State that is required to obligate in an urbanized area with an urbanized area population of 50,000 or more under this subsection funds apportioned to the State under section 104(b)(7) shall make available during the period of fiscal years 2022 through 2026 an amount of obligation authority distributed to the State for Federal-aid highways and highway safety construction programs for use in the area that is equal to the amount obtained by multiplying—

(i) the aggregate amount of funds that the State is required to obligate in the area under this subsection during the period; and

(ii) the ratio that—

(I) the aggregate amount of obligation authority distributed to the State for Federal-aid highways and highway safety construction programs during the period; bears to

(II) the total of the sums apportioned to the State for Federal-aid highways and highway safety construction programs (excluding sums not subject to an obligation limitation) during the period.

(B) Joint responsibility.—Each State, each affected metropolitan planning organization, and the Secretary shall jointly ensure compliance with subparagraph (A).

(f) Federal Share.—The Federal share of the cost of a project carried out using funds apportioned to a State under section 104(b)(7) shall be determined in accordance with section 120.

(g) Treatment of Projects.—Notwithstanding any other provision of law, a project assisted under this section shall be treated as a project on a Federal-aid highway under this chapter.