October 4, 2023
By Ramona du Houx
Elected Officials to Protect America (EOPA), an organization dedicated to solving the climate crisis ,highlighted the importance of the Inflation Reduction Act’s (IRA’s) $27 billion green bank investment as grant program applications are due October 12, 2023. Critically environmental justice communities will be helped by a guaranteed 40 percent of these investments that will bring a measure of long overdue equity.
“We are committed to addressing the climate crisis and ensuring energy security for our nation. Working with the Department of Energy, Elected Officials to Protect America’s (EOPA’s) Task Force will help support the implementation of the Inflation Reduction Act, and related funding, to assist state and local elected officials in implementing climate solutions. Given the IRA’s historic $370 billion investment, we want to ensure districts that have not traditionally received funding know what is available, the criteria, and how to apply for the funds,” said Alex Cornell du Houx, former Maine state Representative, Marine combat veteran, President of Elected Officials to Protect America and Co-Founder. “Communities that can’t afford to finance projects will be able to use a financial institution green bank that will have access to part of the $27 billion or a non- profit can apply for a grant. The funds will be transformational, especially for Justice40 communities.”
Green banks have a proven track record — from 2011 to 2021, the 23 existing sub-federal green banks have driven $9 billion of green investment, using relatively small amounts of public money and stretching it to generate investments in emissions reduction projects.
Among the many pro-climate funding mechanisms in the historic IRA is the creation of the Greenhouse Gas Reduction Fund, which allocates $27 billion to the Environmental Protection Agency (EPA) to make grants to one or more entities that would function as a national green bank. $20 billion dollars of this is eligible only for nonprofits — this could be granted entirely to a national, nonprofit green bank — and requires that 40 percent of this, or $8 billion, must be invested in projects that reduce greenhouse gas (GHG) emissions in low-income and disadvantaged communities, as required by President Biden’s Justice40 Initiative.
The other $7 billion is available directly to states, municipalities, tribes, and eligible nonprofits for e low-income communities’ access to residential solar panels through the EPA, which was announced in June.
“The climate crisis endangers Americans from all walks of life and left unchecked will disrupt life and threaten our prosperity, aging infrastructure, ecosystems, and further existing inequalities. Climate change exposes the most vulnerable to the impacts of flooding, heatwaves, and wildfires which are becoming more frequent and more severe,” said John Polimeni Dept. of Energy Taskforce Chair, New York Leadership Council, Schenectady City Councilmember, N.Y. “The IRA funding for a national green bank will enable communities across the nation to finance important projects that will reduce environmental degradation while increasing our country’s energy security and creating thousands of new jobs. This funding is a once-in-a-lifetime opportunity to put the United States on a sustainable path to fight climate change. These grants will support local ideas and actions to address the climate crisis and environmental inequalities, by deploying solutions and putting plans into action.”
In July, the EPA launched two competitive grant programs with the $20 billion funding that aim to spark clean energy investments across the country especially in low-income communities.
The deadline for applying to all the grant programs is October 12, 2023.
The $14 billion National Clean Investment Fund will provide grants to two or three national clean financial institutions, enabling them to partner with the private sector to provide financing to tens of thousands of clean technology projects nationwide.
A $6 billion Clean Communities Investment Accelerator competition will provide grants to support up to seven nonprofit groups that will deliver funding and technical assistance to build the clean financing capacity of local lenders working in lower-income and disadvantaged communities. 100% of the funds from the Clean Communities Investment Accelerator will be dedicated to low-income and disadvantaged communities.
“If we believe in addressing the climate crisis, we really should be investing in green banks and clean energy. If we are to avoid future climate catastrophes, we are running against the clock,” said Jenny Wong, Auditor for Berkeley, CA., Elected Officials to Protect America Leadership Council member.
Green banks are nonprofit institutions designed to provide and leverage capital to accelerate the transition to clean energy and mitigate climate change, and there are currently 23 sub-federal green banks across 17 U.S. states and territories.
“The IRA greenhouse reduction fund will not only provide the financial support to our local communities to combat climate change, but will encourage and accelerate innovation and investment in sustainable technologies,” said Ahmad Zahra, Fullerton Councilmember, CA.
The IRA’s allowances for green banking will facilitate direct and indirect investments into emissions reductions projects, especially in underserved communities, and states will play a huge role in allocating funds. In states with or without existing green banks, climate policy actors must understand how the IRA affects state-level clean power financing institutions.
“With this $27 billion in IRA funding the EPA is granting entities that effectively function as a national green banks. $20 billion of the grants are eligible only for nonprofits,” said Robin Reynolds Wilt, Councilmember Brighton, N.Y., Elected Officials to Protect America Leadership Council N.Y. “These entities provide the funds toward clean-energy building, electrification projects and much more. Basically, any scope of work that would impact greenhouse gas (GHG) in a positive sense could be funded.”
GHG Reduction Fund investments must be designed to reduce GHG emissions, and they fall into two categories.
The first is “direct” investment, which invests money into specific projects that require financial assistance. These include high-impact, nonstandard projects that cut across regions or have national significance, but may not attract any single, local financier. A green bank can step in to make the initial investment in the project and unlock further capital from local institutions.
The second is “indirect” investment, which increases local capital, enhances existing financing institutions, and otherwise builds capacity in communities so that they are able to then make direct investments. These indirect investments are essential to fill several common commercial financing gaps across states, where the investments are good from social, environmental, and financial perspectives, but the market hasn’t caught up.
The basic different ways green banks will accelerate increases in clean energy investments:
- Operating grants to expand administrative capacity.
- Access to low cost, long-term debt facilities.
- Access to equity that allows for experimentation and the development of new approaches to decarbonization.
- Access to secondary markets to ensure there is always more money flowing in.
- Scaling this model up with a national green bank can catalyze an unprecedented level of clean investments that are required to transition us toward a clean, equitable society.