The U.S. Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law (BIL), are poised to deploy hundreds of billions of dollars in federal funds and unleash private investment to catalyze climate action and clean energy technology deployment. These investments will not only create new jobs and economic opportunities across the nation, but are critical to putting the United States on the path to meet its climate goals: reducing greenhouse gas emissions 50-52% below 2005 levels by 2030 and achieving net-zero carbon emissions by 2050. Between IRA’s passage in August 2022 and July 2023, 272 new clean energy projects totaling $278 billion in private investments have been announced across the country.
However, unlocking the full impact of these federal laws will not be possible without timely and effective implementation by non-federal actors — especially the private sector, community-based organizations and subnational governments. State and local governments, in particular, will play a critical role in determining whether the country as a whole is able to meet its climate goal.
Highlighting this dynamic, the National Academies of Sciences, Engineering, and Medicine (NASEM) published a report that provides a comprehensive roadmap for the U.S. to realize its net-zero emissions goal while achieving a just and equitable transition. Importantly, the chapter entitled “Enhancing and Realizing the Climate Ambitions and Capacities of Subnational Actors: State and Local Government Perspectives” elevates the essential role of state and local governments in deploying and creating an enabling environment for impactful, locally relevant climate and clean energy investments. The authors of this article, WRI’s Devashree Saha and NASEO’s Sandy Fazeli, served on the expert committee that contributed to and developed the report.
As the report notes and in line with WRI’s research on climate federalism, federal, state and local government actors each wield important tools in efforts to decarbonize. These are strengths which can be (and have been) used to set ambitious goals, deploy funds and create conducive environments for climate actions or, conversely, to hinder or impede such actions.
It is insufficient to grant the dollars out with the hope that states and local governments are ready and willing to take on large climate programs and investments. This passive strategy risks excluding the very states and communities with the greatest needs and most opportunities to use the funds to meet local goals, whether they’re reducing greenhouse gas emissions, growing jobs and economies, enhancing resilience or boosting energy security. Rather, federal agencies must empower, engage and support a wide network of players across different levels of government to deliver the transition promised by IIJA and IRA.
Understanding the Promise and Challenges of State and Local Government Climate Action
Subnational governments have driven a significant amount of climate progress (see here, here and here) in the last two decades, sometimes in the face of federal inaction. Using policy levers at their disposal, U.S. state and local governments have advanced climate action across all sectors of the economy, including carbon pricing, clean electricity and renewable portfolio standards, low carbon fuel standards, zero-emission vehicle deployment, buy clean standards, building performance and electrification incentives, and energy codes and standards. In fact, states, cities and counties that are committed to climate action currently represent two-thirds of the U.S. population and economy.
At the same time, subnational climate action is a patchwork of political will and capacity, with deep variations across different parts of the country and different policy, regulatory and market environments. How federal agencies tackle the challenges posed by lack of political will and capacity — defined as resources, knowledge and expertise, and staff availability within state and local governments — will determine the extent to which subnational governments will be able to identify, apply for, and implement the new federal resources for climate action.
Building political will for climate action is a complicated topic and not the subject of this article. We will just note that when decarbonization strategies are tied to immediate and tangible benefits important to local populations, electorates and economies, they can often gain support in areas where “climate” policies might not. The economic opportunities presented by clean energy technologies perhaps explain why Texas leads the nation in utility-scale, wind-powered electricity generation, or why local governments of different political hues are looking to clean energy to provide affordable electricity, tax revenue and resilience.
Building state and local governments’ capacities to leverage BIL and IRA funding deserves immediate attention from the federal government. Out of the BIL’s $1.2 trillion to be spent on transportation, infrastructure, energy and climate resilience projects, approximately $984 billion will be deployed by state and local governments. Even though the majority of IRA’s energy and climate funding is in the form of tax credits, as much as $139 billion (including the $27 billion Greenhouse Gas Reduction Fund, the $5 billion Climate Pollution Reduction Grant, and the $3 billion Environmental and Climate Justice Block Grants) rely on effective implementation of programs by state and local governments.
New research focused on the Federal Emergency Management Agency’s (FEMA) Building Resilient Infrastructure and Communities grant program highlights that communities that are most successful in securing these grants tend to be higher-capacity, larger cities. While this is one example, it wouldn’t be surprising to find out that a similar pattern plays out across other federal programs.
The issue of capacity is often an equity concern as well. As IRA and BIL policies are implemented, it will be critical to ensure that federal investments and programs benefit all Americans, particularly given how past disparities have disproportionately affected communities of color and low-income neighborhoods. Lack of capacity can present structural and economic barriers to some jurisdictions’ ability to apply for and deploy federal funding, further perpetuating inequities. While both the IRA and BIL include a significant focus on environmental justice and equity and prioritize investments in disadvantaged communities through the Justice40 Initiative, state and local governments will require support to realize the intended results.
The success of tax incentives, too — whether it is individuals using incentives to purchase an electric vehicle or renewable energy developers accessing the renewable energy Investment Tax Credit or the Production Tax Credit — will depend on how effectively subnational governments are able to communicate the tax credits’ availability and use to households and businesses.
More importantly, state and local governments will need to create the enabling infrastructure that facilitates the uptake of these tax credits. For instance, how effectively and equitably states deploy charging infrastructure with BIL funding will make a big difference to how many people in that state take advantage of the EV tax credit.
5 Recommendations to Enhance Subnational Capacity to Implement BIL and IRA
State and local government readiness to take on this work will require targeted investments, assistance and support, but can have widespread benefits. At the seemingly most basic level, bolstering their capacity can help states and localities, including those with smaller budgets and staff sizes, make informed decisions about which federal funding opportunities to pursue. More broadly and over time, it can help draw attention and expertise to the broader policy, regulatory, fiscal and other conditions that affect the expansion of clean energy and climate markets at the local level.
Below are five strategies that can support state and local governments in taking advantage of new opportunities presented by BIL and IRA.
Federal Agencies can:
1) Establish an ongoing process to evaluate and integrate feedback into technical assistance processes and federal applications. The White House Council on Environmental Quality, in cooperation with agencies like the Department of Energy (DOE) and Environmental Protection Agency (EPA), should establish a process to integrate feedback from subnational entities into federal application and technical assistance processes, as well as strengthen and coordinate processes across federal agencies. This process should be relationship-based, iterative and ongoing. It can begin with a national convening through which subnational government entities can elevate concerns with application, implementation and technical assistance processes and quality, and then continue with a working group dedicated to evaluating and informing federal processes on a semi-annual basis. Observations and recommendations from the convening and working groups could be delivered to the Office of Management and Budget, DOE’s Office of State and Community Energy Programs, and other relevant offices across the federal agencies, to empower them to adjust processes and resources according to subnational needs.
The Biden administration has already deployed several new technical assistance programs, including: the Thriving Communities Technical Assistance Centers focused on supporting disadvantaged communities; the National Community Solar Partnership focused on expanding access to affordable community solar; and a Memorandum of Understanding between DOE, the Department of Transportation, the National Association of State Energy Officials, and the American Association of State Highways and Transportation Officials, which includes technical assistance to support coordinated, efficient and equitable investment of electric vehicle charging infrastructure. The administration has designed many of these technical programs to capture local feedback, including through listening sessions.
Still, federal agencies can do more to ensure that available technical assistance resources are flexible and meet the needs of local and state officials, as well as create new ones to meet the increased demand for federal support. To do this effectively, federal agencies will not only need to listen closely and continuously to the concerns raised by state and local officials, but will also need to improve coordination between the various technical assistance programs.
Finally, there is a real need for federal agencies to develop flexible technical assistance programs that aren’t oriented around specific programs and grants, but rather around providing more general support to state and local officials. This arrangement can help local stakeholders better understand federal funding opportunities, various financing strategies, and how to develop competitive funding applications.
2) Structure competitive opportunities as noncompetitive planning grants followed by competitive grants. To support lower-resourced states and localities in accessing funding opportunities, federal agencies should structure future competitive opportunities under BIL and IRA via a two-stage approach: noncompetitive planning grants followed by competitive grants. As subnational governments try to seize new federal funding opportunities, almost all of them need additional capacity for effective and timely implementation of clean energy programs.
EPA’s Community Pollution Reduction Grants program offers a model. By providing sizeable non-competitive planning grants to states and large localities in its first phase, it can help inform state and local efforts to pursue the remaining $4.6 billion in competitive funding in its second phase. The program aims to support states, large metropolitan areas, U.S. territories and Tribal nations in developing plans and policies to reduce greenhouse gas emissions. Non-competitive planning grants totaling $250 million are flexible and can be used for a wide range of purposes, such as hiring and/or retaining staff, assessing capacity and capability, modeling and data collection, and conducting stakeholder engagement. In this manner, the planning grants support state and local governments’ capacity-building and put them in a better position to compete for competitive funding.
3) Disburse capacity-building funds for state, local and community recipients flexibly and speedily. DOE, EPA and other federal agencies should be held to strict timelines (within 3–6 months of program passage and funding authorization) to disburse funds for existing programs to support state, local and community clean energy and climate planning and capacity-building. There are a handful of key IRA and BIL programs such as the State Energy Program, the Energy Efficiency Conservation Block Grants (EECBG), the Environmental and Climate Justice Block Grants, and the Climate Pollution Reduction Grants that provide sufficiently flexible funding for state and local government capacity-building. Maine, for instance, is planning to use a portion of its EECBG program to hire staff to manage grants and provide technical assistance to local governments implementing clean energy and energy efficiency programs. The timely implementation of these crucial federal dollars can be hampered when federal agencies are slow to distribute funds to state and local governments.
DOE began dispersing BIL funds for the State Energy Program in May 2023, more than a year after the passage of the law. The $550 million in EECBGs for state and local governments were also significantly delayed. Both programs have been in existence for years as non-competitive formula programs that should have been relatively straightforward for DOE to administer. The failure to prioritize the release of funding for long-established programs can have repercussions for BIL and IRA implementation by subnational governments.
A bipartisan bill, Investing in State Energy Act, was introduced earlier this year to expedite federal distribution of funding through the State Energy Program and the Weatherization Assistance Program to state agencies and local partners that implement energy initiatives. The bill directs DOE to publish expected WAP and SEP allocations to states within 60 days of enactment of appropriations, enabling subnational entities to effectively plan for the expected funding and distribute it as quickly as practical.
4) Continue and expand reliable and flexible funding to subnational governments. Recognizing the central role that subnational actors will play in BIL and IRA implementation, Congress should continue and expand reliable, annual, flexible funding to subnational governments for the life of BIL and IRA programs. The $500 million in SEP and the $550 million in EECBG funding through the BIL are not insignificant levels of funding. However, when spread across all 50 states and hundreds of local jurisdictions and other community-based recipients, not to mention federal agencies’ share of administration and technical assistance (the $550 million in EECBG funding includes $110 million for program administration and technical assistance by DOE), the funding amount can stretch thin. It may not be adequate in positioning subnational governments to make the most of the opportunity, particularly in terms of integrating disparate funding streams across different types of agencies to maximize their impact.
As proven and well-established programs, both SEP and EECBG should be sustained and annually funded at heightened levels ($100 million annually for SEP, roughly double the amount appropriated in recent years, and $500 million annually for EECBG). For each of these programs, federal contracting officials should reduce the upfront burden of developing written proposals and applications, and instead encourage federal agencies and program officers to interface regularly with recipients and provide customized support.
State and local governments can:
5) Designate an official or entity to track decarbonization program opportunities and deadlines. To ensure that economies and residents do not lose out on economic and emissions-reduction opportunities, every governor, mayor and county official should, at the very least, designate an official or entity to track activities, deadlines and funding opportunities in BIL and IRA that support their state and local needs and priorities. This individual or entity should serve as a coordinating body and engage other agencies to leverage the collective strength and expertise of the state, county or city in pursuing funding.
In a larger state or city, this coordinating body may be an entire office or working group of department staff; in smaller jurisdictions, it may start out as a fraction of someone’s time. In either case, they can help ensure critical opportunities to advance state, county and local economic development and decarbonization goals are not missed.
Emerging examples from some states and cities point to how this can be accomplished. Earlier this year, Massachusetts created an Office of Climate Innovation and Resilience and the state’s first cabinet-level position of climate chief. The office led by the climate chief is entrusted with taking a whole-of-government approach to addressing climate change, coordinating the state’s climate policy across all agencies, and maximizing implementation opportunities. Michigan created the Michigan Infrastructure Office after the passage of BIL; the office has also taken on the responsibility of coordinating IRA implementation.
Local governments can also play a variety of roles in maximizing new opportunities provided by IRA and BIL, including developing a strategic plan for implementation. Chicago, for instance, released an addendum to its2022 Climate Action Plan highlighting how IRA could assist the city in accelerating or exceeding its goal. It also identified relevant funding provisions for plan actions. The Philadelphia Energy Authority sought the help of consulting firms to provide technical assistance in designing and implementing a strategic plan to help the city prioritize, sequence and blend the different types of funding available in IRA.
Working at All Levels of Government to Decarbonize the US
The path ahead for decarbonization relies on many actors across the country making the decision to invest, design programs and policies, and conduct challenging work. The promise of many climate and clean energy investments is that they can be tailored to meet locally relevant goals — from climate change and environmental quality to economic growth, innovation, competitiveness and security.
The task before federal agencies right now is not only to get IIJA and IRA dollars out, but to do so with a sensitivity for which states and communities need investments the most, in what format and timing, and with what types of extra assistance and capacity-building support they might need. The only way this can happen is with greater focus on partnership-building across the federal, state and local levels.