{"id":11746,"date":"2022-08-22T08:45:49","date_gmt":"2022-08-22T13:45:49","guid":{"rendered":"https:\/\/blogs.law.columbia.edu\/climatechange\/?p=11746"},"modified":"2022-12-19T13:22:59","modified_gmt":"2022-12-19T18:22:59","slug":"cities-the-inflation-reduction-act","status":"publish","type":"post","link":"https:\/\/blogs.law.columbia.edu\/climatechange\/2022\/08\/22\/cities-the-inflation-reduction-act\/","title":{"rendered":"Cities & the Inflation Reduction Act"},"content":{"rendered":"
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\"\"<\/a>By Amy Turner<\/span><\/p>\n

On August 16, President Biden signed the Inflation Reduction Act (or \u201cIRA\u201d), widely hailed as the most ambitious piece of climate legislation in U.S. history. The bill is sprawling, covering climate and energy topics as diverse as electric vehicles, building decarbonization, clean energy manufacturing and supply chains, agriculture, and greening the electricity system, all through a range of tax incentives and direct grants. (The bill also has healthcare and prescription drug provisions, makes tax code changes unrelated to climate and energy, and guarantees federal land on- and offshore for oil and gas drilling.) Only portions of the legislation apply directly to units of local government, but taken as a whole it can be expected to help U.S. cities move toward their greenhouse gas reduction goals via a cleaner national electric grid, increased vehicle and building electrification, and new distributed renewable energy resources. Still, how does a local government tap in?<\/span><\/p>\n

There are six broad ways<\/strong> local governments will need to navigate the IRA.\u00a0<\/span><\/p>\n

First<\/strong>, there are several provisions in the legislation through which units of local government may directly draw financial support from a federal agency. Generally, local governments are not the only parties eligible to access funding from a particular program; often states, Indian tribes, and sometimes even private parties are also eligible. In some instances, the IRA specifies a timeframe in which the relevant agency must issue parameters for tapping into funding amounts. Regardless of whether this is made explicit in the IRA, in each case, the relevant agencies will need to make additional details about their respective programs available, whether through formal rulemakings or otherwise. <\/span>A list of programs for which local governments are eligible appears as an appendix at the end of this blog post.\u00a0<\/b><\/p>\n

Second<\/strong>, the IRA includes several direct-to-consumer tax credits and grants for vehicle and building electrification and distributed energy generation, which will help decarbonize those sectors at the local level. Local governments can maximize these programs for their residents through outreach and education about the benefits available. Some of these programs are administered by the federal government, as with vehicle tax credits claimed directly by individual purchasers, while others will be administered by states, as with the rebate programs described in the next paragraph.<\/span><\/p>\n

Third<\/strong>, some funds will be routed through states and state energy offices. State energy offices, as defined under <\/span>Section 124(a) of the U.S. Energy Policy & Conservation Act<\/span><\/a> (\u201cEPCA\u201d), are specifically tasked with administering two broad rebate programs for which individuals and building owners are eligible. The first is the HOMES (short for Home Owner Managing Energy Savings) rebate program, to which $4.3 billion is appropriated under Section 50121 of the IRA. Under this program, households and residential building owners are eligible for rebates to cover some of the costs of energy efficiency upgrades. Second, under Section 50122 state energy offices are to administer a $4.275 billion electrification rebate program under which individuals, households, and other eligible entities can receive rebates for electric heat pumps, heat pump water heaters, stoves, and clothes dryers, and for non-appliance home electrical system upgrades. States are also eligible for other funding opportunities and for many of the same funding pools as local governments. While the details of state programs will not be known until applicable state agencies develop them, there is significant room for coordination and advocacy by local governments to state policymakers.\u00a0<\/span><\/p>\n

Fourth<\/strong>, local governments with municipal utilities are now eligible to benefit from the IRA\u2019s clean energy tax credits. Section 13801 of the IRA, which adds a new Section 6417 to the tax code, allows states and municipalities, along with other tax-exempt organizations like municipal utilities and rural cooperatives, to receive as a \u201cdirect payment\u201d many of the IRA\u2019s tax credits that would otherwise only have value to tax paying entities. The addition of direct pay bolsters the ability of municipally-owned utilities to invest in clean energy generation, as they have no tax liability against which to otherwise claim a credit. Direct pay is available for <\/span>production, investment, and other tax credits<\/span><\/a>. Municipalities with publicly-owned utilities who are otherwise looking to invest in clean energy generation should discuss applicable parameters with a qualified tax or energy financing attorney.<\/span><\/p>\n

Fifth<\/strong>, communities that are located near ports can benefit from significant appropriations for port decarbonization. Section 60102 of the IRA adds a new Section 133 to the U.S. Clean Air Act appropriating $2.25 billion for a competitive grant and rebate program for the purpose of \u201cpurchas[ing] or install[ing] zero-emissions port equipment or technology\u201d at ports. Funds from this appropriation may also be awarded for planning and permitting relating to such zero-emission equipment and technology, and for a port\u2019s climate action planning. A climate action plan that qualifies for funding under this section must include \u201ca strategy to collaborate with, communicate with, and address potential effects on low-income and disadvantaged communities and other stakeholders that may be affected by implementation of the plan.\u201d An additional appropriation of $750 million is made for the same set of activities in ports located in nonattainment areas, as designated under Section 107 of the Clean Air Act. Local governments with \u201cjurisdiction over a port authority or a port\u201d are eligible to apply for funding. More details regarding funding applications will need to be made available by the EPA, and funding is set to remain available until September 30, 2027.<\/span><\/p>\n

And sixth<\/strong>, many areas of the IRA have extra set-asides for disadvantaged and low-income communities, as well as \u201cenergy communities\u201d (defined as areas that meet certain thresholds for employment or tax revenues from fossil fuel extraction, processing, transport, or storage of coal, oil, or natural gas; that have above-average unemployment rates; that have had coal mine or plant closures since 1999 or 2009, respectively; or brownfield sites as designated under CERCLA). These provisions appear across the IRA and are administered through tax credits, funding programs for which local governments are eligible, and funding programs for which local governments are not directly eligible. Using the range of tools described in this blog post, local governments can help ensure that communities and residents in need of these benefits are in the best position to access them.\u00a0<\/span><\/p>\n

The IRA is broadly understood to have the potential to materially transform the U.S. economy and to significantly contribute to its greenhouse gas reduction efforts. Local governments will be central to these efforts, as they\u2019ll be responsible for many of the projects that IRA appropriations ultimately fund. There is much, much more to the IRA than can be summarized in this short blog post; in particular, renewable energy developers will have access to tax credits to help scale up the renewable energy needed to decarbonize at the local level. <\/span>Materials<\/span><\/a> are emerging about the <\/span>direct-to-consumer programs<\/span><\/a> and <\/span>allocations to state governments<\/span><\/a>, which municipalities can use to begin crafting their own approaches to engagement. Local governments will need to watch for federal agencies to make details available with respect to the IRA\u2019s many funding programs.<\/span><\/p>\n

Local governments have a significant opportunity over the next several years. Cities\u2019 climate action plans contemplate greenhouse gas reductions from buildings, from vehicles, and from energy generation and consumption. The IRA and local climate action planning may be mutually beneficial, with local governments able to access funding for programs included in their climate action plans, and the federal government able to achieve the goals of the IRA through local policymaking and implementation. Moreover, the IRA\u2019s broad decarbonization of the economy through tax incentives, grant programs, and other resources can help reduce local emissions in all sectors. Several provisions – a few of which are directly available to local governments – can additionally help address local air pollution and other inequitable impacts to vulnerable communities. The IRA may be federal legislation but, with local governments\u2019 leadership, it\u2019s poised to remake our communities as well.<\/span><\/p>\n

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APPENDIX: IRA Funding Opportunities for Which Local Governments are Directly Eligible\u00a0<\/b><\/p>\n

GHG reductions and climate action planning<\/span><\/span><\/p>\n