Federal Law, Local Solutions: what the Inflation Reduction Act means for Cities

The Inflation Reduction Act unlocks unprecedented climate action opportunities for local governments

Photo by Andreas Gücklhorn on Unsplash

President Biden signed the Inflation Reduction Act (IRA) on August 16, 2022, officially enacting the most ambitious climate legislation in United States history. Nominally intended to curb domestic inflation, the IRA also includes tax code reforms and healthcare provisions that are significant in their own right. It is the bill’s expansive climate change focus, however, that has received the most attention — and the most funding. The IRA’s climate components will impact federal, tribal, state, and local governments, as well as businesses, nonprofits, and individuals. This article focuses on the provisions that are especially relevant to cities.

In contrast to the keystone environmental legislation of the 1970’s that tackled environmental pollutants through regulation and enforcement, the IRA is more carrot than stick. Rather than set new limits on greenhouse gas emissions, the bill funds massive investment in green technologies through rebates, credits, grant programs, and financing opportunities. The goal is to make renewables so cost-competitive that clean energy will naturally overtake fossil fuels as the preferred way to run our cars, heat and cool our buildings, and power our industries.

Much of the media coverage of the IRA has focused on provisions that apply to individual Americans — from tax credits for electric vehicles to homeowner incentives that defray the cost of things like electric appliances, heat pumps, home solar and wind installation, and efficiency measures. But there’s much more to the IRA than consumer incentives. Funding earmarked for cities has the potential to move the needle on climate change while also advancing racial equity and improving residents’ lives.

Cities have a critical role to play in reducing global emissions and avoiding the most catastrophic effects of climate change. The programs created and funded by the IRA promise to accelerate those reductions. Many of the grant structures are also designed to encourage collaboration and engagement at the community level to ensure that projects are informed by and targeted to residents’ needs. For example, some programs will require cities to partner with community-based organizations (CBOs) to ensure the inclusion of local voices. And projects directed toward low-income and underserved areas are prioritized throughout the IRA.

Some details of the IRA are still being finalized, as agencies and states craft specific policy elements. But it’s already clear that the bill creates incredible opportunities for local governments. Some provisions with the most relevance for cities include the following:

• Greenhouse Gas Reduction Fund. One of the largest line items in the IRA is the $27 billion allocation for the Greenhouse Gas Reduction Fund, which provides grants to establish “green banks” that will finance projects at the national, regional, state, and local level to promote the rapid deployment of low- and zero-emission products, technologies, and services. A significant portion of the Greenhouse Gas Reduction Fund is earmarked specifically for low-income and disadvantaged communities. Green banks leverage federal money to help bring projects to life that would not otherwise be able to secure financing. (For example, when a technology is so new that there is not yet a well-developed market, traditional banks might hesitate to extend a loan.) Projects qualified to receive financing from green banks must reduce or avoid — or assist communities in reducing or avoiding — greenhouse gas emissions and other forms of air pollution in partnership with the private sector.
• Environmental and Climate Justice Block Grants. The IRA provides $3 billion to be invested through an Environmental Protection Agency (EPA) grant program. To be eligible to apply for a grant, cities will need to partner with a CBO. Funding can be used to address disproportionate environmental and public health harms related to pollution and climate change. The IRA outlines the following eligible project types:
  
  – community-led air and other pollution monitoring, prevention, and remediation, and investments in low- and zero-emission and resilient technologies and related infrastructure and workforce development that help reduce greenhouse gas emissions and other air pollutant
  – mitigating climate and health risks from urban heat islands, extreme heat, wood heater emissions, and wildfire events
  – climate resiliency and adaptation
  – reducing indoor toxics and indoor air pollution
  – facilitating engagement of disadvantaged communities in State and Federal advisory groups, workshops, rulemakings, and other public processes
• Neighborhood Access and Equity Grants Program. The IRA earmarks $3 billion to remove, replace, or retrofit infrastructure barriers like highways and freeways that create connectivity obstacles within communities. Cities will be eligible to apply for competitive grants for projects to improve walkability, safety, and affordable transportation access, as well as for planning and capacity building to increase community involvement for equitable transportation planning going forward. A portion of the funding is specifically authorized for projects in economically disadvantaged communities.
• Grants to reduce air pollution at ports. The IRA provides $3 billion to develop a grant program that will award funds to purchase or install zero-emission port equipment or technology to serve ports, conduct planning or permitting related to the installation, and to develop climate action plans for ports. Cities with jurisdiction over a port or port authority will be eligible to apply for grants, and a quarter of the funding must be used in nonattainment areas — places where air quality is worse than permitted under the applicable environmental quality standards. This earmark will benefit Black and brown communities due to the close correlation of higher levels of air pollution with historic redlining.
• Low-Carbon Transportation Materials Grants. The IRA appropriates $2 billion to the Federal Highway Administration to reimburse or provide incentives to cities and other eligible recipients for the use of construction materials and products that have substantially lower levels of embodied greenhouse gas emissions as compared to estimated industry averages. Embodied carbon refers to the total greenhouse gas emissions associated with every stage of a material’s life, including manufacturing, transportation, use, and disposal.
• Urban tree planting grant program. The IRA allocates $1.5 billion to be distributed through the U.S. Forest Service’s Urban and Community Forestry Assistance Program. Cities will be eligible to apply for competitive grants to engage in tree planting and related activities. Increasing tree canopy is a common climate mitigation strategy to provide shade for residents and combat the urban heat island effect.
• Assistance for Latest and Zero Building Energy Code Adoption. $1 billion is available through the IRA to help states and local governments adopt and achieve compliance with low-and zero-energy residential and commercial building energy codes.
• Clean Heavy-Duty Vehicles. $1 billion from the IRA will provide grants and rebates to replace heavy-duty vehicles like garbage trucks and transit buses with zero-emissions vehicles. Cities will be eligible to transition to zero-emissions fleets, and the grants can also be used to install, operate, and maintain the infrastructure necessary to charge, fuel, and maintain the new vehicles. $400,000,000 of the money allocated for this program must be used to purchase vehicles that will be used in nonattainment areas.
• Greenhouse Gas Air Pollution Planning And Implementation Grants. The IRA provides $250 million to be distributed to at least one city or other eligible entity in each state for the purpose of developing a climate action plan that includes programs and projects that will reduce greenhouse gas air pollution. Then, the EPA will award an additional $4.75 billion for implementation of selected plans.

For cities committed to climate action, the IRA will inject critical funding to help transform vision into implementation and amplify progress that has already begun. The legislation is, as Clarence E. Anthony, the CEO and Executive Director of the National League of Cities, stated “an important step forward in our collective fight against climate change, and will help local leaders create more resilient communities in the years to come.”

Through our work with cities, both in the American Cities Climate Challenge and beyond, Delivery Associates has experience supporting cities as they implement climate solutions, including electrifying vehicles, finding funding for climate initiatives, building bus lanes, and retrofitting municipal and other buildings. To learn more, reach out to daniel.gk@deliveryassociates.com.