This is 8 Minutes a podcast helping you understand the energy and climate challenge . In just a few minutes , I'm your host , Paul Schuster . The Inflation Reduction Act was undoubtedly a hugely influential piece of climate legislation .
Through a combination of tax incentives and competitive grants , the IRA has estimated to flow hundreds of billions of dollars into clean and renewable technologies . But it did something else as well .
While the technology and manufacturing investments may get top-line billing as to the impact of the IRA , the federal legislation also set aside meaningful dollars for state and local governments to participate in climate action , to the tune of over $50 billion .
During this episode , I'll dig a bit deeper into how the IRA changes the game for local and state governments , giving them both the ability to plan , adapt , mitigate and ultimately thrive in a clean energy economy .
8 Minutes it's how long it takes the suns raised to the earth , or about how long it takes for your family to devour the Thanksgiving feast that you spent three days preparing . Holiday season is upon us . Let's get it on . The IRA funneled a lot of money into climate technologies .
The Congressional Budget Office initially estimated that about $379 billion would be invested into renewable energy and EVs , and storage and a whole host of climate activities . But then the IRA isn't as much of a grant-based program as its sister bill . The Infrastructure Investment in Jobs Act was .
The IIJA had discrete dollar amounts set aside to support specific infrastructure needs , whereas the IRA set up tax credits as incentives to support the build-out of renewable energy . The CBO estimate was based on how much they thought the market would respond to those tax credit incentives .
Goldman Sachs this year released an updated estimate that says that response has been so good that the total subsidies from the IRA could reach over $1 trillion . But the IRA was not just about renewable technologies . In fact it even had an expansion of the Affordable Health Care Act buried inside it .
And alongside the tax incentives and manufacturing grants that dominate a lot of the IRA climate news was actually a lot of money designated towards municipalities and states in helping those governmental bodies action their own climate plans .
In fact , the IRA allocates a little over $50 billion in competitive grants to state and local governments , and these support a wide range of activities . In energy-related grants , the IRA sends a little less than $10 billion to states to help develop rebate programs for energy efficiency and home electrification projects .
$27 billion was allocated to a greenhouse gas reduction fund which is likely to act like a giant green bank . It will allocate competitive grants to support distributed technologies such as solar and other zero emissions technologies , with a very concerted focus on supporting disadvantaged communities and nonprofits .
3-ish billion will go towards capacity building for community-led projects in disadvantaged or low-income communities , 6 billion towards improving local infrastructure such as transmission , water or electrifying fleets of buses or garbage trucks , and 5 billion towards climate pollution reduction grants .
These CPRG dollars will come in two ways the first , helping each state and 125 of the country's largest municipalities develop actionable greenhouse gas reduction plans and then , once those plans have been established , these state and local governments will compete for $4.7 billion in grants to actually implement their reduction measures .
Look $50 billion into local governments is a huge windfall . It's going to accelerate a lot of really great climate work at local schools , transportation authorities , city buildings . But it comes with its own challenges too . For one , most of the IRA funds headed to local governments is being distributed as competitive grants .
That means that everyone is competing against each other with no clear guidance as to how the distribution of dollars is really going to work . I think the general assumption is that it will be somewhat fairly distributed amongst requesters , but poorly designed or implemented applications will not be doing themselves any favors in that process .
More importantly , though , is the emphasis on disadvantaged and underserved communities .
These are communities that are projected to be overly impacted by air pollution and missions in climate-related events , so it makes sense that the federal government has emphasized support for those communities , but applications that simply acknowledge or emphasize their commitment to the communities may be missing a real opportunity in this process .
How these local governments engage with their communities will be important .
Rather than reacting to grant guidance or climate roadmap plans , local governments that embed their communities' voice into the process from the beginning are likely to have greater success , Working with local community-based organizations CBOs to not only develop the application but to plan , strategize , communicate the action planning that can best be initiated within the
community . That's going to ensure that , when projects start rolling out , everyone can fully benefit from the opportunity .
And for those CBOs , the CPRG funds in particular give them a chance to uplift their priorities , emerging collaboration across both ways to mitigate greenhouse gas emissions , but also in ways to make the community more resilient to potential climate repercussions .
The federal funds are also likely to unlock additional channels for funding , either through the state , private corporations or philanthropic organizations , both private and corporate . But with more stakeholders come more and differing priorities .
Local governments that establish a strategic vision and plan early will be better able to harness these well-meaning dollars in ways that maximize the impact for their communities .
And lastly , the vast amount of funding that is going out is likely to move in waves and , frankly , there are probably going to be a lot of lessons learned through the first few cycles of funding .
Working across entities , sharing lessons learned and success is achieved , is going to be important , both to ensure that the next wave of funding is more effective , but also to help gain credibility and buy-in from all the stakeholders in the process , which may end up being the toughest challenge of integrating these IRA funds into local governments .
The number and diversity of stakeholders is likely to bring many , many perspectives . Some municipalities are already banding together , such as under council of governments , in order to scale up and be eligible for federal funding , which is great , but comes with the added challenge of working across that .
Many more disparate participants , Clear roles and responsibilities , crystallized strategy , over-communicative messaging , how stakeholder engagement is managed may likely separate successful and challenged entities . The IRA is an amazing opportunity for local governments to advance hard needed climate solutions at a hyper-local level .
But execution of these projects still come with risks . I'm Paul Schuster and this has been your 8 minutes .