How To Benefit From Climate Investments in the Inflation Reduction Act
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The Inflation Reduction Act (IRA) is the most significant climate bill in US history. With $349 billion available for climate solutions, whether you apply as a local government, business, non-profit, or individual, money is out there for you!
So how do you tap into it? This post will walk through how eligible entities and individuals can use this historic amount of funding to achieve their sustainability goals along with quick tips based on our experience helping clients across every sector.
What climate considerations are in IRA?
On August 16th, 2022, the Inflation Reduction Act (IRA) was passed by Congress, signifying the most important climate legislation in US history. The act aims to catalyze investments in manufacturing capacity, encourage procurement of domestic supplies, and jumpstart R&D in cutting-edge carbon capture and clean hydrogen tech. It will create predictable long-term tax incentives for wind and solar companies and encourages the manufacturing of renewable energy and electric vehicles (and the jobs that come with it).
IRA will allocate significant funding towards environmental justice, including air pollution monitoring, urban canopy, coastal restoration, investment in old-growth forests, and national park restoration and protection. This legislation will also make oil and gas companies pay significantly more to bid on leases and drill on public land and waters. Additionally, natural gas companies will be charged for vented and leaked methane, a highly potent driver of climate change.
IRA is the third piece of legislation passed since 2021 intended to improve US economic competitiveness, industrial productivity, and innovation. The Bipartisan Infrastructure Law (BIL), CHIPS & Science Act, and IRA all have overlapping priorities and welcome $2 trillion in new federal spending over the next ten years. IRA, though, is unique in that. Much of this climate-related funding is in the form of tax credits and financing for businesses and individuals. Smaller amounts are available as grants or direct payments to the government and other entities. Ultimately, the impact of IRA depends on how businesses, individuals, organizations, and public agencies take advantage of these incentives.
Where do the dollars flow?
The largest share of IRA funding is allocated towards shifting from fossil fuels to low-carbon energy sources. It does so by expanding tax credits for renewable electricity and providing incentives for battery production, clean hydrogen, and electrification of vehicles, buildings, and industrial processes. Due to the investment size, even smaller slices of funding can bring about significant impacts.
We are seeing an unprecedented level of investment in areas that have yet to receive this level of funding. This includes $27 billion to finance carbon reduction projects through new and existing green banks and nearly $50 billion in incentives for efficient, clean housing and commercial buildings.
Funding from IRA comes from various mechanisms, including grants, loans, bonds, tax credits, deductions, and other investment tools such as cooperative agreements and technical assistance. Fruitful navigation of the federal funding available will require familiarity with:
The mechanisms through which federal programs are implemented, and
The different ways federal funds flow through agencies to communities, businesses, or directly to eligible entities and individuals.
The following section is intended to help readers understand how IRA impacts various entities, what funding may be available to you and your organization, and tips from our team.
Climate Funding by Eligible Beneficiary
Corporations & Small Businesses
Every company with sustainability and resiliency goals depends on the availability, accessibility, and affordability of clean energy. IRA creates opportunities for a modernized grid and clears the way for businesses to meet their climate pledges. The Inflation Reduction Act will reduce business costs by supporting energy-saving investments and bolstering supply chain resiliency. Organizations can tap into several provisions that will save business owners energy costs, including projects like switching to low-cost solar power, supporting energy efficiency improvements, and converting large vehicles to clean commercial vehicles, like electric and fuel cell models.
Quick Tip: Companies that own and operate vehicles can electrify their fleet by tapping into tax credits for the manufacturing and purchasing of electric cars and charging infrastructure.
Government
IRA funds more than a dozen new programs that local governments are directly eligible to apply for, ranging from assistance in adopting updated building codes, implementing air pollution monitoring, and initiating greenhouse gas reduction initiatives in disadvantaged neighborhoods. Local governments are eligible for specific programs that create unique opportunities for cities, like reconnecting neighborhoods divided by highways, reducing greenhouse gas emissions and air pollution in low-income communities, and purchasing zero-emission vehicles.
Quick Tip: The US has experienced a boom in local climate action, including municipal development of climate action, resiliency, and net zero plans. Various programs available through IRA provide local governments with the unique opportunity to accelerate the growth of place-based Climate Action Plans.
Climate Pollution Reduction Grants (Sec. 60114)
Climate Pollution Reduction Grants (Sec. 60114) provides an investment of $5 billion to support efforts by states, municipalities, and tribes to develop and implement plans to reduce greenhouse gas emissions. KERAMIDA has worked with cities to create these plans based on Climate Scenario Analysis, benchmarking, community engagement, technology application, and feasibility studies, resulting in actionable and impactful mitigation actions with the highest return on investment.
Quick Tip: This funding is non-competitive. If the MSA you are in is interested in developing a climate action plan or expanding your existing plan, apply here.
Greenhouse Gas Reduction Fund (Sec. 60103)
Another new program the EPA has rolled out is the Greenhouse Gas Reduction Fund (Sec. 60103). This section provides $27 billion in funding to EPA to help leverage private investments in clean energy and climate projects, with an emphasis on projects that benefit low-income and disadvantaged communities.
Quick Tip: Cities can utilize this funding by developing EV suitability analysis for their city with the long-term goal of deploying low and zero-emission technology if it is appropriate for the community and the electric grid can support the infrastructure.
Environmental and Climate Justice Block Grant (sec. 60201)
Another focus area within IRA is community and worker resilience, funded through the Environmental and Climate Justice Block Grant (sec. 60201). The EPA has allocated $3 billion in block grants for supporting community-led efforts in disadvantaged communities to address climate and environmental injustice.
Quick Tip: Local governments and higher education institutions can find support by partnering with non-profits, like the Keramida Foundation for Sustainable Living, to carry out projects in line with this new program to benefit disadvantaged communities.
Industrial
Industries are seeing an increased demand from their consumers to provide environmental transparency on their materials and products. IRA presents a unique opportunity with $250 million available for businesses with industrial operations that produce materials or products.
Environmental Product Declaration (EPD) Assistance Program (Sec. 60112)
The Environmental Product Declaration (EPD) Assistance Program (Sec. 60112) provides $250 million to EPA to support the development, standardization, and transparency of EPDs for construction materials and products. The EPD Assistance Program will provide grants and technical assistance to businesses, states, tribes, and nonprofits that support businesses to develop EPDs for their materials and products. This will also help other activities that assist in measuring, reporting, and steadily reducing the quantity of embodied carbon in construction materials and products.
Quick Tip: Businesses that produce goods used for construction or building materials can use this funding to develop EPDs and increase their revenue by expanding into new green building markets. KERAMIDA can help entities apply for these funds and provide technical expertise to receive an EPD for their materials or products.
Low-Carbon Labeling for Construction Materials (Sec. 60116)
Another new program out of the EPA is the Low-Carbon Labeling for Construction Materials (Sec. 60116), with $100 million available. This funding will help identify and label low-embodied carbon materials and products for buildings and transportation projects.
Property Owners
Low-Carbon Affordable Housing Program (Sec. 30002)
The US Department of Housing and Urban Development (HUD) has a significant $837.5 million available in funding through the new Low-Carbon Affordable Housing Program (Sec. 30002). These funds are eligible for projects that implement low-emission technologies, materials, or processes or address the climate resilience of multifamily properties.
Quick Tip: Good candidates for this funding are building owners of multi-family properties looking to lower operating costs, mitigate future risk, and increase the market value of their housing development. KERAMIDA can work with owners or sponsors of eligible property to apply for and help manage the implementation of these funds.
Port Authorities
Grants to Reduce Air Pollution at Ports (Sec. 60102)
The EPA has allocated $3 billion towards Grants to Reduce Air Pollution at Ports (Sec. 60102). This award is eligible to port authorities, state, regional, local, or tribal entities with jurisdiction over ports, air pollution control agencies, and private entities (e.g., owners or operators of facilities, cargo handling equipment, transportation equipment, or related technology).
Quick Tip: These grants and rebates can be used to purchase or install zero-emission port equipment and technology, conduct planning and permitting activities, and develop climate action plans at ports.
Natural Gas / Petroleum Industries (and Communities!)
Methane Emissions Reduction Program (MERP)
IRA legislation has created the Methane Emissions Reduction Program (MERP), which will use $1.5 billion in funding to mitigate pollution via technical assistance to companies to reduce their methane emissions.
Quick Tip: This funding can also be used for communities impacted by greenhouse gas pollution, including mitigating negative health impacts and supporting environmental restoration. KERAMIDA can work with owners and operators of eligible facilities to conduct and submit their greenhouse gas reports.
Tax Exempt Entities
Investment Tax Credit (ITC)
One special provision in IRA that will benefit tax-exempt entities, such as non-profits and universities, is the allowance for a direct payment option instead of a tax credit, functioning as a refundable credit. The Investment Tax Credit (ITC) can be used for solar or standalone energy storage and interconnection costs.
Quick Tip: A base rate of a 6% tax credit increases to 30% if the negotiated contract states that the installers are paid a fair wage. This means a tax-exempt entity could install a solar array for up to 30% off; furthermore, a solar array that historically took 14 years to pay off can be brought down to 4-5 years.
Commercial Buildings
The IRA provision around commercial buildings has developed out of a previously existing deduction of $1.88 per sq ft for energy efficiency upgrades. This deduction has now increased for qualifying efficiency improvements to a minimum of $2.50 per square ft. to a maximum of $5.00 per sq. ft. for new and existing buildings (assuming the Wage and Apprenticeship Requirements are met). Qualifying improvements include the building envelope (insulating and retrofitting), lighting (fixture replacements, skylights, LED, and HVAC and hot water), and more.
Quick Tip: To be eligible for this provision, a building analysis based on software models needs to demonstrate savings from energy or costs with a minimum of 25% annual energy savings to qualify, with a full deduction available for 50% energy savings.
Individuals Household Benefit
IRA focuses on uplifting individuals to make sustainable changes in their homes. Depending on household income, individuals can get between 50-100% of certain upgrades funded. Higher-income households can get up to a 30% tax credit deduction for these upgrades.
Quick Tip: Eligible projects include but are not limited to installing a heat pump for home electrification, doing a weatherization project, and installing rooftop solar or an EV charger.
Community-Based Grant Appropriations
Climate and Environmental Justice Block Grants
Environmental and Climate Justice Block Grants have appropriated $3 billion to invest in community-led projects in disadvantaged communities and capacity-building centers to address disproportionate environmental and public health harms related to pollution and climate change.
Neighborhood Access and Equity Grant Program
Another program with a $3 billion allocation is the Neighborhood Access and Equity Grant Program, which aims to reconnect communities divided by existing infrastructure barriers, mitigate the negative impacts of transportation facilities or construction projects on disadvantaged or underserved communities, and support equitable transportation planning and community engagement activities.
Green Bank Grant Program
Finally, a groundbreaking $27 billion was allocated to a Green Bank Grant Program to support competitive grants to national and local “green banks,” which will use the money to invest in projects and innovations.
Interested in applying?
Whether you are interested in utilizing IRA funds for your house, organization, or community – there are likely funds you or your organization are eligible for.
All applicants must have active SAM.gov and Grants.gov registration to apply for IRA funding. Make these accounts now if you think you may apply for a federal grant, as the process can take a month or more for new registrants. Once you have registered, sign up to receive notifications for alerts that will notify you when the grants come online. If there are informational webinars that speak to more details of the grant programs, it is highly recommended to attend as the competitive grants will have many entities competing for the funds given the historical amount of investments available.
KERAMIDA can help eligible local governments, businesses, non-profits, and individuals to apply for IRA grant funding. In addition to grant applications, our Climate and Sustainability experts can help manage the implementation of these funds. Please contact us or call (800) 508-8034 today to speak with one of our Climate and Sustainability consultants.
Blog Author
Amber Greaney, MPA, LEED GA
Sustainability Analyst
KERAMIDA Inc.
Contact Amber at agreaney@keramida.com
