So Your CPRG Application Didn’t Get Funded – Climate Law Blog

Last week, the U.S. Environmental Protection Agency announced the 25 successful applicants for a shared $4.3 billion in implementation funding under the Inflation Reduction Act’s (IRA) Climate Pollution Reduction Grant (CPRG) program. The grants will enable investments in solar projects, building energy-efficiency upgrades, the buildout of electric vehicle charging infrastructure, and the promotion of climate-smart agricultural practices, among many other projects. Notably, the grants were quite large – between $3 million and $500 million – and, as a result, a smaller number of grants were awarded than anticipated, leaving many states, municipalities, regions, and tribes out of one of the most significant pools of IRA funding. In addition, the CPRG program had tight deadlines, and some eligible states, tribes, and local governments may not have been able to apply for CPRG implementation funding due to timing and capacity constraints. But all is not lost.

Briefly, by way of background, CPRG is a nearly $5 billion emissions reduction program intended to catalyze planning for and implementation of ambitious projects to reduce greenhouse gas (GHG) emissions and other harmful air pollution. In the first phase of CPRG, referred to as the “planning grants” phase, the EPA made $250 million worth of grants to 45 states, 81 of the nation’s largest metropolitan statistical areas (MSAs), and nearly 100 territories and tribal groups to develop plans for achieving equitable GHG reduction strategies. The grants, made in July 2023, were offered on a formula basis – $3 million for states and $1 million for MSAs – and grantees are required to complete three deliverables: a Priority Climate Action Plan (PCAP) that was due earlier this year, a Comprehensive Climate Action Plan (CCAP) due June 2025, and a status report due June 2027. Generally, PCAPs include a GHG emissions inventory, a focused list of near-term, high-impact and implementation-ready measures to reduce GHG emissions, and a benefits analysis for low-income and disadvantaged communities (LIDACs) and the measures within them. CCAPs, informed by the PCAPs, will expand on those PCAP elements and establish near- and long-term emission reduction goals.

The second phase of CPRG focuses on implementation of strategies identified during the PCAP process, with $4.3 billion in competitive funding appropriated. While most implementation grant applications are not public, it is likely that states, tribes and MSAs, who were only eligible to apply for implementation grants if they completed a PCAP, focused their proposals on the Priority GHG Reduction Strategies identified in those PCAPs.

The implementation grants were highly competitive – grant applications totaling $33 billion competed for just $4.3 billion in funding, making the program oversubscribed by a factor of seven – and applicants whose applications were not selected are surely feeling some disappointment. But CPRG achieved one of its primary goals, which was to seed hundreds of millions of dollars for climate action planning in states, tribes, and metropolitan regions across the country. Moreover, other provisions of the IRA offer significant additional tools for states, tribes, local governments, community-based organizations, and the private sector to fund and finance clean energy, clean transportation, and building decarbonization investments. The CPRG planning process and implementation grant applications provide a roadmap for reducing GHGs at the state and local scale; the IRA created some of the vehicles for getting there.

Leveraging CPRG’s Planning Phase

Recipients of CPRG planning grants (in addition to local governments not located in one of the 81 MSAs receiving funding but that collaborated with their states in those planning processes) did significant work to develop their PCAPs and identify GHG reduction strategies. These are lengthy, detailed documents that inventory area GHG emissions, identify possible emissions reduction measures, and analyze the benefits of such measures to LIDACs. Grantees can use the insights gained during the PCAP process to develop targeted and effective local policies for GHG emissions reduction. By inventorying their emissions, applicants have at the ready key data that can inform which sectors to prioritize for emission reduction and how to implement emission reduction policies in those sectors. For example, the Buffalo-Niagara Falls Metropolitan Statistical Area (Buffalo-Niagara MSA), which consists of 64 separate municipalities located in two counties, determined in its PCAP that 42% of its emissions are attributable to the transportation sector. By recognizing that the area is especially reliant on personal vehicles, Buffalo-Niagara could tailor its approach to reducing transportation emissions by, for example, leveraging federal tax credits to invest in electric vehicle charging infrastructure, engaging in outreach campaigns to residents about the federal electric vehicle tax incentive under the Internal Revenue Code Section 30D, or considering more major systemic solutions like public transportation or alternative transportation infrastructure such as bike lanes and bike storage. Moreover, and as required by the CPRG program, Buffalo-Niagara’s PCAP identified LIDACs and assessed the benefits that emissions-reducing measures could have in them, which better enables the MSA to pursue place-based strategies that improve equity outcomes in those communities.

As another example, the Chicago MSA’s PCAP – which covers areas in 14 counties across Illinois, Indiana, and Wisconsin – established that a large portion of its emissions are generated from the industrial sector, with industrial processing the largest contributor of the sector’s GHG emissions. Through engagement with 270 stakeholders representing 175 organizations, the Chicago MSA identified a range of GHG reduction approaches that would reduce emissions from industrial buildings. The CPRG planning process helped Chicago develop a GHG emissions reduction strategy aimed at increasing renewable energy supply through the installation of solar arrays at twenty percent of industrial manufacturing facilities in the MSA by 2030. CPRG implementation funding surely would have advanced this strategy had it been awarded, but even in its absence, the Chicago MSA has developed stakeholder relationships on which to base future efforts to solarize the industrial sector. Moreover, IRA tools like the Renewable Energy Investment Tax Credit, low-cost financing from green banking entities, and possibly funds from Solar for All and from Illinois’ CPRG implementation grant can help fund some of the investment in solar energy required to meet the twenty percent target.

From Planning to Action: Money in the IRA and Other Programs

Through the CPRG planning process and in preparing implementation grant applications, states, tribes and local governments (through their MSAs) have laid the groundwork for ambitious GHG emissions reductions. Now, they need capital to implement their strategies. Beyond CPRG, the IRA provides several funding and financing sources to support projects that were not funded in the CPRG implementation phase.

Other federal grants: While some of the largest buckets of funding in the IRA have already been awarded, significant federal grant opportunities remain, and some of them can be matched with the GHG emissions reduction strategies identified in PCAPs and implementation grant applications. For example, the IRA’s Environmental and Climate Justice Community Change Grants Program (Community Change Grants) focuses on community-based non-profit organizations (CBOs), providing almost $2 billion for capacity building to tackle environmental and climate justice issues, increase community climate resilience, and advance clean energy. To be eligible to apply, a governmental entity must partner with a CBO; CBOs may also apply in partnership with other CBOs. This program could provide an alternative implementation pathway for states and MSAs that developed placed-based GHG emissions reduction strategies in their PCAPs in collaboration with CBOs and other community stakeholders. Community Change Grant applications are being reviewed on a rolling basis, with a deadline of November 21, 2024.

Another relevant grant program is the Charging and Fueling Infrastructure (CFI) program. Established by the 2021 Bipartisan Infrastructure Law, this competitive grant program is set to award $2.5 billion in funding over five years for electric vehicle charging and other alternative fueling infrastructure in communities and along alternative fuel corridors. In the first round of funding, the CFI program awarded $622.57 million to 47 applicants, with awards ranging from $500,000 to $70 million. Maine, for example, received $15 million to fund the installation of 62 fast charger ports and 520 Level-2 charging ports in more than 70 cities and towns statewide. The Round 2 Notice of Funding Opportunity is available now and will award up to $800 million in grants. Grant applications are due on August 28, 2024.

We don’t purport to provide a complete list of all potentially relevant grant opportunities here, but rather to note that projects and investments identified during the CPRG processes thus far may be eligible for existing grant programs, and a mapping exercise can help unsuccessful CPRG applicants pair their proposals with funding opportunities. Resources that may be helpful to states, local governments, and others in this regard include the Urban Sustainability Directors Network’s Seeking Federal Funding guide and the Sabin Center & Environmental Defense Fund’s IRA Tracker and Database.

Tax incentives: The IRA established or extended several tax credits that can subsidize the cost of renewable energy investments like rooftop and utility scale solar and storage, electric vehicle purchases, and EV chargers to build out charging networks. Of particular interest to the states, local governments and tribes that participated in the CPRG planning process will likely be the Sections 48 and 48E Investment Tax Credits, the Sections 45 and 45Y Production Tax Credits, the Section 45W Clean Commercial Vehicle tax credit, and the Section 30C Alternative Fuel Vehicle Refueling Property tax credit. These credits can provide significant funding towards PCAP strategies including rooftop solar, municipal investments in utility-scale clean energy, fleet vehicle electrification, and plans to extend EV charging into neighborhoods that largely lack it. In general, these credits can fund about thirty percent of the applicable project costs, though the terms vary by credit and may be more or less depending on whether criteria for “bonus” credit amounts are achieved. Tax credits are available to private sector businesses and developers – opening the door to public-private collaboration – and to states, local governments, tribes, and nonprofit organizations through an “elective” or “direct” pay mechanism that allows them to collect the tax credit value as a cash payment. Elective pay dramatically changes the value proposition of the relevant tax credits for government entities and nonprofit organizations, offering CPRG participants flexibility in assessing who should take on strategies identified in the PCAPs, including the option to develop and own projects themselves.

In addition to tax credits, which focus on clean energy and clean vehicles, the IRA makes a more limited tax incentive available for commercial building energy efficiency improvements. For PCAPs that identify buildings as a major contributor to state or MSA emissions, or for applications focused on building decarbonization or electrification, the Section 179D deduction can be a useful tool for offsetting the cost of building energy retrofits, particularly for privately owned buildings. States, local governments, and other nontaxable entities are not directly eligible for the deduction, but it can be taken by the designer or contractor performing energy upgrades to buildings owned by those entities.

Greenhouse Gas Reduction Fund (GGRF): GGRF is a $27 billion IRA program that will help finance clean energy deployment across the country through its National Clean Investment Fund (NCIF), the Clean Communities Investment Accelerator (CCIA), and Solar for All programs. The first two of these programs will fund eight entities serving as “green banks” that can provide financing for unfunded CPRG projects – three national entities offering direct financing and credit enhancements and five groups that will offer capital to local lending partners like CDFIs and credit unions for use in their communities. Low-interest loans from GGRF entities and their local lending partners help build out the capital stack – cash, tax credits, other grants, municipal bonds, and more – to finance needed climate and clean energy investments. Each NCIF and CCIA grantee has a slightly different geographic or sectoral focus, but together they address renewable energy, building and housing improvements, vehicle electrification, and more. As the GGRF grantees are in the process of finalizing their grant awards with EPA, it is unlikely that their capital will be available to borrowers until later in 2024 or even 2025, and it is difficult at this time to assess exactly how these funds will shape the market. But local governments and others should keep an eye on green bank developments over the coming months and years.

In addition to the two green banking programs, the Solar for All program has awarded $7 billion to 60 states, tribes, and multistate coalitions to build solar energy installations to benefit low-income and disadvantaged households. To the extent that CPRG strategies involve expanding access to residential solar, Solar for All funds might help fill funding gaps.

Individual-Facing Rebates & Tax Credits: The IRA has a number of funding opportunities available to individuals and households. For example, the law established two large residential rebate programs, the Home Energy Performance-Based, Whole-House Rebates (HOMES) program ($4.3 billion), and the High-Efficiency Electric Home Rebate Act (HEEHRA) program ($4.275 billion). Each program will run through state energy offices, empowering them to issue rebates to households and residential landlords for energy-efficiency upgrades, electric appliances, and electric panel upgrades. An additional $225 million is available to tribes to develop similar rebate programs. Most states do not yet have their rebate programs up and running, but they should be online in many places in the coming months. Additionally, the IRA established an individual-facing tax credit of up to $7,500 for electric vehicle purchases, which is now available at the time and point of sale, and individual-facing home energy tax credits.

For each of these programs, CPRG applicants can’t claim the funds themselves; rather, they can conduct outreach and education on IRA incentives available to their residents to help subsidize some of the strategies in their PCAPs and CPRG applications.

Zooming Out: How the Federal Government and Others Can Help

CPRG participants have spent considerable time and resources completing their PCAPs and implementation phase applications, with more work to come in connection with their CCAPs due next year. The responsibility to make something of the effort that has already gone into CPRG should not fall solely on the applicants themselves, especially given that many of them have significant capacity and resource constraints. To that end, federal policymakers should consider how existing and future grant programs can repurpose work done for CPRG already. It may be feasible for a federal agency to consider an implementation grant application for a different grant opportunity without significant additional lift from applicants. In the future, as funds are appropriated for new or expanded programs, offering some formula funding for project execution would go a long way in ensuring that more entities could advance a GHG emissions reduction strategy. Local governments, in particular, generally receive little formula funding and are left competing for scarce funds.

There is also an important role for advocates and technical assistance providers working with states, tribes, and local governments to maximize federal funding opportunities. Some CPRG participants will need help in adapting their CCAPs and applications into actionable policies and plans and matching them with funding and financing sources. As in so much of this work, a range of assistance may be helpful – some CPRG participants will benefit from close, tailored guidance in identifying and pursuing funding sources and in developing a full financing plan for their projects. Others will be well positioned to take just one federal program at a time – for example, a tax credit – and overlay it with work that otherwise might have been funded by CPRG. Technical assistance providers should seek to meet CPRG applicants where they are and provide them with the support they need to pursue some or all of the strategies in their PCAPs. At the same time, at-the-ready resources will be a helpful, lower-touch way of reaching a broader audience. Many existing resources that identify, provide technical knowledge about, and help troubleshoot grant programs, tax credits, and green financing could be repurposed with a focus on CPRG-identified strategies and applications.

CPRG represents an enormous down payment on climate planning and investments across the country, one whose efforts need not be set aside when plans are completed, strategies are identified, and grant applications are won or lost. With support from others who would like to see CPRG participants’ ambition rewarded, states, tribes, and MSAs can look to other federal funding and financing sources to help their priority climate strategies.