Implementing the Inflation Reduction Act and Infrastructure Investment and Jobs Act

Congressional Climate Camp 2023

Find out more about the briefings in this series below:

Budget and Appropriations

Public Polling on Climate Change

Non-CO2 Greenhouse Gases

Implementing the Inflation Reduction Act and Infrastructure Investment and Jobs Act

Want to learn more about climate policy? But not sure where to start? We have you covered. The Environmental and Energy Study Institute (EESI) invites you to join us for our start-of-the-new Congress briefing series, Climate Camp. We will go over the basics of the legislative process, highlighting key areas and opportunities for climate mitigation and adaptation policy. 

Our fourth session in EESI’s Congressional Climate Camp series is on implementing the Inflation Reduction Act and Infrastructure Investment and Jobs Act. These laws provide billions of dollars to confront the climate crisis and strengthen critical infrastructure. Panelists provided an update on the status of their implementation, described how state and local governments and organizations are accessing funds, and explained the oversight role Congress must play to maximize these investments.

Highlights

KEY TAKEAWAYS

The Infrastructure Investment and Jobs Act (IIJA) (P.L. 117-58), also referred to as the Bipartisan Infrastructure Law, provides $1.2 trillion for infrastructure across a variety of sectors, including transportation, energy, broadband, and water. More than half of IIJA funding—$660 billion—flows by formula, meaning that the law itself specifies who is going to get the funds and how much they will receive. In addition to formula funds, there are over 100 competitive grant programs in IIJA. The Inflation Reduction Act (IRA) (P.L. 117-169) provides a market environment that strongly favors the deployment of new clean electricity generation. The IRA focuses on bringing funds down to the community level. Community-based organizations, such as green banks, community development financial institutions, and credit unions, will have a role in facilitating the flow of these funds from state and federal agencies to communities. The IRA contains numerous consumer rebate provisions and tax credits for residential energy efficiency and electrification. All consumers are eligible for these rebates and low-to-moderate income households may receive enhanced benefits. As implementation gets underway, it is important to consider what measures should be tracked to understand the outcomes of investments made through the IIJA and IRA.

 

PANEL 1

 

Dr. Henry McKoy, Jr., Director, Office of State and Community Energy Programs, U.S. Department of Energy

• The Infrastructure Investment and Jobs Act, passed in 2021, provides approximately $6 billion to the Department of Energy (DOE).
• DOE created the Office of the Under Secretary for Infrastructure in response to the passage of IIJA, and the office received approximately 90 percent of DOE's IIJA and IRA funding.
• The Office of the Under Secretary for Infrastructure created the Office of State and Community Energy Programs (SCEP).
• SCEP is part of DOE’s work to expand the capabilities of state, local, and tribal governments to implement high-impact, self-sustaining clean energy transformations.
• SCEP serves as the “tip of the spear” and employs a place-based strategy to get resources and funding into communities to plan how to execute projects.
• There are 28 programs within SCEP that often work together.
• SCEP has six strategic priorities: following the Justice40 initiative, deploying clean energy technologies, catalyzing local economic development, creating jobs and increasing hiring, avoiding pollution through place-based strategies, and reducing energy costs.
• The Biden-Harris Administration's Justice40 initiative ensures that 40 percent of the benefits of climate-related federal investments go to historically disadvantaged communities.
• The IRA provides $10 billion to SCEP, which is distributed between Home Efficiency Rebates, Home Electrification and Appliance Rebates, training for residential energy contractors, and assistance for the adoption of building energy codes and appliance standards.
• Key SCEP programs that have support from or were created by IIJA and IRA include the Weatherization Assistance Program, State Energy Program, Home Energy Rebates Program, Energy Efficiency and Conservation Block Grant Program, Energy Efficiency Revolving Loan Fund Capitalization Grant Program, Building Training and Assessment Centers Program, Career Skills Training Program, Energy Efficiency Materials Pilot Program, and Renew America’s Schools.
• Part of IRA and IIJA funding is directed towards training and education in communities to ensure there are individuals to take on jobs in the clean energy sector. Together, the IRA and IIJA dedicate around $260 million to training programs.
• The IIJA funded the Energy Efficiency Materials Pilot Program, which invests in nonprofits to make them more energy efficient.
• The Weatherization Assistance Program focuses on weatherizing homes in low-income communities.
• Technical assistance and partnerships create tools and solutions to address barriers in energy programs and connect people to technical data and information from experts.
• Two tools that SCEP employs to support state and local governments include the State and Local Planning for Energy (SLOPE) Platform and the Low-Income Energy Affordability Data (LEAD) Tool. The SLOPE Platform integrates data sources to display untapped energy savings opportunities, and the LEAD Tool is an interactive tool to learn about a community’s energy burden.
• The benefits of the IIJA and IRA programs to communities include the historic investment in clean energy infrastructure; the creation of jobs and workforce development programs; the holistic approach to community investment focused on mutually respected relationships; the focus on generating more wealth in historically disadvantaged communities; and the creation of a robust and durable system.

 

David Terry, President, National Association of State Energy Officials

• The National Association of State Energy Officials (NASEO) represents the 56 state, territory, and D.C. energy directors and their offices.
• With the exception of the Weatherization Assistance Program, no funding from the IIJA or IRA has gone to states yet.
• Congress delivered to DOE the substantial challenge of planning and managing the many new and scaled up programs in a responsible way. As a result, communication between DOE and the states has increased.
• The State Energy Program is a foundational program and receives an annual appropriation, which was $65 million last year spread across the 56 states and territories. These funds act as the glue that holds together many of the state-private sector partnerships in the utility industry. They are used for state-wide energy planning, emergency response and preparedness programs, building energy code education, voluntary programs around schools, and financing of public-private infrastructure.
• The State Energy Program received $500 million under the IIJA.
• Almost all of the programs listed under SCEP have a central state component, and the State Energy Program provides flexible funding to help these programs operate within states.
• The cross-cutting planning money in the IIJA and the State Energy Program also goes to permitting, zoning, and siting energy projects. State and local governments have significant control over implementing infrastructure funding and must work with industry to do so.
• An example of this planning is in Indiana, where the governor and legislature have developed voluntary programs to prepare local governments for renewable energy siting to ensure that communities are educated and prepared to take advantage of funding opportunities.
• Members of NASEO came together with their governors to create regional collaboratives around hydrogen and hydrogen hubs that considered the implications for businesses and local resources. This method allowed each state to take an individualized approach.
• Section 40101(d) of the IIJA focuses on grid resilience. It includes formula funds that go to the states and competitive funds that go to both consumer and investor-owned utilities. There is about $2.5 billion directed to state energy offices under this section, and state energy officials are working with their utilities and communities to address grid resilience issues at the state level.
• The DOE, Department of Transportation (DOT), state energy offices, and state transportation offices are working together to use $5 billion in funding for electric vehicle charging infrastructure. The integration of different agencies at the state and federal level and industries has gone well, and this success has inspired research into the electrification of other areas of transportation.
• The states of Louisiana, Texas, and Oklahoma have been investing in carbon utilization and carbon capture using private and state funding. These states have been building on existing carbon pipelines, refineries, and hydrogen infrastructure to take advantage of tax credits under the IRA.
• There is a total of $9 billion available for home energy efficiency and electrification, and NASEO members manage these funds with the help of the DOE. NASEO has a major task force that includes almost every state in the United States and around 50 private sector companies to consider the consumer experience around these rebates—how to tailor them to low-income families, how consumers will benefit, and how to implement rebates fairly.

 

Q&A

 

Q: What is being explored in terms of how point-of-sale rebates will work alongside verifying income levels?

McKoy

• Income verification in rebates ensures that an individual is qualified to get these resources.
• There are certain privacy issues that must be considered with income verification, so a number of tools are being considered. But partner agency programs, like the U.S. Department of Agriculture's Supplemental Nutrition Assistance Program and the U.S. Department of Housing and Urban Development’s public housing programs, have ways to understand if someone is qualified for these rebates. Some states already have their own tools in place.

Terry

• A national program of income verification for the rebate program would make implementation difficult.
• Income verification will be run by the states, so retailers and providers will not handle this process. States have run similar rebate programs to this one before, but this rebate program is larger than past ones.
• States will use state-run, low-income programs and federal programs to pre-qualify people so that a customer does not need to go through the hoops before they get to a local retailer. States will also need electronic and paper-based mechanisms of capturing data surrounding the rebate.
• There was a rebate program for ENERGY STAR® equipment in the American Recovery and Reinvestment Act of 2009, and states ran it without issues.
• There is a big push from state and federal governments to move quickly on this subject to get it done, but moving too fast may open up space for mistakes. Taking the time to do this well guarantees a good experience for manufacturers and consumers.

 

Q: How can we guarantee that there is an equitable flow of capital to all states, regardless of each state's motivation level?

McKoy

• Equity is a critical part of this work.
• There are formula programs that ensure every state is qualified to get an amount of money.
• Community benefit agreements are included in the application process for funding to guarantee that the local community is being considered.
• The application process should be removed from partisan politics as the focus is on community and workforce benefits.

Terry

• Every state that NASEO works with is motivated and has constituents that need this kind of work.
• A lack of motivation is tied to a lack of adequate staffing on projects.

 

Q: Organizations, nonprofits, and community development financial institutions that finance low-income communities are often underbanked or may not benefit from large networks. Are rebates keeping them in mind?

Terry

• Many states already had rebates that include these local organizations in place.

McKoy

• As seen with the ENERGY STAR rebate program in 2010, each individual state designed their rebates to consider one-person companies and companies with thousands of employees.
• The differences between how states handle programs like rebates demonstrates how a national program may not be the most effective. Each state has its own needs, and it cannot be one-size fits all.

 

Q: What is Congress’s role in the implementation of these laws?

Terry

• Oversight by Congress provides checks and balances on implementation efforts.
• Congress will also handle expectation setting, which is a more difficult task. The message that is sent about these programs influences how people view them, and the example of rebates being portrayed in the media as open to everybody despite being targeted to low-income communities shows how Congress must set the expectations on programs to ensure that the facts are clear.
• Oversight involves transparency, and DOE has a good history of transparency.

McKoy

• A number of these provisions are one-time provisions.
• When we consider the future of investments in communities, we often talk about the technical challenges. But there is also a challenge of how to get these resources into communities—particularly the communities that have been left behind over time—which is not a one-time endeavor.
• We must consider how pilot programs may garner long-term funding on an annual basis.
• There must be a focus on getting communities access to capital to fund the long-term projects that communities are planning.

 

Q: How does the IRA address the issue of scaling up technology like carbon capture and utilization while making it cost effective?

Terry

• The IRA tax credit doubles the price of carbon, and this makes the technology financially feasible.
• One of the missing components in addressing this question is Class VI wells. Class VI wells can be used to store carbon; it is a safe and proven technology. States can move more quickly on Class VI wells than the federal government.

 

PANEL 2

 

Sarah Kline, Consultant, Bipartisan Policy Center

• The IIJA authorizes $1.2 trillion for infrastructure across a variety of sectors. Transportation is the largest in terms of dollar amount, but the energy, broadband, and water sectors also received funding.
• IIJA is unique because it bundles multiple infrastructure sectors together, includes both authorizations and appropriations, and was negotiated by a bipartisan group of 21 senators and the White House instead of moving through House and Senate committees. IIJA passed in November 2021 with bipartisan support.
• More than half of IIJA funding, $660 billion, flows by formula, meaning that the law itself specifies who is going to get the funds and how much they will receive.
• Seventy-five percent of the transit program support is distributed by formula, with a bulk of formula funding going to local governments and transit agencies.
• In addition to formula funds, there are over 100 competitive grant programs in IIJA. These grant programs are an opportunity for states, counties, cities, tribes and other entities to apply for funding directly from the federal government. As agencies seek input on how to implement these programs, the Bipartisan Policy Center has compiled a list of these competitive grants to help stakeholders navigate what opportunities are available to them over the next five years. The White House also has an interactive map to track what funding has already been announced or awarded.
• The majority of funding for transportation goes directly to state departments of transportation through seven formula programs totaling around $267.4 billion. The four programs specifically focused on reducing greenhouse gas emissions or increasing resilience are the PROTECT Program, Charging and Fueling Infrastructure Formula Program, Congestion Mitigation and Air Quality Improvement Program, and the Carbon Reduction Program. The National Highway Performance Program and Surface Transportation Block Grant Program, which together account for over $200 billion of IIJA funding, can also be used for climate-friendly projects if state departments of transportation choose to do so.

 

Kevin Rennert, Fellow; Director, Federal Climate Policy Initiative, Resources for the Future

• The IRA implemented long-term extensions of the production tax credit (PTC) for producing renewable electricity and the investment tax credit (ITC) for building clean energy projects.
• The IRA transitioned the tax credits to a technology-neutral incentive structure based on greenhouse gas emission rates. This will be a lasting provision that will make it easier to add new technologies to the list of eligible technologies.
• The structure for these tax credits is set up so that there is a base rate of $5 per megawatt hour for the PTC and 6 percent of the investment for the ITC. If you meet prevailing wage and apprenticeship requirements, you can receive a five times bonus multiplier. You can also receive another 10 percent if the project is located in an energy community or meets domestic content criteria.
• In the IRA, there is a PTC for existing nuclear generation, which is tied to market conditions. The Tax Credit for Carbon Sequestration (45Q) has doubled to $85 per ton.
• The IRA contains provisions that make it easier to monetize these tax credits. Tax-exempt entities are eligible for direct pay and taxable entities also have the ability to transfer their credits to others to prevent the loss of value.
• Resources for the Future operates two detailed power sector models: Haiku and E4ST. Under the IRA, both of these models build solar and wind capacity at rates well above historical maxima. Carbon capture and storage (CCS) retrofits of coal are projected to be economically viable under the IRA's 45Q incentives. The models suggest retrofitting all plants or building new plants with CCS due to the projects being so economically viable.
• Both models indicate substantial carbon dioxide reductions compared to the pre-IRA baseline. Yet, even with the IRA, the United States will fall short of President Biden’s goal of getting to net zero in the power sector by 2035.
• The IRA's incentive-based structure allows tax incentives for clean energy to be passed through to consumers in the form of lower retail rates. Retail electricity rates are reduced by approximately five to seven percent of the national average.
• Baseline air quality is improved under the IRA due to the reduction in fossil fuel use across the country. In particular, there are significant decreases in sulfur dioxide and nitrogen oxide emissions, which translates to important health benefits.
• The IRA was funded through a change in the corporate income tax rate. The tax shift is progressive.
• Households will experience the IRA through reductions in electricity prices, reductions in the price of goods and services due to decreased retail electricity rates, and changes in tax burdens.
• The IRA provides a market environment that strongly favors the deployment of new clean electricity generation. Models suggest the IRA will result in substantially greater clean electricity generation with associated reductions in greenhouse gas emissions and widespread air quality improvements.
• Real-world conditions faced when deploying these projects at the scale and pace they require are not represented in the models and are important sources of uncertainty that will require ongoing work to characterize.

 

Duanne Andrade, Executive Director, Solar and Energy Loan Fund (SELF)

• The IIJA provides federal funding for bridges, transportation, rail, and water infrastructure. The IRA focuses on bringing funds down to the community level. Community-based organizations, such as green banks, community development financial institutions (CDFIs), and credit unions, will have a role in facilitating the flow of these funds from state and federal agencies to communities.
• SELF is the first and only green bank and CDFI hybrid model in the country. SELF was created in 2009 by St. Lucie County, Florida, with a $3 million seed grant from DOE. The $3 million seed grant has leveraged $40 million in direct capital into the organization. With this capital, SELF has been able to finance over $100 million in projects. SELF was created to kick start the clean energy economy by facilitating access to low-cost capital to stimulate green jobs and to finance energy efficiency, solar, and resilience upgrades for low- to moderate-income households. SELF now operates statewide in Florida and serves the broader Southeast region.
• The equitable deployment of capital is especially important in the South. We need to scale investments in resilience, energy efficiency, and low-carbon housing because the Southeast is a vulnerable region to extreme weather events, including hurricanes, extreme heat, and sea level rise.
• More people in the Southeast are cost burdened than in any other part of the country. More than a third of households have trouble paying their energy bills. The Southeast has the lowest average credit scores, which means many people cannot access capital to make improvements that would benefit their homes and reduce energy use and costs.
• To address these issues, SELF created a loan program for solar energy that addresses the needs of homeowners, small to midsize landlords, developers, and contractors. This program mostly focused on single-family homes but has now expanded to multi-family homes. SELF is leveraging every public-sector dollar with 13 from other sources.
• Tax breaks do not benefit low-income populations because these individuals do not have a tax liability to begin with. Grants will allow local community organizations to provide technical assistance and build capacity. Direct pay is available for nonprofits to help low- to moderate-income communities and residents access the benefits of the up to 30 percent ITC, allowing for broader access to solar energy.
• The Greenhouse Gas Reduction Fund (GGRF) provides $27 billion to mobilize and leverage private capital for greenhouse gas emission reduction with a focus on low-income and disadvantaged communities. The goals of this fund are to accelerate the transition to an equitable, net-zero economy and to catalyze jobs for the future. Seven billion dollars of these funds are designated to go through states, tribes, municipalities, and eligible nonprofits. Twenty billion dollars are eligible for nonprofit entities that will deploy capital and provide technical assistance and capacity building.
• Climate resilience, energy efficiency, and clean energy all save money. All of these investments are going to help put working class Americans in a better position to save money on their homes.
• GGRF funds will catalyze tremendous opportunities through the deployment of these funds in green banks, CDFIs, credit unions, and other community-focused intermediaries.
• There are 24 green banks across the nation, and they mobilized $14 billion in 2020 in green projects. The leveraging capacity of green banks ranges from one public-sector dollar to between three and 13 from other sources.
• There are about 1,100 CDFIs nationwide that leverage eight dollars for each one invested. At least 200 CDFIs report they are preparing to deploy IRA funds and GGRF funds specifically.
• Credit unions play a critical role in helping communities in the face of natural disasters and helping with financial inclusion and coaching. There are 6,000 such institutions nationally that are serving roughly 100 million consumers; they mobilized $2.25 billion in green loan products in 2021.

 

Jana Barresi, Head of Washington, D.C., Office, Lowe’s Companies Inc.

• Lowe's has four main customer segments: customers who buy and install their own products; customers who use Lowe’s service business to have their products installed; contractors who do projects for consumers; and customers who cannot find the product they are looking for in stores and are connected to a relevant service provider. Each type of customer requires different information about the government programs relevant to them, so Lowe’s is thinking about how they can make their customers aware of the incentives available to them.
• The Home Electrification and Appliance Rebates will provide point-of-sale rebates for eligible customers (households earning less than 150 percent of local median income) when purchasing specific energy efficient products and services. Products included in this rebate program include heat pump heating and cooling systems, heat pump water heaters, biomass stoves or boilers, electric stoves, electric cooktops, electric ovens, heat pump dryers, upgraded electric paneling or wiring, and insulation.
• Home Efficiency Rebates will be available to homeowners and aggregators (such as those representing multi-family buildings) for whole-house energy saving retrofits. All consumers are eligible for these rebates and low- to moderate-income households may receive enhanced benefits. This program will include more stakeholders, including home energy auditors.
• Due to current uncertainty around how the HOMES program will be implemented, retailers are considering how certain elements of the program will work, including income and product verification prior to purchase, point-of-sale rebate execution, consumer education, and post-purchase rebates for emergency repairs.
• Consumers are increasingly likely to consider whether products are sustainable and energy efficient. Property managers are using energy efficiency upgrades as a potential selling point.
• Homeowners have a strong aversion to replacing items prior to failure. However, new builds, remodels, or refreshes can trigger proactive replacement.
• There is a lot of funding in the IRA for helping states develop contractor training programs. Lowe’s recently announced a $50 million program targeted to community colleges that will increase the number of people in skilled trades by 50,000 people over the next five years.

 

Q&A

 

Q: What steps are planned for outreach and communication to ensure that the people who are intended to benefit from these programs actually benefit?

Kline

• In terms of the IIJA, the challenge of involving community members in the development of infrastructure projects is something that transportation and infrastructure agencies have been focusing on for a long time because you do get better results when you have input and engagement from the people who are ultimately going to use the project.
• DOT recently released a public involvement guide, which has a lot of useful strategies to involve the community in transportation projects.
• Public involvement is often challenging due to the limited resources of community organizations. Congressional staff should meet with constituents and transportation agencies to help them identify the most important opportunities for them to work together.

Andrade

• There is an issue of trust in communities that needs to be addressed by working with and listening to established community organizations.
• Messaging is important when it comes to building trust with communities. For example, climate resilience is a big word, but it translates into the simple idea that replacing your roof or window can improve the safety of your home and make it a healthier place to live.

 

Q: Do agencies and states need to do a better job reaching out to the public on a regular basis about the resources available?

Kline

• The government needs to do a better job talking about programs, plans, and projects in a way that makes sense to people. There are requirements for public engagement in the public transportation plan, but many people do not have time to engage in multiple planning processes.

 

Q: Are there big next steps in the programs, investments, and policies you are tracking that people should be on the lookout for in respect to implementation of the IIJA and IRA?

Barresi

• The DOE had a request for information on consumer rebate programs that was due last week and is currently being reviewed. An important next step is going to be ongoing conversations about program design, implementation, timing of funding flows, and when states can put in their plans.

Andrade

• We are still waiting for GGRF final rules to come out from the EPA. They expect there will be up to 15 recipients for the funds, which will then be channeled to community-based organizations. The timeline has moved, and we have another year to wait for those funds. We need to look out for programs that help communities build capacity and that provide the technical assistance to prepare communities for the GGRF funds.

Rennert

• There is still guidance coming out from the Treasury Department on some of the tax credits such as the hydrogen credit. The overlay of regulations is also going to be coming out and we are looking at how the EPA’s regulations are going to be influenced by the regulatory environment we are in that incentivizes clean electricity.

Kline

• Appropriations and the debt limit are important conversations that will happen in Congress this summer and that will affect these programs.
• There are multiple technical assistance programs across the federal government to help communities deliver infrastructure projects. Members of Congress can also play a role in helping connect their communities with federal resources.
• There needs to be a feedback loop with the federal government. In the future, it will be important to know the outcome of investments made through the IIJA. While federal agencies may not be thinking right now about how they will track these outcomes, it is important to consider what measures should be tracked to help implement similar laws in the future.

 

Compiled by Madeline Dawson and Lynlee Derrick and edited for clarity and length. This is not a transcript.