Gearing Up for the Greenhouse Gas Reduction Fund (GGRF)
The Environmental Protection Agency (EPA) typically focuses on complex regulations tackling important challenges like air quality and vehicle standards. But any day now, the EPA is set to announce a list of partners that will work with the EPA to pump billions of dollars into our economy to finance climate change initiatives. This move is unprecedented in its scale and potential impact. But the aim of this financing is to do more than just drive climate solutions. It is to deliver environmental justice to communities of color and low-income communities that have been underinvested in and, as a result, bear the greatest burdens of climate change. For communities across the country striving to fortify their climate resilience, now is the time to gear up.
The Inflation Reduction Act of 2022, referred to as the “single largest investment in clean energy, environmental justice, and carbon pollution reduction in American history,” includes a number of tax credits, rebate programs, and incentives designed to shift our entire economy towards sustainability. Chief among these initiatives is the Greenhouse Gas Reduction Fund (GGRF), earmarked at $27 billion to finance projects that promote clean energy and reduce emissions, with a focus on delivering benefits to historically underserved communities.
These billions will flow from the EPA through national non-profits, community development financial institutions (CDFIs), credit unions, green banks, and governments at many levels. This network will provide households and communities with financing for climate projects at more favorable terms than those offered by traditional financial institutions.
Currently, EPA is reviewing applications to determine the entities responsible for administering these funds. The GGRF is divided into three key programs: the National Clean Investment Fund (NCIF) with $14 billion allocated to 2-3 national entities directly financing projects; the Clean Communities Investment Accelerator (CCIA) with $6 billion supporting 2-7 hub nonprofits providing funding and technical assistance to local community lenders, enabling them to lend to community-driven projects; and Solar for All with $7 billion distributed to up to 60 states, territories,
Eligible projects for GGRF financing are wide-ranging and include three priority areas: (1) Distributed Energy Generation and Storage, (2) Net-Zero Emissions Buildings, and (3) Zero-Emissions Transportation. The fund places a significant emphasis on investing in and delivering benefits to low-income and disadvantaged communities (LIDACs), mandating certain percentages of funds to be invested in these communities. This commitment ensures that projects like net-zero affordable housing, solar panels and battery storage, electric vehicle charging, and more will prioritize communities most impacted by pollution and climate change due to historic disinvestment and neglect, providing them with much-needed capital to address the environmental injustice they face.
Another critical priority of the GGRF is to catalyze market transformation by leveraging private capital. What does that mean? Essentially, for every $1 of public investment, the entities responsible for distributing this funding are aiming to attract an additional $10 from traditional banks and other private entities for these same projects. GGRF is incentivizing private entities to step up and start financing these kinds of projects and a lot more. This leveraging mechanism makes climate projects previously deemed “risky” more appealing to private investors, thus amplifying the impact of this public funding. It will be up to the winners of the NCIF, CCIA, and Solar for All competitions to work with traditional banks, investors, and other private capital providers to do this leveraging work, allowing the $27 billion public investment to stretch much further.
What does all of this mean for community-based organizations on the ground? It presents an additional funding source to consider when thinking about drawing down money to meet community needs. These resources will come in the form of loans, not grants, so it is important to consider the implications of taking on debt to support projects. However, the entities distributing this funding will have the flexibility to issue loans with competitive terms like 0% interest or “recoverable” loans that may be forgiven. This financing may be an important piece of the overall pie of money communities must assemble to bring their visions for climate solutions to fruition.
At Greenlining, we have been closely following the creation of the GGRF. Through initiatives like the GGRF Equity and Governance Best Practices Alliance, in collaboration with partners such as Just Solutions Collective, Rewiring America, Emerald Cities Collaborative, and Natural Resources Defense Council, we advocate for environmental justice and work to ensure community-based organizations, representing and made up of LIDACs, have influence over where the GGRF is deployed. As an Alliance, we published the GGRF Awardee Best Practices for Equity and Governance Pledge as well as the GGRF Best Practices for Equity and Governance: A Guide for NCIF and CCIA Applicants, both aimed at advancing environmental equity across the entire field of applications for GGRF.
Additionally, we engaged directly with applicants to the NCIF and CCIA, collaborating as community engagement subrecipients with the Justice Climate Fund and serving as an advisory board member with Climate United. While the outcomes of these competitions remain to be seen, we remain optimistic that these efforts have established strategic objectives that will help ensure investments reach underserved LIDACs.
We’ve also weighed in on California’s specific strategy for deploying these resources. Alongside Just Solutions Collective, we submitted comments to the California Infrastructure Bank and the State Treasurer’s Office, aiming to optimize the state’s “Green Bank” structure, products, partnerships, and community engagement to maximize benefits to LIDACs.
Moving forward, in coalition with other members of the Alliance, we will closely monitor implementation to ensure GGRF resources reach LIDACs and finance projects that are driven by and directly benefit these communities. We also aim to foster a pipeline of community-centered projects eligible for GGRF investment by facilitating connections between communities and awardees, as well as securing funding for pre-development and technical assistance from philanthropic sources. We know these are the links necessary to ensure low-income communities and communities of color can fully participate in the transition to a more sustainable economy.
The GGRF presents an unprecedented opportunity for transformative investment in historically marginalized communities that disproportionately bear the burdens of climate change. As the announcement of competition winners looms, we are gearing up to harness this momentous opportunity. Stay tuned for more on ways to plug in and seize the full potential of this moment to support community-driven solutions.
