Interim Report – August 2023
The Greenhouse Gas Reduction Fund (GGRF) represents an historic investment in climate resilience and equitable economic development in the United States. The GGRF, managed by the U.S. Environmental Protection Agency (EPA), will provide $27 billion in grants to state, local, and tribal governments as well as not-for-profit financial institutions to mobilize financing for projects that reduce greenhouse gas (GHG) emissions, particularly where the benefits of such projects flow to low-income and disadvantaged communities (LIDCs).
To achieve the dual goals of the GGRF—to reduce emissions and to benefit low income and disadvantaged communities—the EPA, applicants seeking GGRF grants, and the ultimate grant awardees will need data, analysis, and best-practice models to refine their strategies and implement the public resources effectively.
CPI is undertaking a project to provide baseline data and neutral analysis to inform effective applications for, and subsequent deployment of, GGRF funds.
This interim report focuses on analysis of investment needs in LIDCs, down to the census tract level for the three priority project categories specified in the GGRF notices of funding opportunities:
- distributed energy generation and storage,
- net-zero emissions buildings, and
- zero emissions transportation.
Building on data produced by the Princeton Net-Zero America (NZA) project, we estimated investment needed in the GGRF priority project categories in order to achieve net-zero GHG emissions by 2050.
The investment needs start at $131 billion in 2023, increasing to $449 billion by 2030 and $761 billion by 2035. Estimated investment needs in LIDC census tracts account for about one-third of the total: $40 billion in 2023, $138 billion in 2030, and $234 billion in 2035.
Compared to these investment needs, CPI’s most recent Global Landscape of Climate Finance tracked just $82 billion in total U.S. climate finance on average annually in 2019-20, and BloombergNEF and the Business Council for Sustainable Energy identified $141 billion in overall US energy transition investment in 2022.
These needs estimates support GGRF applicants and awardees to make the case for and allocate funding, both geographically and across project types. The data supplement to this report includes breakdowns of the estimated investment needs at the county level, to allow applicants to focus on the specific geographies in which they operate and determine the relative amounts of financing needed in the different GGRF priority project categories and project types. The full interim report includes more information on potential use cases for GGRF applicants as well as important information on the limitations of these estimates. A workshop recording also includes an overview of the results and a demonstration of how to navigate the data supplement.
We also welcome feedback on how our estimates or the presentation of the data could be made more useful for developing applications for the GGRF competitions and/or executing on successful GGRF applications.
This interim report also identifies many of the key barriers to successful execution of GGRF-supported projects in LIDCs. These include:
- Constraints to the supply of finance in LIDCs, including lack of operational and financial capacity among community-based lenders, and perceptions of high credit risks that inhibit co-financing from larger financial institutions;
- Barriers to demand for financing from households, such as complementary needs for housing investment, lower homeownership rates, and distrust of external institutions; and
- Barriers to demand for financing from businesses, including constraints on access to financing and a lack of a workforce trained in executing climate projects.
These barriers need to be addressed with targeted technical assistance (TA) and appropriate financing structures. In particular, over the next 6-12 months TA is especially needed to generate project pipelines so that GGRF funds can be quickly deployed once grantees are selected and funding is disbursed. There is a particularly clear role for foundations to participate in this time frame to ready communities, lenders, and ecosystems for the implementation of the GGRF.
CPI will further develop this report in the coming months to offer more insights on many of the issues touched upon in this interim report, as well as to present case studies and recommendations for different GGRF stakeholders. The final report is expected to be published in late 2023.