EPA Takes First Steps to Stand Up Greenhouse Gas Reduction Fund
Agency Aims to Open Fund for Solicitations This Summer
The U.S. Environmental Protection Agency (EPA) on Feb. 14, 2023, announced key parameters for the two grant competitions authorized by the Inflation Reduction Act (IRA) to award $27 billion to leverage private capital for clean energy and clean air investments across the country. The EPA expects to open the Greenhouse Gas Reduction Fund (Fund) for solicitations for funding by summer 2023, and funding must be obligated by September 2024.
The IRA authorized the Fund, a clean energy development fund under the direction of the EPA. The Fund is split into two programs: 1) $7 billion in competitive grants for the Zero-Emissions Technology Fund; and 2) $19.97 billion for the General and Low-Income Assistance Fund. Both programs will make funding available on a competitive basis for financial and technical assistance for projects that reduce or avoid greenhouse gas emissions and other forms of air pollution, with an emphasis on projects in low-income and disadvantaged communities.
The overarching objectives of the Fund are to 1) reduce emissions of greenhouse gases and other air pollutants; 2) deliver benefits to low-income and disadvantaged communities; and 3) mobilize financing and private capital to stimulate additional deployment of greenhouse gas and air pollution reducing projects.
The EPA announced initial guidance that it will award two to 15 grants through the $19.97 billion program. This likely puts to rest the notion that one entity, namely the EPA, would be the sole entity dispersing out the nearly $20 billion. Based on this initial guidance, it appears the EPA has chosen to go for a more regional approach vs. central control, although EPA Administrator Michael Regan recently said that the creation of a national "green bank" to fund climate-friendly projects was not off the table despite the fact that the agency is considering issuing multiple grants.1 These grants will go to "eligible recipients" who are defined as nonprofit organizations that are designed to provide capital, leverage private capital and provide other forms of financial assistance for the rapid deployment of low- and zero-emission products, are non-depositary entities, are funded by public or charitable contributions, and invest alone or with other investors.
If an entity is selected as one of the grant recipients, it will be charged with deploying the program's funds via a competitive grant process that is expected to open in the summer of 2023. It is expected that these entities will work with community financing institutions, credit unions and others to leverage public dollars with private capital.
For the $7 billion Zero-Emissions fund, the EPA will award competitive grants to states, tribes, municipalities and eligible nonprofit entities to enable the deployment of residential rooftop solar, community solar and associated storage and upgrades in low-income and disadvantaged communities. The EPA expects to award up to 60 grants under this competition.
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