How Can Ohio Municipalities Navigate the Inflation Reduction Act?
Authored by Cassandra Clevenger, Deputy Director of Power a Clean Future Ohio
Ohio municipalities have a golden opportunity to reduce their greenhouse gas (GHG) emissions and support climate and clean energy projects through the Inflation Reduction Act (IRA). This comprehensive bill covers a wide range of topics related to climate and energy, including electric vehicles, building decarbonization, clean energy manufacturing and supply chains, agriculture, and greening the electricity system.
There are multiple avenues for Ohio communities to navigate the bill. One of those is to access funding from federal agencies through several provisions in the legislation. Another way is to maximize tax credits and grants for vehicle and building electrification and distributed energy generation for residents. Additionally, some funds will be routed through states and state energy offices, tasked explicitly with administering two broad rebate programs for which individuals and building owners are eligible. Local governments with municipal utilities are now eligible to benefit from the IRA’s clean energy tax credits. Communities near ports can benefit from appropriations for port decarbonization. Finally the IRA has set-asides for disadvantaged and low-income communities, as well as "energy communities."
Direct Pay is one of the many funding opportunities available under the IRA that aims to reduce greenhouse gas emissions by 40% by 2030. It is noncompetitive funding and enables tax-exempt entities to directly capture tax credit incentives for clean energy. Eligible parties are treated as if they "overpaid" on a tax return, making projects directly owned by tax-exempt entities significantly more affordable than ever before. Direct Pay strengthens the role that cities play in community clean energy deployment because tax credits are received as cash payments directly from the federal government. Tax credits and adders align with public policy goals, such as supporting American businesses and ensuring clean energy benefits low-income communities. Direct Pay is open to all state, local, and tribal government subdivisions, as well as any 501(c)(3) organization, opening up new partnerships and alignments for clean energy funding.
The IRA allocates $394 billion for climate and clean energy funding through tax credits, competitive grants, loans, and direct payments to federal agencies. However, applying for funding can be a daunting task. The application process for many programs will take anywhere from 60 to 180 days, and the time between the Notice of Funding and the application due date can be particularly challenging. Moreover, tax credits and their adders can be quite complex and may require expert assistance.
Communities with climate goals and equitable action plans are more likely to succeed in securing funding. By staying up-to-date with program criteria and funding notices, municipalities can take advantage of the various funding mechanisms provided by the bill and make significant progress towards a sustainable future.
To maximize the benefits of the IRA, local governments should develop new plans and enhance existing ones. Developing a comprehensive strategy for utilizing funding from multiple avenues can help to complement your current plans and vision. Collaboration takes time, and regionalization can help make smaller communities more competitive. The cities must be prepared with potential projects, or they will find it hard to capitalize on this funding.
The Inflation Reduction Act allows Ohio municipalities to reduce their GHG emissions and receive funding for climate and clean energy projects. By developing climate goals and equitable action plans, staying up-to-date with program criteria and funding notices, and carefully planning their funding applications, municipalities can make significant progress toward reaching their climate goals and creating a more sustainable future for their communities.
Additional Resources
How states and cities can benefit from climate investments in the Inflation Reduction Act
As with the IIJA, the Inflation Reduction Act’s policies and investments will require states, local governments, and the federal government to collaborate in order to achieve the most transformative results. To maximize the act’s impact on emissions and ensure frontline communities are centered in its implementation, state and local governments must partner with federal agencies as key funding streams and programs are launched. This issue brief provides descriptions of relevant programs, funding amounts, and key cost-sharing requirements for state and local governments where applicable.
Cities & the Inflation Reduction Act
The Inflation Reduction Act (IRA) is a large climate legislation that covers a range of topics such as electric vehicles, building decarbonization, clean energy manufacturing, and supply chains. While not all legislation applies to local governments, this blog post explores six ways local governments can benefit from the IRA.
How Cities Can Make the Most of IRA Dollars — Episode 168 of Local Energy Rules
For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Amy Turner, Senior Fellow with the Cities Climate Law Initiative at the Sabin Center for Climate Change Law. They discuss how cities can use Inflation Reduction Act dollars to advance local goals — and should help their residents do the same.
Climate Mayors, a bipartisan coalition of nearly 500 mayors, and C40 Cities, a network of mayors of nearly 100 world-leading cities, released, “Climate Action and the Inflation Reduction Act: A Guide for Local Government Leaders,” a guidebook to help local leaders understand the landmark Inflation Reduction Act and all the resources available to them through the law. The guidebook – supported by Bloomberg Philanthropies – advises U.S. mayors and city staff on the opportunities for local governments, organizations, and businesses to implement the Inflation Reduction Act and address climate change.
