EPA Announces Detailed Framework for the Greenhouse Gas Reduction Fund

The U.S. Environmental Protection Agency (EPA) has taken a major step in implementing the $27 billion Greenhouse Gas Reduction Fund (GGRF), one of the largest investments in the Inflation Reduction Act to combat climate change, advance environmental justice, and accelerate the transition to an equitable clean energy future.

Building on guidance released earlier this year, EPA proposed an Implementation Framework for the GGRF that outlined its plans to create three programs:

• The $14 billion National Clean Investment Fund (NCIF) will make 2-3 awards to national nonprofits that will provide financing to businesses, communities, community lenders, and others to deploy low- and zero-emission projects. In accordance with Justice40 principles, at least 40 percent of NCIF investments must benefit low-income and disadvantaged communities (LI/DAC). EPA identified three categories of priority projects for NCIF funding, including decarbonization of existing buildings, decarbonization of transportation, and distributed power generation.
• The $6 billion Clean Communities Investment Accelerator (CCIA) will make 2-7 awards to “hub nonprofits” that will rapidly expand the clean finance ecosystem by providing funds to community lenders that have the experience, expertise, and relationships needed to rapidly deploy capital in underserved markets. Community lenders are defined as community development financial institutions (CDFIs), credit unions, green banks, housing finance agencies, minority depository institutions, and others. These hubs will provide the capitalization funding and technical assistance to community lenders to get projects off the ground. Unlike the NCIF, however, EPA has proposed that funds may only be used for the three priority project categories identified above. Notably, the entire CCIA is dedicated to projects in LI/DAC.
• The $7 billion Solar for All (SFA) program, which will provide up to 60 grants to states, Tribal governments, municipalities, and nonprofits to deploy residential and community solar, storage, and enabling upgrades in LI/DAC. Funds may be used for both financial and technical assistance, and the former may include subgrants, rebates, subsidies, other incentive payments, or loans.

EPA has proposed a detailed framework that incorporates many of the principles we have championed, including orienting the program around equity and Justice40 principles; recognizing the critical role that both green banks and community-based lenders like CDFIs and credit unions can and should play; and prioritizing certain types of high-impact, community-based projects. But there’s significant room for improvement.

On May 12, NRDC submitted comments to EPA in response to the proposed framework, identifying key recommendations to maximize the GGRF’s impact. Highlights include:

• EPA must develop a more comprehensive, better-resourced, and strategic approach to technical assistance (TA) across the programs. There needs to be significant investment in market support, ecosystem development, and demand generation to complement the GGRF financing capital – this should happen both within GGRF programs and in connection with other existing TA programs housed at EPA, DOE, HUD, and other agencies. TA needs to be increased and thoughtfully coordinated throughout the three GGRF programs. As proposed, the $14 billion NCIF would not allow funds to be used for TA, while funding provided through the $6 billion CCIA would be limited. EPA must consider the robust TA and market support needed to build demand for GGRF financing in all areas of the country – the last thing we want is to earmark all GGRF capital for financial assistance that cannot be deployed to reduce GHG emissions and deliver benefits to communities thus far overlooked by clean energy financing. These types of investments include market support and TA at both the national and community lender level, as well as TA support at the project level. EPA should also allow for greater use of funds for predevelopment expenses which are critical to moving projects forward and ultimately making them financeable.
• Higher and more flexible capitalization funding and TA awards for community lenders in the $6 billion CCIA to truly induce market transformation. As proposed, CCIA nonprofit hubs can only award $5 million to individual community lenders for capitalization funding and a corresponding limited amount of TA investment. This cap is artificially low and would limit both the reach and potential impact of GGRF dollars in LI/DAC and limit market transformation. In addition, EPA has currently limited funding to the three priority project categories described above. Community lenders should have flexibility to respond to their local circumstances and go beyond the three priority categories where applicable, as long as they align with a clear methodology detailed by EPA for vetting projects and technologies, or invest in projects deemed “safe harbor”.
• Energy efficiency must be an eligible use of funds in the $7 billion SFA. We strongly believe that in order to realize the benefits of the SFA program in LI/DAC, EPA should affirmatively recognize energy efficiency as an “enabling upgrade". By pairing solar deployment with energy efficiency improvements, the GGRF can meaningfully reduce energy burdens, maximize the number of households with access to solar by right-sizing projects, and reduce overall deployment costs.
• EPA should develop and maintain a list of “safe harbor” projects and technologies, deem others ineligible, and provide guidance on an acceptable methodology and process community lenders can use to assess projects/technologies not currently considered. EPA has succeeded in setting priority categories, including decarbonization investments in existing buildings which is a significant driver of GHG emissions across the country. But it has yet to provide guidance on “safe harbor” projects/technologies that would be considered eligible for GGRF, nor has it ruled certain technology categories ineligible. To truly deliver on the program’s equity and environmental justice goals, EPA must disallow funds from being used for technologies like carbon capture, which allow for continued use of fossil fuels – generally in LI/DAC. Finally, providing guidance on an acceptable methodology and process for evaluating projects/technologies not currently considered would give community lenders a clear pathway for responding to local needs while delivering on the overall goals of the GGRF.

NRDC urges EPA to take these and other matters raised in our comments into consideration as it finalizes GGRF program design. This program has unprecedented potential to deliver real, lasting benefits for both the climate and communities. We look forward to working with our partners in the weeks, months, and years ahead to ensure the GGRF realizes this potential.