One of the Inflation Reduction Act's (IRA) notable features is the creation of a Greenhouse Gas Reduction Fund (GGRF). This fund could create a mechanism to quickly disburse up to $27 billion to clean energy technologies, without undergoing the sometimes laborious reviews required by the National Environmental Policy Act (NEPA). IRA § 60103.
The GGRF would allow the EPA Administrator to disburse $20 billion to "eligible recipients," which are defined as non-profit green banks that "provide capital, including by leveraging private capital, and other forms of financial assistance for the rapid deployment of low- and zero-emission products, technologies, and services." Id. Among these $20 billion, $8 billion would be dedicated to providing financial and technical assistance in low-income and disadvantaged communities. Id. Additionally, this provision of the IRA allocates $7 billion for the EPA Administrator to provide to either states, municipalities, tribal governments, or "eligible recipients." Id.
Because the IRA does not establish a minimum or maximum number of grant recipients—it only mandates that the Administrator make the grants "on a competitive basis"—it is conceivable that all the funds could be disbursed to a single National Green Bank. This potential model bears several similarities to the $27 billion Clean Energy and Sustainability Accelerator the White House previously announced as part of the American Jobs Plan (AJP), which we have previously covered. Indeed, the GGRF has been lauded by members of Congress who previously proposed the creation of a National Climate Bank or Clean Energy Accelerator as part of the AJP,[1] who have noted that the GGRF could be used to launch a National Green Bank.[2]
A central bank is only one option. The Administrator could also fund several regional banks, or provide additional capital to pre-existing green banks in states like Connecticut and New York.[3]
Whether central or regional, proponents of the green bank model are optimistic about the model's ability to increase the pace and scale of investment. For this reason, proponents of the green bank model sometimes refer to the model as an "accelerator" given the ability for these funds, through focused investments, to "accelerate" investment in certain clean energy technologies. Those champions believe that an investment in a National Green Bank (or several regional green banks) will catalyze additional private spending, and result in a larger proportional increase in the development and deployment of clean energy technologies. Accordingly, if the initial investments and grants are successful, the green banks may be self-perpetuating and not require additional appropriations from Congress.
Finally, there is some optimism that this green bank model could result in streamlined funding for certain projects. Because the EPA administrator would be providing funding directly to the green bank(s)—not to the qualifying emissions-reduction projects—there is no federal government involvement in the administration of loans, grants, or other financial assistance for these projects. While the initial decision by the administrator to provide financing to a green bank or state, local, or tribal government might itself be subject to some sort of judicial or environmental review, the subsequent disbursement of funds from the green bank would not be a "federal action." Without "federal action," NEPA's environmental analysis requirement may be inapplicable, accelerating the timeline by which capital could be transferred to certain clean energy projects. While it is debatable how much NEPA currently slows down environmental permitting, streamlining the permitting process for energy projects is a priority for certain key members of Congress. Notably, in Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin's (D-WV) joint statement announcing the IRA, the senators explained that they have an agreement with President Biden and Speaker of the House Nancy Pelosi (D-CA) to "pass comprehensive permitting reform legislation before the end of this fiscal year." This emphasis on speed echoes and underscores the IRA's commitment to rapid decarbonization.
[2] The statement of Senator Chris Van Hollen (D-MD), one of a the GGRF's key proponents, seems to imply that the law is meant to create a National Green Bank.
[3] Senator Van Hollen has previously referred to the success of state-level green banks when discussing his proposed Clean Energy And Sustainability Accelerator.