The skinny on state and local funding in the Inflation Reduction Act

Photo by Airlangga Jati on Unsplash

Greetings, friends. While I was bouncing around on vacation last week in northwestern New Mexico and southern Colorado, observing first-hand the water shortage our warming climate has brought upon the region, President Biden signed a bill to start addressing this and many other environmental sustainability issues. The Inflation Reduction Act (IRA) marks the largest amount of federal funding ever allocated to address climate change—nearly $370 billion for climate and energy programs, including ​$5 billion in grants available to states and municipalities.

I’ve read the bill text (well, most of it) and this week’s newsletter will outline key new programs and funding opportunities for state and local governments. 

Environmental justice measures in the Inflation Reduction Act

Two programs in the IRA are specifically aimed at environmental justice measures and build upon existing programs passed in the Infrastructure Investment and Jobs Act (IIJA). 

The Neighborhood Access and Equity program is a competitive grants program with up to $1.9 billion to dole out for projects that improve connectivity/mobility, reduce urban heat effect, improve safety, and reduce greenhouse gas emissions, among other things. Priority is given to projects in communities that:

• Are economically disadvantaged, underserved, or located in an area of persistent poverty;

• Have entered or will enter into a community benefits agreement with representatives of the community;

• Have an anti-displacement policy, a community land trust, or a community advisory board in effect; or

• Have demonstrated a plan for employing local residents.

The grants, available until Sept. 30, 2026, will cover up to 80% of a project’s cost and cover 100% of projects located in disadvantaged communities.

The $2.8 billion Environmental and Climate Justice Block Grants are open for the same time period and available to nonprofits and local governments that are partnered with a community nonprofit. It funds “community led” efforts in:

• Pollution monitoring, prevention, and remediation;

• Investments in low- and zero-emission and resilient technologies and related infrastructure; and 

• Workforce development that helps reduce greenhouse gas emissions and other air pollutants.

It also provides funding for things like mitigating climate and health risks from extreme heat, climate resiliency and adaptation, and reducing indoor air pollution.

The takeaway: These programs build upon environmental justice initiatives in the IIJA and provide additional federal funding for states and localities to support those projects. Specifically, the Neighborhood Access and Equity program triples the amount of federal money available to support retrofitting or demolishing highways and other infrastructure that cuts off or divides communities. And the new block grants’ focus on community-led efforts means that engagement and participation from historically overlooked or hard-to-reach groups is critical. Once again, localities can tap existing federal funding to support that effort: either from their American Rescue Plan funds or technical assistance funding available through certain IIJA programs.

Further reading:

Harvard Law explains the IRA’s Environmental Justice Provisions

White House fact sheet on environmental justice in the IRA

Dan Vock’s take on the Neighborhood Access and Equity program

What else is in the bill for states and localities?

The IRA authorizes several new competitive grant programs aimed at reducing emissions, conserving water and renewable energy. It also funds a new state-administered home energy savings program, as well as boosts funding for existing programs related to forestry conservation, controlling invasive species, and protecting habitats from extreme weather events. Here are the details.