EPA’s Greenhouse Gas Reduction Fund

INSIGHTi

EPA’s Greenhouse Gas Reduction Fund

Updated February 14, 2023

On August 16, 2022, President Biden signed H.R. 5376 (P.L. 117-169), a budget reconciliation measure

commonly referred to as the Inflation Reduction Act of 2022 (IRA). IRA contains eight titles, each with

some provisions that directly or indirectly address issues related to climate change, including the

reduction of U.S. greenhouse gas (GHG) emissions and the promotion of adaptation and resilience to

climate change impacts.

IRA Section 60103: Greenhouse Gas Reduction Fund

Section 60103 of IRA (codified at 42 U.S. Code §7434) amends the Clean Air Act to provide for a

Greenhouse Gas Reduction Fund (GHGRF) to be administered by the U.S. Environmental Protection

Agency (EPA). The provision appropriated $27 billion to EPA for FY2022, out of any money in the

Treasury not otherwise appropriated, to remain available until September 30, 2024, to make grants, on a

competitive basis, as follows:

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$7.0 billion to states, municipalities, tribal governments, and eligible recipients for the

purposes of providing grants, loans, or other forms of financial assistance, as well as

technical assistance, to enable low-income and disadvantaged communities to deploy or

benefit from zero-emission technologies;

$11.97 billion to eligible recipients for the purpose of providing financial and technical

assistance for qualified projects;

$8.0 billion to eligible recipients for the purpose of providing financial and technical

assistance for qualified projects in low-income and disadvantaged communities; and

$30.0 million for agency administrative costs.

IRA defines “eligible recipient” as a nonprofit organization that

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is designed to provide capital, leverage private capital, and provide other forms of

financial assistance for the rapid deployment of low- and zero-emission products,

technologies, and services;

does not take deposits other than deposits from repayments and other revenue received

from financial assistance provided using grant funds under the IRA;

is funded by public or charitable contributions; and

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invests in or finances projects alone or in conjunction with other investors.

IRA defines “qualified projects” to include any project, activity, or technology that reduces or avoids

GHG emissions and other forms of air pollution in partnership with, and by leveraging investment from,

the private sector.

Eligible recipients that meet the above definition may use the grant funding for

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direct investments in the form of financial assistance for a qualified project or

indirect investments in the form of funding and technical assistance to support new or

existing public, quasi-public, or nonprofit entities that in turn provide financial assistance

to qualified projects at the state, local, territorial, or tribal level, including communityand low-income-focused lenders and capital providers.

IRA directs EPA to begin this process not later than 180 calendar days after the date of enactment (i.e., not

later than February 12, 2023). Section 60103 does not explicitly clarify which additional requirements

apply to EPA or its grant recipients, such as the general federal requirements for grants and agreements.

EPA Implementation

Upon enactment of IRA, EPA launched a stakeholder engagement strategy to help shape implementation

of the GHGRF. EPA conducted listening sessions for members of the public and stakeholder groups on

November 1 and November 9, 2022. EPA published a Request for Information seeking public comment

on core design aspects of the GHGRF. Further, EPA delivered a set of formal charge questions for expert

review and comment at the October 18-19, 2022, meeting of the agency’s Environmental Financial

Advisory Board (EFAB). On January 26, 2023, EFAB submitted guidance and considerations to EPA

regarding the GHGRF’s potential objectives, program structure, execution, reporting, and accountability.

In its review, EFAB assessed the strengths and weaknesses of various design elements of the fund

including leverage, additionality, capital recycling, capacity building, and long-term operability across

various recipient types including states, municipalities, tribes, regional collectives, sectoral collectives,

lender intermediaries, and a national entity.

On February 14, 2023, EPA reported initial guidance on the design of the GHGRF program. EPA

announced plans to hold two competitions to distribute the grant funding: a $20 billion General and LowIncome Assistance Competition and a $7 billion Zero-Emissions Technology Fund Competition. It

expects to release Notices of Funding Opportunity for these competitions in early summer 2023.

Green Banks

Statutory provisions for the GHGRF reflect the characteristics of entities commonly referred to as “green

banks.” Green banks are relatively new types of financial institutions aimed at overcoming market

barriers and scaling up investment in low-carbon technologies and climate-resilient infrastructure. In

general, green banks may be public, quasi-public, or nonprofit institutions that are publicly capitalized to

facilitate private investment and produce revenue to be used for further investments. Green banks

typically do not exist to make a profit and as such may be able to help reduce the cost of capital, mitigate

risk, and provide more favorable lending rates to incentivize investments. They can offer loans, leases,

credit enhancements, and other financing services either directly to project management entities or

through financial intermediaries.

Governments have created green banks in various national and local contexts to achieve a range of goals,

including meeting GHG emissions targets, supporting local community development, lowering energy

costs, developing low-carbon and climate-resilient technology markets, creating jobs, and lowering the

cost of capital for specified investments. Governments have established green banks at the national level

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(e.g., Australia, New Zealand, Malaysia, Switzerland, and the United Kingdom), at the state or district

level (e.g., California, Connecticut, Hawaii, New York, Rhode Island, and the District of Columbia), and

at the county level (e.g., Montgomery County, MD). Some of the above-listed green banks—as well as

some other financial institutions—may meet the definition of eligible recipient under Section 60103 of

IRA, whereas others may qualify to receive indirect investments.

Past Congressional Proposals

Proposals for a national green bank in the United States reach back at least to the 110th Congress (e.g.,

H.R. 6078 and H.R. 6899). In the 117th Congress, at least four bills were introduced on green banks prior

to IRA, including H.R. 806, S. 283, S. 685, and S. 1208.

Past congressional proposals for a national green bank have differed among themselves and from existing

entities in significant ways, including, but not limited to, (1) the amended statute; (2) legal status; (3)

specific project or recipient eligibility; (4) project prioritization; (5) means of capitalization; and (6)

governance, administrative, and oversight structure. The establishment of a national green bank would

likely require decisions among the various policy options within these items.

Author Information

Richard K. Lattanzio

Specialist in Environmental Policy

Disclaimer

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