What’s Next for Federal Climate Funding and Where We Go From Here

While funding priorities will change with the new administration, federal and state government investments will continue. The Hub is here to help you make projects happen in your community. We have been having several conversations with government professionals in our network and reviewing transition papers. The following is our best understanding of how projects may move forward in the next four years:

Grants

Grants under the Inflation Reduction Act generally are “one-and-done,” though not all programs have disbursed all of their funds. Grant funds under this policy may be at risk if they have not yet been obligated. Columbia University’s Sabin Center for Climate Law has an IRA Tracker which shows which funds have been spent. 

The Bipartisan Infrastructure Law (BIL) has established several programs, and expanded funding for dozens of other existing programs, but since the legislation has only authorized five years of funding and we are currently entering the fourth year, these programs are in jeopardy. There is more bipartisan support for this legislation, but communication with your federal representatives regarding successful projects supported by both IRA and BIL will help to make the case for their continuation. 

If you have been awarded a grant under IRA or BIL but do not yet have the funds in hand, contact your program administrator now to try to establish an agreement and draw down these funds.

Some IRA and BIL funds have been granted to intermediaries who are now administrating grant processes. EPA has disbursed funds to regional funders that are administrating the Thriving Communities grant funds for assessment, planning, and implementation ranging from $75,000 and $350,000. Applications are on a rolling basis with one deadline on December 30, 2024 and another in April 2025. 

Another, recently announced, pool of funding is ClimateUnited NEXT, which provides $300,000 grants for predevelopment including feasibility and environmental impact studies, project planning, technical assistance for funding opportunities, and community engagement. The deadline for the first tranche of funding is January 10, 2025. 

Financing

The Greenhouse Gas Reduction Fund (GGRF) awarded $20 billion to national and community lenders through two programs that are now capitalized and poised to begin lending. The $14 billion National Clean Investment Fund (NCIF) is for large-scale clean technology financing, and is administered by three intermediaries – Climate United Fund, Coalition for Green Capital, and Power Forward Communities. Recently, Coalition for Green Capital held a webinar outlining their request for proposals, which included guidance that projects should be in the $50 - 300 million range. Other lenders are rolling out programs and financing, including the grant programs through Climate United, mentioned above. 

The Clean Communities Investment Accelerator (CCIA) provides $6 billion to capitalize community lenders and to provide technical assistance to support clean technology deployment specifically in low-income and disadvantaged communities. It is administered by five intermediaries - Opportunity Finance Network, Inclusiv, Justice Climate Fund, Appalachian Community Capital, and Native CDFI Network. These funds will be made available to low-income and disadvantaged communities, and will be focused on distributed energy, net-zero buildings, and zero-emissions transportation projects. 

The Green Bank for Rural America, a project of Appalachian Community Capital, has launched it’s lending as of December 4. This organization is focused on making loans to community lenders in the Appalachian region and beyond. Additionally they will also fund technical assistance for six target areas including Financing Strategies and High Performance Buildings. 

GGRF also awarded funds to states for Solar for All, a program designed to expand access to solar for low-income households. In Pennsylvania, the Energy Development Authority is administrating a $156 million program to provide solar installations for 14,000 households over a five year period.  

GGRF funds have already been awarded; lenders and states are developing programs to disperse them. As such, it is legally difficult for the federal government to claw them back.

Tax Credits

The tax credits available through the Inflation Reduction Act, which allow for 30% - 70% of the cost of renewable and clean energy projects to be re-captured are currently in operation until 2032, and have bipartisan support. These credits are available to municipalities and non-profit organizations in the form of direct payments, and to for-profit organizations as transferable (and sellable) tax credits. 

The direct pay provision, which applies to 12 key credits, has made these incentives accessible to tax-exempt entities for the first time, with the Investment Tax Credit (ITC) and Production Tax Credit (PTC) emerging as particularly impactful tools for climate change mitigation.

The ITC provides a base credit of 30% for the cost of qualifying projects that meet labor requirements, with significant opportunities for enhancement through bonus credits. Projects can qualify for an additional 10% credit by meeting domestic content requirements, another 10% for location in energy communities, and between 10% to 20% for projects in economically distressed areas or on tribal lands. The PTC offers an alternative approach, particularly valuable for larger installations, providing 2.75 cents per kWh (2023 rates) for qualifying projects over a ten-year period. Organizations must carefully evaluate which credit structure best serves their needs. The ITC typically advantages smaller projects with higher upfront costs, while the PTC often benefits larger utility-scale facilities that can generate consistent production over time.

Clean vehicle and charging infrastructure credits have created a clear pathway for fleet electrification. Organizations can recoup 30% of electric vehicle costs, with caps of $7,500 for small vehicles and $40,000 for large vehicles. Charging infrastructure in qualifying areas can receive up to 30% reimbursement, capped at $100,000, specifically targeting non-urban areas and low-income census tracts that have historically seen underinvestment in clean vehicle infrastructure.

For implementation support, the Clean Energy Tax Navigator from Lawyers for Good Government (L4GG) provides guidance through the direct pay rules and filing process. The Hub has held workshops on direct pay, and will continue to support organizations utilizing these tax credits.

Earmarks

Now operating under the names "Community Project Funding" in the House and "Congressionally Directed Spending" in the Senate, earmarks continue to provide viable funding pathways despite recent constraints. The FY2025 process will likely operate within more strict parameters, with allocation limited to 1% of discretionary spending and prohibiting awards to for-profit entities. Submissions for this funding is typically due between February and March 2025 and is accessed via your federal representative.

The FY2024 cycle demonstrated the ongoing vitality of this funding mechanism, with over 8,000 approved earmarks totaling $14.6 billion. While the total funding decreased by 4.6% from the previous year, reflecting broader fiscal constraints, the number of approved projects actually increased by 12%, indicating continued strong support for local project funding through this channel.

State Funding

No matter the federal landscape, Pennsylvania has robust funding mechanisms for clean energy and development projects, headlined by the RISE PA Program. This $396 million initiative targets industrial decarbonization, addressing the state's largest emissions sector which currently accounts for 30% of total greenhouse gas emissions. The program supports a comprehensive range of interventions, from industrial electrification and efficiency improvements to low-carbon fuel adoption, on-site renewable energy development, and carbon capture and storage implementation. This program is available to owners of industrial facilities as well as landlords - such as municipalities that own industrial parks. These funds have already been allocated to the Commonwealth, and awards are underway. 

For industrial facilities seeking to reduce emissions by at least 20% annually, RISE PA offers Medium-scale awards (MAT) of $300,000 to $20 million and Large-scale awards (LAT) of $20-110 million. Project funding comes in three forms:the Base Grant Award is 30% of total project costs with potential bonus awards up to an additional 30% for a Community Benefits Bonus (10%), Fair Labor Bonus (10%), and GHG Reduction Bonus (up to 10% for reductions over 20%).

Applications are reviewed on a rolling basis until all funds are obligated. Applications must be submitted through the Department of Community & Economic Development's Electronic Single Application system at grants.pa.gov. For optional pre-screening support up to 3 months before applying, email RA-EP-CPRG@pa.gov with your project concept. Contact RISE PA Director Louie Krak at lkrak@pa.gov or 717.787.6107 for application guidance and support.

Funding from programs at the PA Department of Community and Economic Development is available, with some new programs coming online, and others that align well with federal programs, such as direct pay. The Hub has assisted communities with Local Share Account applications, funding from gambling revenues which can fund many phases of a project from planning to construction. Pennsylvania Strategic Investments to Enhance Sites Program (PA SITES) is a site development program open to municipalities, non-profits, economic development organizations, and even for-profit organizations, which provides either planning or construction and development funds for specific sites. 

Local Government Capital Project Loan Program offers targeted support for smaller communities. This program provides low-interest loans at 2% for local governments serving populations under 12,000, supporting both equipment purchases and facility development with terms extending up to 15 years. These loan funds can be utilized as bridge financing for investments that may be partially reimbursed by direct pay.

The Hub team stands ready to assist municipalities and organizations in navigating these complementary funding streams and developing comprehensive project financing strategies that maximize available resources while meeting community needs.