How Can the Inflation Reduction Act Work for Communities?

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In late October, UC Berkeley’s Othering and Belonging Institute (OBI) launched its Climate Justice webinar series. The first webinar featured panelists who spoke about how the Inflation Reduction Act (IRA) came to be, what it’s missing, and how communities can take advantage of the opportunities the act presents.

The first speaker was Johanna Bozuwa, executive director of the Climate and Community Project, a policy think tank developing research at the intersections of inequality and climate. Bozuwa provided an overview of the policies and movements that led to the IRA’s passage, beginning with the Green New Deal and the November 2018 sit-in of Representative Nancy Pelosi’s office, led by young activists from the Sunrise Movement and backed by Representative Alexandria Ocasio-Cortez. The Green New Deal helped the nation and lawmakers imagine something that was expansive by connecting climate policy, justice, and industrial policy for the first time. “It created this re-engagement and excitement around climate policy,” said Bozuwa.

The Green New Deal also coincided with publication of the 2019 UN’s Intergovernmental Panel on Climate Change (IPCC) special IPCC report. The IPCC publishes these comprehensive reports every 6-7 years to provide policy makers with socio-economic, technical, and scientific knowledge about climate change to help inform rulemaking on the issue. This special report provided policy makers with a warning that limiting global warming to 1.5°C was crucial to slowing sea level rise and other potentially irreversible climate impacts. The most recent report, published earlier this year, was the Sixth Assessment Report, which focused on adaptation and vulnerability. Shortly after release of the 2019 report, youth from 150 countries came together for a global demonstration to protest the inaction of governments across the world on climate change. In early 2020, the global COVID-19 pandemic hit, bringing to light various compounding inequities, including health inequities and the widening wealth gap as frontline workers were tasked with being our nation’s lifelines. “We need to build back from the COVID crisis, but also integrate that with a climate perspective, “said Bozuwa.

At the beginning of 2021, newly elected President Biden was settling in, and one of his first efforts was the Build Back Better (BBB) bill. BBB was smaller than the Green New Deal but took certain elements from it. It earmarked money for public housing retrofits, had a decarbonization plan, and integrated medical justice. However, the bill did not pass Congress; instead, elements of it were integrated into the Inflation Reduction Act. Though the act has a much smaller scope than the Build Back Better bill, it includes unprecedented, historic climate spending.

 

How we can influence the IRA

The IRA includes various provisions intended to help marginalized communities and will offer grants and other incentives to state and local governments to reach them. For example, it sets aside $2.85 billion for underserved farmers, foresters, and ranchers. Tribal governments can access such funds to reduce air pollution. The act also institutes high labor standards that communities can utilize as a pathway to green jobs and includes climate finance mechanisms like the Greenhouse Gas Reduction Fund, which has carve outs for environmental justice communities.

There is ample opportunity to mold the IRA’s funding landscape as funding guidelines are currently being set, but community organizations and local government must take advantage of public engagement opportunities. For example, the Greenhouse Gas Reduction Fund hosted listening sessions earlier this month, and its request for information is open until December 5. Various public dockets of the Environmental Protection Agency (EPA) are calling for input. “There are also real opportunities to work with labor organizations, to work with community groups, to build really powerful community benefits agreements,” said Bozuwa.

“There’s work to be done and opportunities here, but it takes organizing,” said John A. Powell, executive director of the OBI and the next speaker on the webinar. “That organizing looks like commenting on the ranks of rulemaking, creativity, and organization.” Other pieces of legislation, like the American Recovery and Reinvestment Act of 2009, were not readily accessible to marginalized communities despite being touted as so, Powell points out. The 2009 act raised the national debt and did little to help the unemployment rate. Learning from these lessons, the IRA instead provides tools that communities can use to address environmental justice, climate challenge, economic development, and wealth disparities. For example, tools like the climate justice block grants, which total $2.8 billion, aim to help community-based organizations overcome persistent environmental challenges.

Another positive impact that the IRA will have on communities is equitable solar deployment. Energy efficiency rebates for low- and moderate-income homeowners can be a powerful economic development tool, as Joe Recchie, CEO of Praxia Partners and another webinar speaker, points out. The IRA includes tax credits for investments in energy storage, reducing the capital cost of installing solar panels, which, according to Recchie, has dropped “by 85 percent, almost 90 percent in the last 12 years,” making it possible to deliver cheaper, reliable solar power to consumers around the country. Importantly, the tax credit operates without a cap—meaning there is no upward limit to how much money can be utilized in the form of tax credits over the next 10 years. For Congress to pass this measure, they had to calculate the tax revenue that would be lost through the use of these credits. However, these IRA credits are just one base level of resources that can help marginalized communities. To further expand the resources that marginalized communities can access, private investment can play a key role. Recchie points out, “there’s the ability to expand significantly from the original contours of the Inflation Reduction Act to meet the requirements of communities and especially those environmental justice communities.”

There is also an opportunity to bring private investment to the table, helping to amplify and accelerate the act’s legislative commitments and create living wage jobs. Recchie uses Cleveland Ohio as an example. Using statistics assessed and developed by Ohio University and the EPA’s co-benefits risk assessment model, he explains that if the city deployed 100 megawatts of equitable solar development, it would not only reduce carbon emissions, but also create 1,500 living wage jobs, $292 million in local economic impact, and $419 million of health benefits for the region. “100 megawatts is just a placeholder—it could be a hundred times that in communities around the country,” said Recchie. “The IRA has embedded tools that permit [it] to punch way above its weight.”

One key feature of the IRA is that it is a reconciliation bill, meaning that everything stemming from the bill must be attached to funds or supported by private investment. However, the act creates ways to connect incentives. For example, an energy company can’t access the full amount of renewable energy incentives if it doesn’t pay its workers a prevailing wage or invest in an environmental justice community.

Although state governments can reject IRA funding, which would be detrimental to communities that need it most, the act has some work arounds. (In Republican-led states, IRA rejection is prevalent.) In particular, subsidies can flow directly to nonprofits, corporations, or local governments. “So, it means that we’ll have to leverage and mobilize our communities to use what is available while also doing the political organizing that’s necessary,” said Bozuwa.

 

Centering climate justice wisdom in IRA implementation

The IRA earmarks funding for Indigenous nations—specifically for light rail, rural electrification, and solar. The act also earmarks funding for forest management and can provide a pathway to incorporating traditional ecological knowledge into this area. State and local governments can play a big role in securing funding to create intergovernmental partnerships with Indigenous nations.

Sarita Turner, Senior Fellow at Prosperity Now, pointed out that the clean energy job sector is steadily outpacing the traditional energy sector. However, “data collection on the climate economy, including the participation for Black- and Brown-owned businesses, is almost non-existent,” said Turner.

As IRA funding gets dispersed, it remains crucial to understand who is benefiting from these funds, as disparities exist. For example, the Small Business Association has dispersed nearly $40 billion in disaster loans in racially inequitable ways since 2001, an E&E analysis concludes. White-majority areas received billions more dollars to rebuild than majority Black areas after natural disasters. “This landmark legislation offers an opportunity to engage Black and Brown communities in the economic benefits of the climate economy,” said Turner. She goes on to say, “The EPA needs to carefully think about how it can commit to working with entities like the African American Alliance and the [newly formed NALCAB initiative] National Alliance of Latino CDFI Executives.”

Ann Pratt, senior strategist of the People’s Action Network, was the webinar’s last speaker. The organization builds the power of poor and working people in urban, rural, and suburban areas to win change through issue fights and elections. Pratt shared the network’s views on establishing programs based on communities’ needs, and how they could potentially go about seeking funding for such programs from the IRA. For example, the network is working on an overland flooding initiative in Ohio that has accessed funds from the Bipartisan Infrastructure Bill and is seeking opportunities to access IRA funds. A partnership between local government and PA Stands Up, the Pennsylvania-based Whole Home Repair Program, used American Rescue Plan Act funds to provide homeowners and small landlords with money to upgrade their homes. The program’s success was credited to a commitment to long-term development and co-governance. It offers a framework that can be applied when tapping into IRA funds. “Who leads, how they lead, and what they’re leading is hugely significant,” said Pratt. Such issues can make or break the success of attempts to use IRA dollars in local communities.

The series wrapped up by sharing a resources page, which includes NPQ’s latest climate justice magazine. The IRA is a critical piece of legislation that provides a variety of pathways toward environmental justice. Organizing around public engagement opportunities, tapping into private investment, and aligning with key leadership are some of the strongest ways that communities can access all that the IRA has to offer.