It's up to states to implement IRA. Are they ready?

States don’t (yet) have the administrative capacity to smoothly
implement the ambitious policies in the IRA; in this episode,
policy strategist Sam Ricketts of Evergreen Action discusses how
federal programs can help them get there.


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transcript)


(Active
transcript)


Text transcript:


David Roberts


States are central to climate and energy policy. After the
failure of the Waxman-Markey climate bill in 2010, states carried
the torch of climate policy during the long decade that Democrats
were locked out of majority power in Washington, DC. Now that
Dems have actually passed some federal policy — and they are
unlikely to pass any more anytime soon — states are once again in
the spotlight, tasked with implementing that legislation to
maximize its effect.


This raises the obvious question of whether states have the
administrative capacity — the people, institutions, time, and
money — necessary to implement ambitious federal legislation
competently.


They do not, says Sam Ricketts, but they could, and there are
federal programs that can help them get there.


Nobody is better positioned than Ricketts to address the issue of
state readiness. He played a key role in Jay Inslee's
pathbreaking presidential campaign, which was built off of
successful policies in Washington and other states. Then, as
senior strategist for Evergreen Action, a nonprofit he founded
with other Inslee veterans, he helped shape the ambitious trio of
bills the Democrats have passed in the last year and a half: the
Infrastructure Investment and Jobs Act, the CHIPS act, and the
Inflation Reduction Act (or as advocates fondly refer to them,
Uncles Bill, Chip, and Ira). Now he’s working with Evergreen and
the Center for American Progress to educate and prepare state and
local lawmakers for the post-IRA world.


I've known Ricketts for years, and there's nobody who better
balances detailed knowledge of policy with a practical head for
advocacy and activism. I'm excited to talk to him about the
crucial role states will play in coming years, the kind of
administrative capacity they will need, and the types of federal
programs that can fund their capacity building.


So, enough of that. With no further ado, Sam Ricketts, welcome to
Volts. Thank you so much for coming.


Sam Ricketts


Thanks for having me, David. Pleasure to be with you.


David Roberts


I'm so excited to talk about administrative capacity, the sexiest
of all podcast topics loyal listeners know this is an ongoing
obsession of mine.


Sam Ricketts


They've come for the good stuff.


David Roberts


Yes, exactly. So get ready to jump in. So I want to talk about
state and local governments and whether they're up for this. But
first, let's just briefly talk a little bit about just how
central states and local governments have already been in climate
policy in the US. So after you and I, well remember all too well
the humiliating defeat of the Waxman-Markey Bill back in 2009,
2010. And after that, the sort of national scene was dead for ten
years and everyone was off in the wilderness. And the only thing
that was going on was states passing good legislation.


So maybe let's start by just talking about those states being
kind of the laboratories for democracy as it were and how the
states sort of pioneered stuff and learned stuff that then went
into informing the federal legislation that was just passed.


Sam Ricketts


Indeed. So the first thing to your point, you mentioned that
states and local governments have long been sort of the nation's
leaders in developing and implementing climate and clean energy
policy. And we're going to talk about what they need to do next
in terms of implementation. But an important point, as you allude
to here, is the progress that's just been given to us from
Washington DC. The passage of Uncle Bill, Uncle Ira, Uncle Chip,
the three climate uncles, so to speak. And the other initiatives
that the Biden administration is advancing are really drawn from,
inspired by, informed by the progress that states and local
governments have made throughout the country.


And this progress, as you mentioned, really jump started over the
course of the last decade and sort of in the interregnum period
between the last attempt at climate legislation and this
ultimately very successful one. But it goes back further, right.
States began passing clean energy laws decades ago. Years ago. I
mean, the first renewable portfolio standard to require utilities
to start utilizing clean renewable electricity was actually
passed in Iowa 40 years ago. That activity last went through
states red, blue and purple alike through the 1990s. In the early
2000s, you really saw an uptick in states beginning to target
greenhouse gas climate pollution directly with laws that like
Massachusetts' Global Warming Solutions Act, notably, of course,
the AB 32 law passed in California in 2006, sort of set
economy-wide programs and sectoral programs advancing climate
action.


And then in the 2000s, after the last failed attempt at federal
climate legislation, you really saw this uptick. And states
really carried the ball in a number of different ways and in ways
that directly inspired the breakthroughs here. I mean, just a few
of the items. In 2015, Hawaii became the first state in the
country to pass a 100% clean electricity standard requiring
utilities to get to all carbon-free electricity on their grid.
And now over 20 states have that commitment in some form. About
15 have passed that requirement into law. And I would argue that
that underlies President Biden's most important climate
commitment that he's made and is trying to advance through both
legislative and executive means towards 100% clean electricity by
2035.


A couple of the other things that were passed by states and
indirectly informed things in IRA in particular were tax credits
tied to labor standards. So to ensure that we're building not
just clean energy and not just jobs, but clean energy supporting
good family wage, high quality jobs. And notably that was
inspired by things like the Clean Energy Transformation Act
passed in Washington state and signed by my former boss, Governor
Jay Inslee in 2019. You also see in IRA and throughout the Biden
administration's initiatives a prioritized investment in
disadvantaged communities to advance environmental and economic
justice and things like President Biden's Justice40 initiative,
which was itself directly inspired by the New York State Climate
Leadership and Community Protection Act that had that Justice40
commitment for New York that was also passed in 2019.


So there's this rush of legislative and policy making in the
second half of the last decade in particular, but really
throughout the course of it just one more item because it's a
favorite that really directly informs what we're seeing
implemented now. And IRA is connecticut in 2011 was the first
state in the country to establish a green bank. It's now been
created in 23 state and local governments, I believe. And that
directly, of course, inspired the creation of a greenhouse gas
reduction fund, a $27 billion program in IRA that again is going
to be now a critical tool for states and local governments to
leverage to build the clean energy economy flowing out of IRA
implementation.


So the first thing here is this progress that we now have so much
of. It builds on the foundation established by states and local
governments throughout the country. And now it's of course going
to be a critical thing for them to turn to, really being drivers
in implementation of these bills.


David Roberts


Yeah, I was going to say I wrote a piece for Vox a few years ago,
I talked to you for it about the sort of general turn in policy
thinking among climate people away from this sort of monomaniacal
obsession with carbon pricing to what I called Standards
Investments and Justice. SIJ never did quite get that term to
catch on. But it wasn't just an intellectual turn. It wasn't just
a sort of theoretical turn. It was very much states demonstrating
that this is the politics that works, right. You can bang your
head on that top-down carbon pricing wall over and over again.


It is the sector-by-sector standards and investments that work to
get political buy in. So this wasn't just an idle exercise. This
was very much showing the federal government what's possible and
what works.


Sam Ricketts


Totally. Can I just say, you wrote eloquently about standards,
investments, and justice. And really to your point, it's directly
informed by what's really borne out in practical terms,
particularly on state policy leadership, right? Both the politics
and the policy conspired here to show a better and a different
path that you're seeing inform the entirety of the Biden
administration's climate agenda. They have advanced robust
investments that are going to leverage even greater private
sector investments to catalyze this clean energy transition. They
are now utilizing federal administrative authorities to go after
sector by sector rules to ensure they're holding automakers
utilities, others accountable for following this clean energy
trajectory that's now available to them, especially with robust
public and private sector investment.


And then they've got this central commitment for the first time
at the federal level to justice this confluence of factors that
again is directly borne out and directly inspired by the
leadership of state and local governments throughout the country.
Which leads us to where I guess we've got to go next.


David Roberts


Let's go there then. So the federal government passed all this
stuff and I feel like everybody kind of gets on a general level
that it's states and localities that are going to have to
implement all this stuff but I think most people understand that
in a very vague way. So maybe let's flesh that picture out a
little bit. What are the kinds of things that federal legislation
does that the states and localities are going to be directly
responsible for administering?


Sam Ricketts


The first thing is the Biden administration. We hear a lot of
talk these days about Bidenomics and there were sort of a return
at long last of industrial policy at the federal level. Targeted
investments, economic strategies to really seize on the country's
strengths, develop and maintain the industries we're going to
need for a thriving and just and healthy economy.


David Roberts


Volts listeners or everyone else should go back and listen to my
podcast with Brian Deese a month or two ago all about that
subject.


Sam Ricketts


Totally. That was a great one and it really informs what's
happening now in Washington DC. But also at the same time seeing
industrial policy through in the country arguably has long been a
larger part of the role of states and local governments, right,
who implement federal dollars. I mean so many of the federal
programs we know and love, the federal funding programs we know
and love, be they Medicaid or education, energy and climate are
dollars that the federal government or federal agencies pass down
to states and to local governments and sometimes communities or
individual consumers. But so much of it flows through state and
local governments and then even the programs that don't directly
flow through those governments they need to be the ones to take
advantage of to help their companies and their consumers and
their communities take advantage of clear hurdles, plan for, and
execute on.


So there's three different types of investments I point to here
in these bills that are all going to be part of what states and
cities need to be administering or being attentive to as they do
so. And all of them are direct opportunities and some of them are
massive like untold opportunities. So there are direct grant
programs, there are financing programs and then there are tax
incentives and all of which state governments, local governments
need to be attentive to all three of these. So just give a few
examples. Direct grant programs. There's a few different programs
or actually a number of different programs of course in these
bills that are provided to state governments or to local
governments that they can then turn and leverage for climate, for
equity, for public health, for good jobs.


One is the Department of Energy has much discussed building
energy rebate programs. Two different programs, one supporting
energy, Home Energy Retrofits, another supporting electric
appliances. Those programs are actually being run by the
Department of Energy, but they're actually going to be dollars.
The Department of Energy first provides to all state energy
offices for those state energy offices to turn around and
operationalize, working with contractors, working with local
governments and providing consumers directly with rebates.
Another program is the Greenhouse Gas Reduction Fund, which I
mentioned is a program that combines a couple of different
elements, but there's an element of it that provides money
directly to states and local governments for them to deploy or to
set up programs to deploy solar and storage technologies in
disadvantaged communities.


A third example of this direct grant program that I think we're
going to talk about a little bit more is the Climate Pollution
Reduction Grants, which is an investment program directly for
state and local governments basically only, and tribal and
territorial governments to be able to plan and then execute on
programs and policies and measures to decrease climate pollution
and build their own clean energy and industrial strategies that
suit their needs.


David Roberts


Yeah, we're going to come back to that one.


Sam Ricketts


Then the second category is financing programs, programs the
federal government has or is newly established where they provide
financing tools, loan, loan guarantees, other financial
mechanisms that individual companies and projects can use to
leverage more private capital, to deploy zero emission
technologies or build new manufacturing facilities. And there's a
few different ones of these. One is again the new GGRF for
Greenhouse Gas Reduction Fund which is a new program being stood
up at the EPA. Another is the USDA Rural Utilities Service has
about $10 billion for rural electric cooperatives to be able to
leverage to securitize and retire their coal plants and instead
build clean and renewable energy for sort of a next generation
rural electrification agenda for the country.


And then a third, the DOE Loan Guarantee program has got hundreds
of billions of dollars of financing authority that states can
help work with their local companies and projects to leverage to
deploy much greater private sector capital. And this DOE one I'm
particularly excited about because of its intersection with
states, there's actually reforms made to the program in the
infrastructure law. In Bill, Uncle Bill, the state gets a chance
to work with the Department of Energy loan guarantee program to
waive the technology requirement requiring this project to
utilize a quote, unquote, innovative technology, one that hasn't
been used before and if the state is a co-investor in the
project, can leverage much greater private sector financing into
deploying that project. So really a reform, a tweak to the DOE
Loan Guarantee program that allows it to be more accessible and
more usable, particularly state clean energy financing
institutions.


And then finally — let me come to the big one — because the
majority of the investments flowing through IRA are actually tax
credits. Sort of automatic spending in reverse for the federal
government, which are resources that an individual project owner,
company, or under IRA. Actual public sector entities like public
utilities, nonprofit institutions can take and leverage greater
private sector or co investment in speeding much more investment
into clean energy, into renewable energy, into individual
consumers purchasing of electric vehicles or heat pumps, clean
manufacturing facilities. The tax credits make up the majority of
the funding in the bill and notably so state and local
governments need to be aware of them so that they can help their
companies and their consumers and their communities take
advantage of those incentives.


And notably those tax incentives I mentioned have this new reform
called direct pay where they are now eligible for use by those
who don't have tax liability, including public institutions,
including local governments who are operating with the, let's say
municipal utility or even nonprofit institutions. And this amount
of money notably is uncapped. So it can be as much money as we
can all spend.


David Roberts


A theme Volts returns to frequently there's no upper limit to the
amount that these tax credits could get sent out. There's no
upper limit to the amount that could be spent on them. So as I
pound the table and say over and over again the size of this
bill, the size of IRA is not a fixed thing. It will be as big as
there are people applying for the tax credits. So anyone out
there who can organize and educate people and have more people
apply for those tax credits, that's going to be a bigger bill. So
states and localities here really have their hands on the lever
of not only how to implement the bill, but literally how big the
bill is.


Sam Ricketts


Absolutely. There's much talk about how this is a $370 billion or
$380 billion investment. I mean the reality is there's a fixed
number of grant programs or financing programs that Congress and
President Biden have invested in. And then there are these tax
incentives that are uncapped and that can range much greater.
They are literally only tied to the amount of money that can be
spent on projects that they can then benefit from those
incentives.


David Roberts


Yeah, Goldman Sachs I think, estimates $1.2 trillion rather than
$3.7 billion, which is an enormous spread. All of which has to do
with how many projects are going to qualify for these tax
credits. And that is something that people can have control over.


Sam Ricketts


That's right. And the Treasury Department writes the rules of
these things and they'll be the ones to dole out an individual
cash payment as a direct pay grant or to send the tax refund to
the company that takes advantage of the tax credit. But they're
not out there searching out projects, working to ensure
permitting works. They're not out there making sure communities
are aware of these things. They're not there working
hand-in-glove with companies on economic development projects.
That is what states do. That is what counties do. That is what
cities do. That's what individual community groups do.


But there is this massive opportunity for companies, for
communities, for individual consumers to take advantage of these
incentives and the rest of these investments and whether or not
they do that well is going to be a thing that state and local
leadership is going to play a key role in seeing through.


David Roberts


Exactly. You can have as much economic development as you can
muster. Right? There's no upper limit. Like you can have all the
economic development you want if you're willing to put in the
work, organizing and pursuing it.


Sam Ricketts


That's right. And as we know we need to move urgently and build
as much of this as we can because we are under some very tight
climate math, right?


David Roberts


So we've established then that states have been an inspiration to
the federal government and now we've established that the new
federal legislation that has been passed in these past couple of
years very importantly requires states and local governments to
implement it. And indeed how big and how efficacious the bills
are is more or less up to states and local governments, how well
they organize and get it done. So then this brings us to the
inevitable next question which is are they ready for this? Do
they have economic development offices that are aware of the tax
credits and understand the procedures and understand where to
direct them and understand how to attract companies around them?


Do local governments have the offices to do outreach to local
communities to clue them in on these tax credits? Do they have
the sort of like manpower to do the research and just create the
programs that can spend all this grant money? Are states and
cities ready for the tsunami of money that is heading their way?
Do they have the administrative capacity they need?


Sam Ricketts


Well, look, there's a gap. I like to think of it as an urgent
opportunity.


David Roberts


It's an opportunity.


Sam Ricketts


It's an opportunity. An urgent one. Look, there's a definitive
gap that exists across states and local governments and also
tribal governments here too. I should probably mention that state
and local and tribal governments are all sort of implicated as
part of this sub-national government space of entities that are
going to be helping to deploy dollars and are going to be
dispositive about the success of these bills. They're all
different. People regularly bunch them together. And here we're
spending most time talking about state governments, a little bit
about local governments and I'm going to continue to zero in on
states because it's where I've worked before and it's what I'm
particularly focused on in this moment.


But they're all going to be really important in this work and
they all lack capacity, certainly to varying degrees. But I'll
say state governments even just sticking with states often lack
capacity. The state agencies, even the ones who have been sort of
leading the most on climate and sometimes in many respects do
lack capacity. And this is simply people in seats doing the work.
They can lack capacity because of budgets regularly. That's the
biggest reason. And then there is kind of like how the tax
credits in the bill can be spent up to the level of funding that
we put into them.


They'll get out what we put in. The same thing here with
governmental capacity at the subnational level, there is an
opportunity to do more because state agencies are regularly, red,
blue and purple states alike, lacking in manpower to be able to
take maximum advantage of these dollars.


David Roberts


Do you think it's fair to say that because industrial policy has
been out of vogue and we've been living under this sort of well,
I'll just use the word neoliberalism for the last 30 or 40 years
with this sort of notion that markets are going to accomplish
everything. Do you think that is part of the explanation for why
some of this state capacity is lacking or has atrophied a little
bit?


Sam Ricketts


Absolutely. I mean, the last 40 years of public sector
disinvestment absolutely plays a role here. In particular, the
public sector got hit hard after the Great Recession in
particular.


David Roberts


Right.


Sam Ricketts


And budgets have only recently kind of gotten back even to those
levels. They got hit again, obviously, recently during the COVID
hit. And there has been investment from the federal level. Think
of their COVID recovery dollars, some of the stuff that's
implicated in debates right now in Congress about what can be
clawed back, these are vital. Just like public sector capacity
building investments, state and local budgets have regained
relative health kind of quickly after COVID recovery.


But there still gaps. And there are gaps in particular in these
areas where with state environmental, clean energy, industrial
development that we've not invested as a society into
sufficiently. And that's what leaves us with a gap.


David Roberts


And if you go look at part of the COVID money was grants to
states arguably too much. But if you go look at what those states
spent those grants on, it's not necessarily building their
long-term administrative capacity. Sadly, obviously if you lack
manpower, you lack manpower, and that's a problem. But maybe try
to give us a little better sense of what are the concrete dangers
here, what are the opportunities that states and cities are going
to miss or botch lacking capacity? Like, one thing I worry about,
and maybe this is silly, we can talk about the politics of this
separately, but Obama and his stimulus money went overboard, bent
over backward to make sure that none of it was misappropriated,
that there was no fraud or graft.


He put so much energy into that for all the good it did him. But
one of the things I worry about is states and cities that lack
administrative capacity also seems to open more room for
shenanigans and graft and just petty local politics kind of
stuff. So flesh out a little bit the danger of lacking
administrative capacity.


Sam Ricketts


A few different things, first of all, it's opportunity cost.
These are all we talk often in climate policy in terms of carrots
and sticks. And these are all carrots. And to the point here
about being able to spend as much as we can spend. Well, carrots
only deliver the nutritional value if people are eating the
carrots. Right? Don't get me wrong, most people like carrots.
Carrots are delicious. I like carrots. But in order to eat that
carrot, people need to know that it's there. They need to know
how to access it, how to ...


David Roberts


Right, somebody's got to go dig it up.


Sam Ricketts


Yes, right.


David Roberts


I don't know how far we can push this metaphor.


Sam Ricketts


We could take this metaphor, but that's an opportunity cost. And
if there's people who companies don't know or can't access them,
if the infrastructure is not built, if the community isn't aware,
consumers aren't aware, that's going to result in less money
being spent here.


David Roberts


Carrots going uneaten.


Sam Ricketts


Yes, carrots going uneaten. Thank you for grabbing that metaphor.
Another thing here, and this is less of an administrative
capacity challenge as it is more of wrong priorities or
leadership challenges. Money being spent on the wrong thing,
which is also, I mean, having administrative capacity and having
it focused on the right things is critically important here.
There has been some discussion about the infrastructure law,
which is the bipartisan infrastructure bill and it's
transportation infrastructure spending and how there is an
opportunity and this is really an opportunity that exists under
law with state governments and local governments, not the federal
government, to use those dollars flexibly for low carbon
transportation projects, not simply widening freeways and
investing in more roads.


That is a challenge. It's a challenge we're not always seeing
fare out in the right direction.


David Roberts


I was just reading this morning a story in E&E about some of
that infrastructure money being used for a giant kajillion dollar
highway widening project outside of Houston that would wipe out
huge swaths of low income community just like classic old school
d*****s highway mistakes, but now paid for with our new
infrastructure money. So yeah, can you stop that? Is there
anything that can be done about that? Like states are going to do
what they're going to do? Well, I guess advocates can pay
attention.


Sam Ricketts


Yeah. No, the first thing to do is to be attentive to the issue
and then to develop the strategies to address it. Sometimes the
states who are investing in those projects are the same ones who
have made ambitious climate commitments. And it sure would be
helpful for people to point out that maybe how the incongruence
of those things. But the final area where things I don't want to
say could go wrong. But the final area that really calls forth
the need for state leadership is that states need to lead here
again and the next generation of clean energy leadership, right?


Not only do they need to maximize the uptake of dollars for the
job creation, for the equitable economic opportunity, for the
emissions reductions that can be catalyzed by those dollars, but
they also need to hold utility companies and automakers and
building developers and the heavy industry accountable for using
those dollars and push forward the next generation of policies
that are going to cut emissions and drive the clean energy
transformation. And people talk about states versus federal
climate leadership and people talk about like states taking the
baton now that the federal government's passed it. And I totally
reject the premise.


As someone who's worked before at the state level in a governor's
office, think of it much more as like a band where the state and
local governments are the rhythm section, the drums and the bass,
if you will. Keeping time and just always keeping a level of
climate and clean energy progress going even while the federal
government fits and starts. Like a lead guitarist will riff on
stage and then disappear. We'll see that happen here. Even the
last couple of years while President Biden and Congress have been
hard at work passing these bills and taking executive action,
states have been leading too.


Right, you've seen the next breakthroughs in state climate and
clean energy policy continue to occur, whether that's New
Jersey's groundbreaking cumulative impacts, environmental justice
law, that's Washington State's Climate Commitment Act, that's
Illinois's Clean Energy Jobs Act, et cetera, et cetera. And so
the states need to take the next step and especially now that
Congress is going to be divided and in that way states will have
to take the baton because the lead guitarist is off the stage
again.


David Roberts


Yeah, exactly. He's backstage smoking a joint.


Sam Ricketts


It's not entirely fair because President Biden is of course
advancing things through administrative action. But especially
for the time being, while we don't see major congressional action
again on the horizon, states are going to have that central role
in driving forward the nation's energy progress again.


David Roberts


I feel like this is a little bit underemphasized aspect of all
this is that one thing states can do with all this tsunami of
money that's coming down on is just use it to boost their own
legislation. Like this is going to change the financial and
social and political landscape in a way that is going to make
more ambitious policy easier. And especially if states are smart
about how they do that, right? Like a smart state can use all
this money to soften the ground, to go further, to get more
ambitious on climate.


Sam Ricketts


And just on that point, a few places to point to. For one, it's
not all legislative. I mean public utility commissions who
oversee utilities need to know that the electricity market, the
system is entirely changed for the country now and the integrated
resource plans that the utilities had provided them before IRA
passed are not really worth the paper they were printed. On
anymore because the economics of energy generation throughout the
country has fundamentally changed. You add in federal rules
coming down governing criteria or carbon pollution from power
plants, another knock that utility commissions need to be aware
of as they're engaging with utilities that they are regulating.


And the utilities are saying we need this rate increase or this
deadline extension or this thing or that thing. That work. That
is capacity and that is the decision at that state level by
utility commissioners, appointed by the governors or sometimes
elected by voters.


David Roberts


Wait. Just before you move on from that, I just want to pound the
table on it a little bit, because when I think about I spend a
lot of time thinking about sort of like, what are the potential
impediments to this legislation doing as good as it could do. I
think about workforce and NIMBY-ism, et cetera, et cetera. But
one of the things I come back to is sort of utility intransigence
or ignorance or intransigence or some mix thereof. I can imagine
if utilities took the amount of money that's being dumped on
clean energy seriously, as you say, it would completely transform
all their plans, right?


Every utility in the country, now that this bill is passed,
should be back at the drawing board, completely rethinking what
they're doing. But of course many of them for various incentive
reasons, don't want to do that and don't see a way to make as
much money doing that or just are stuck in their ways or have
relationships, old boy network relationships that they don't want
to upset, et cetera, et cetera, et cetera. The way to handle that
impediment is with beefed up well informed utility commissions,
which, as you say, is 100% a state capacity issue. It just means
spending the money, getting the staff in place, getting the
research done, really preparing them to force utilities to toe
the line.


Sam Ricketts


Totally.


David Roberts


Anyway, I just wanted to emphasize that because I think it's a
hugely under discussed and important piece.


Sam Ricketts


Well, not just a few other areas where states have been stepping
forward and taking advantage already of that point to Minnesota,
which just earlier this year, at the very beginning of the year,
passed 100% clean electricity standard, taking advantage of these
new investments. I mean, the leadership of State Representative
Jamie Long and Governor Tim Walls and others in the state to
really bring that over the finish line had been a long time
coming and they've been fighting against legislative inertia, but
Minnesota did that. But they've also passed a bill to explicitly
tasking the administration to maximize the flow of federal funds.


David Roberts


Interesting.


Sam Ricketts


And Minnesota is one of a few states, also looking at Wisconsin,
Pennsylvania, New Mexico, a few others who are in the process of
establishing nonprofit financial institutions, particularly to
take advantage of the Greenhouse Gas Reduction Funds green
finance program. Some states are passing incentives to sort of
layer on what the federal government is providing and in some
places to go beyond what the federal government has passed.
Colorado just passed a robust suite of incentives and policies to
go further.


David Roberts


Yes, including for EVs, because a lot of EVs are not going to be
available for credits for quite a while. There's this huge
national controversy over this. Colorado just stepped in and be
like, well, we're going to loosen the criteria and subsidize all
those EVs that are falling out of the federal subsidies, which is
like, well done, Colorado.


Sam Ricketts


Well done. Exactly. Many states have established infrastructure
coordinators housed by their governor or one of their agencies to
coordinate across their state and with their city and county
governments and stakeholders to maximize investment flows. Some
of those have worked well and some of them haven't, state by
state. But a key thing is there are states who are deploying
different strategies to build capacity and coordinate a strategy
around how to do this. Another interesting thing about it is it's
happening in blue and red and purple states alike. Some of the
major investments you're seeing, some of the big job creators,
the battery manufacturing facilities, the big new projects are
actually being announced or sighted and invested in red states or
purple states.


David Roberts


Most, as I understand it, a rather large preponderance, is going
to red states. Yeah, if I'm a state legislator or say I work in a
state agency, I'm listening to this and I'm nodding and I'm
saying, "Yes, I would love to have more effing capacity." Like,
tell me something I don't know. I'm starving for capacity. I'd
love to be able to do all this stuff." But state budgets are
state budgets. Unlike the federal government, the state can't
just print more money. So it's dependent on sort of business
cycle year to year, dependent on booms and busts, and often have
a lot of trouble finding stable funding for capacity.


So let's talk about where states can go to get some money and
help building capacity. As it happens, Uncle Ira also contains
some of that. So tell me about the Climate Pollution Reduction
Grants program, CPRG. What is it and what's it for?


Sam Ricketts


So the CPRG, the Climate Pollution Reduction Grants Program in
IRA, is, I think, one of the most exciting provisions in the law.
It is a new $5 billion grant program housed at the EPA, the
Environmental Protection Agency, that can provide the opportunity
to invest in state and local and tribal government capacity and
to give states and tribal governments who want to lead additional
resources, to empower them to do so, to lead in the clean energy
and the industrial strategies that suit their unique needs and
strengths and that will challenge them to compete amongst each
other for the best plans most deserving of federal investment. To
help them go further.


David Roberts


Right. So there's two basic buckets here, both of which are
interesting, but talk first about the money for planning.


Sam Ricketts


So this is based on a program President Biden first proposed in
his American Jobs Plan, State Clean Energy Challenge Grants,
which was at the very beginning of a very long and arduous
legislative process. We don't need to recap in detail now, but is
worth its own story. The program contains three different parts:
$250 million for planning grants that are in the process of being
executed right now to all states, to all territories, about 70 to
80 of the nation's largest municipal statistical areas, MSAs, and
then to a number of tribal nations. There is going to be later on
this year, Part B, the $4.6 billion Implementation Grant round,
which is like where the big money comes in.


David Roberts


Help to implement the aforementioned plans.


Sam Ricketts


Exactly. With federal money to implement some of perhaps the best
of the aforementioned plans. And then there is also, as an aside,
because it's important, because it's about capacity building,
$140 million in federal administrative costs that the Federal
Government can use for its own cost of administering this program
and can use to better support state and local governments and
tribal governments with technical assistance. So, worth keeping
an eye on that third bucket as well. But, obviously, the $250
million out to states and local governments and tribes right now,
providing capacity as we speak and then providing opportunity for
more money down the line.


David Roberts


So that first bucket is for anybody who submits a plan.


Sam Ricketts


Yes. And this is a great innovation. This is capacity building.
Really excited to see how EPA is carrying out the Planning Grant
round of this. It's some of the first money that's going to go
out grant wise under IRA, every state, provided they submit a
notice of intent to participate that was due at the end of March.
And then, provided they submit a work plan and application that
was due at the end of April, has an opportunity to receive a $3
million grant that they put in the agency of their choosing,
whether that's the Governor's Office or the Energy Office or the
Department of Environmental Protection or otherwise.


Every MSA gets a million dollars as well. Tribes also get
investment, as I mentioned, as do territories. But these
investments directly build capacity. They can use them to hire
staff, hire consultants, build high quality tools they need, like
greenhouse gas inventories, or cover other administrative costs
of not just applying for the Implementation Grant in the future,
but to take advantage of the rest of the money passed in IRA.


David Roberts


Right. When you invest and build the capacity, the capacity is
there. Once you use it for this plan, it's still there, and you
can use it for other things, like these investments in
administrative capacity, pay back richly over time.


Sam Ricketts


That's right.


David Roberts


And so then the Implementation Grants, this is not going to be a
give money to everybody who applies thing. This is going to be
more of a competition type of thing.


Sam Ricketts


Yes. So the Planning Grant round is intended by congress to be
spread widely. And I'm pleased to see how EPA has done that and
done that quickly to make sure dollars are flowing in everywhere.
Again, to address both like, hey, you can use this money to apply
for an implementation grant in the future, but hey, you can also
use this money to build yourself some capacity inside of your
agencies because of all the other things that are flowing. But
yes, then later this year, we're expecting an implementation
grant announcement. EPA says it would come late summer, maybe
it's the fall.


We're hoping, the royal we all of us hoping together, they move
these dollars quickly in order to get the dollars out the door
quickly, certainly as early as they can in 2024. But these would
really be grants that would bolster capacity and could reward
those states and local governments who come forward with the
plans that show they're going to lead to the greatest catalytic
change. And what I'm hoping to see what I and others are hoping
to see from them with this is really investing in the state
driven, local driven strategies that fit their unique needs and
that reduce the maximum amount of climate pollution and achieve
those breakthroughs in places that are additional to that which
may occur otherwise without these grants or that which may be
possible otherwise, given these states unique policy
environments.


David Roberts


And this is not a new format here the idea that states are
competing for federal money, the whole Race to the Top idea, this
is not the first time this has been tried with federal grants.


Sam Ricketts


Indeed, it's not. Actually, a very similar amount of money was
invested in a program called the Race to the Top Challenge Grants
that the Obama administration executed about a decade ago, about
$4 million that was spread around. I think twelve states were
awarded grants that ranged in size from $75 million to $700
million or something, and those grants went to those states to
pass or implement innovative leading edge education policies. But
the fascinating thing about the program that I think should
inform how the EPA thinks about this program is it wasn't only
the states that got grants that executed their policies.


Everyone got to work writing a plan. And the majority of states,
even those who didn't get a grant, would later go on to implement
at least some of those policies.


David Roberts


Yes, this is what I always used to say about the Clean Power
Plan, too, right? I mean, one of the that Obama tried and failed
to pass, one of the great benefits of it is that it would have
made every utility at least think about this stuff. And it's just
a fact that once you start thinking about it, once you start
planning, once you start doing the numbers, you realize, like,
oh, these are good things to do regardless whether you get the
federal money or not, right? So just catalyzing the planning
itself does so much to generate future action.


Sam Ricketts


The Clean Power Plan is a great example of this, right? Because
notably, utilities met targets much faster than they would have
even if the plan had ...


David Roberts


Actually catalyzed it without even passing it all. Look at the
...


Sam Ricketts


And it catalyzed planning ... Actually that's a good example for
this particular topic as well because having been in a state
government at that time and been part of some of those
conversations, it catalyzed planning not only by the utilities in
the industry, but it actually catalyzed planning at the state
government level. For the first time in many places you actually
had environmental regulators who were going to be charged with
implementing the Clean Power Plan, working with the PUC that
regulates the utilities, working with the State Energy Office
that writes the State's energy strategy.


David Roberts


Right, which is a brand new thing. So let me ask you to
editorialize a little bit. You got this $4.6 billion bucket of
money that you can use to help states and localities and tribal
governments implement the plans that they sent to you previously.
Obviously there's a ton of latitude within that. There's a ton of
approaches you could take that you could do bunches and bunches
and bunches of little grants. You could make it your mission to
sort of give at least a little bit of money to everybody who has
a plan. Or you could try to sort of concentrate money on a couple
of big plans that you think could be transformative or could
serve as an example to other states or some mix.


So how would you like to see EPA approach handing this money out?


Sam Ricketts


It's a great question. EPA has wide latitude as to how they
design and execute this Implementation Grant Program round. And I
mentioned it's $4.6 billion. I mean, recall that we were talking
just a bit ago about they have an opportunity here to do a couple
of different things. One is build capacity in states and local
governments basically across the board, right? Because everyone
needs some version of help here in order to take advantage of all
of the resources that are here. But then they also have an
opportunity to reward those states and local governments who are
going to take advantage of that next generation of clean energy
industrial policy leadership who want to use the resources to go
further.


David Roberts


Right. You can fund the laggards to get them up to the starting
line or you could fund the leaders


Sam Ricketts


And you can do a little bit of both. Like you can cover that for
one, using some of the money, a small chunk of the money to build
additional capacity. Recall that capacity building investments
already been made by EPA with the Planning Grant round. What
happens if they did that with basically a second planning Grant
round or maybe a second, twice of the size, Planning Grant round?
And that would give some money across the board to continue
building capacity which, as we've just talked about, is a
ubiquitous problem regardless of the state's level of leadership
on clean energy.


And then you could save the majority of the funding to slice up
for a select number of grants that can range from eight to nine
digits of major investments. That can help provide a locus of
organization and momentum for that state and local government to
execute on a truly ambitious clean energy industrial strategy,
again unique to its own needs, and ensuring that especially EPA
should be looking out for opportunities to invest in clean energy
leadership where it wouldn't be otherwise occurring. So
additionality is key here, I think the EPA should obviously also
be looking at plans that are going to support disadvantaged
communities.


David Roberts


I meant to ask about that specifically, actually, isn't the 40%
rule that 40% of all these monies have to go to disadvantaged
communities? Does that apply to this bucket as well?


Sam Ricketts


Indeed it does. Actually, there's two different ways that sort of
equity applies to the requirements that the administration should
set out for. One, to your point, this is one of the programs that
falls under the Biden Administration's Justice40 Initiative,
meaning that applicants should be showing how no less than 40% of
the investment benefits from their plan are going to benefit
disadvantaged communities. And there's actually a second one in
the statute which Congress said EPA has got to require these
plans to show how they're going to reduce climate pollution both
overall and in disadvantaged and low income communities.


So a couple of different ways. EPA already also in the planning
grant guidance has required states to work with their city
governments in developing their plans or municipal governments,
and they've encouraged them also to work with disadvantaged
communities. And that's an opportunity here for EPA and the
Implementation Grant round as well to task applicants to show how
they're going to work with and benefit disadvantaged communities
with their investments, how they're going to support good jobs
with their strategies. EPA has latitude here as to how to design
this program. I think also there's an opportunity here to
encourage states and local governments to work together, whether
that's in a region and are in multiple parts of the country.


This is a time for creative strategies and for calling forth sort
of that unique next generation of state clean energy leadership
that we're going to need to see now and throughout the coming
decade.


David Roberts


Right, one more note about this program before we move on and
wrap up, because I just personally found it so delightful and
clever. Listeners will recall when Obama said, "Hey, states, how
would you like to have billions and billions of dollars of free
money to help have better health care for your poor people?" And
red states just flat turned it down. They turned down free money,
which is insane, but certainly something you can imagine
happening here too. But there's actually a somewhat clever and
innovative feature of this program meant to address that
eventuality. So tell us about that.


Sam Ricketts


Indeed, this is a really innovative piece of what EPA has done
with this program. I mentioned earlier that $3 million of
planning grant money is available to all states. What they had to
do was submit a notice of intent to participate and follow that
on with an application and a work plan. Notably, if a state chose
to decline that $3 million grant, the money wouldn't dry up or
disappear. It would actually be available to the largest
metropolitan statistical areas in that state, MSAs in that state
and across the country. And so the dollars would go to somebody
and it kind of provides a double incentive for the states to say
yes.


And notably, they did. 46 out of 50 states submitted a notice of
intent to participate and receive their $3 million.


David Roberts


Yeah, it's one thing to say no to money. It's another thing to
say no to money when you know your nemeses in your blue cities
are going to get the money you're turning down. That's such a
clever twist.


Sam Ricketts


And we want some national governments tool one to say yes to
this, right. Because if they take the money, they're going to go
build a plan that's going to reduce emissions. It might be their
unique flavor of that. It should be their unique flavor of that.
But it gives them an opportunity to put people in seats and to
start designing strategies that are going to reduce climate
pollution and that are going to allow them to build the
industrial strategy that's going to work for them in the 21st
century clean energy economy. And we're going to need everyone
doing that eventually at some point.


David Roberts


At every level, okay, by way of wrapping up then, could we touch
on I mean, this is a big $5 billion and especially $5 billion is
how big is money these days? Who can judge? But like $5 billion
when you're talking about state budgets is quite a bit of money.
You can move some needles with that. Are there other federal
programs that states can draw on or states and cities
specifically to help them build administrative capacity?


Sam Ricketts


Really good question. The first thing I want to say is these
investments will allow states and cities and tribal governments
and territories to take advantage of the rest of the funding
flows in IRA and Bill and CHIPS in new and more ways like we're
talking about because they're going to build the capacity that
empowers them to do so. The second part is though, there's not a
lot of capacity building types of investments in these bills.
There are a couple. I think the other main one spend a lot of
time thinking about is the state energy program of the Department
of Energy, which is the program that Department of Energy uses to
support state energy programs throughout the country.


Sometimes they provide, frankly, the only funding that underpins
a state energy program in some states. So a vital program, not a
lot of money. It's actually money that came through that program
was reauthorized and funded through the Bipartisan infrastructure
law, not through IRA. But there aren't a lot of dollars in
capacity building. There are other capacity building programs and
technical assistance programs. Federal government and EPA
actually has just announced investments in a number of TICTACs.
I'm forgetting what precisely that stands for other than a
delicious breath mint, which are regional entities that are going
to work to provide technical assistance for disadvantaged
communities in particular to help them take advantage of and
community based organizations.


So there's the thriving communities program. There's a suite of
federal TA programs, but not a lot that go directly into juicing
the capacity of states and local governments throughout the
country.


David Roberts


Right. It does seem though, like if you're a state and you're
given money to do X, it makes perfect sense to spend some portion
of that money to build the capacity to do X, right? It seems like
you could states could spend a lot of different buckets, at least
a little bit on capacity because otherwise otherwise you can't
really take advantage of the money.


Sam Ricketts


No, absolutely. And there's other piece of it. The Greenhouse Gas
Reduction Fund has some dollars that can be used for particular
assistance. There are others, don't get me wrong. However, the
flexibility provided to individual states to look across
programs, some of them will get very tied into a grant associated
with this particular strategy. And that's a little bit different
than empowering the state or the city or the county to design its
own strategy that works for it or to shift from one day to the
next from one program or one project to the next, which is also a
challenge.


David Roberts


Right. Okay, final question. We've been talking about
governmental capacity, basically administrative capacity, which
is great in rules. Is there anything that just ordinary people
advocates or activists or maybe philanthropies, private
philanthropies can do on this subject other than just like pay
attention and cheerlead?


Sam Ricketts


Yeah, I mean, the first thing to know, as with most things, is
that this is a challenge worthy of attention. That's sort of
first things first. Lots of effort went in over many years to
getting these bills passed for many people. Right. And there's a
whole apparatus of advocacy that zeroed in on that for a very
long time, as you and I know. And this is kind of a different
line of work. Implementation is kind of a different line of work
and it's the talk of the town now, but it's very much like
attention to state and local governments is going to be
dispositive in our success or failure with these bills and what
we're trying to do with decarbonization and with building a just
and thriving clean energy economy.


And that the attention that advocates need to provide, just like
they've provided it at the halls of Congress, just like they
provide it at President Biden and at his EPA and at his Interior
Department, et cetera. They need to not be providing it with
their City Council, with their state legislature, with their
Governor's Office, with their Public Utility Commission. In some
ways, it's not advocacy. In some ways, it's partnership with
spreading the word to disadvantaged communities, to individual
consumers that, hey, there's incentives available to you, there
are investments available to you. Let's go take advantage of them
and build some new, clean, better futures for our communities
here.


David Roberts


Awesome. This has been excellent, Sam. And I bet if state and
city people are listening to this, they are gratified to hear it
wrapped up and get a little focus and direction. So thank you so
much for all your work over the years. And also thanks for coming
on.


Sam Ricketts


Thanks for having me, David. Real pleasure as ever.


David Roberts


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