Greenhouse Gas Reduction Fund: Best Practices for Equity and Governance

The $27 billion Greenhouse Gas Reduction Fund (GGRF) is the single largest climate program in the Inflation Reduction Act, second only to the suite of energy tax credits that make up the majority of the IRA’s spending. Because of its vast size, as well as the flexibility provided by the authorizing language in the law, it could potentially be a huge opportunity to advance environmental justice, but only if it is implemented appropriately.

On April 19, EPA released additional information detailing the agency’s plans for this program in the form of its Implementation Framework. In the Framework, EPA announced that the GGRF would be implemented in the form of three competitions: the National Clean Investment Fund (NCIF), Clean Communities Investment Accelerator (CCIA), and Solar for All competitions.

EPA also identified three program objectives, which all three competitions were designed to advance:

  1. Reduce emissions of greenhouse gases and other air pollutants.
  2. Deliver benefits of greenhouse gas- and air pollution-reducing projects to American communities, particularly low-income and disadvantaged communities.
  3. Mobilize financing and private capital to stimulate additional deployment of greenhouse gas- and air pollution-reducing projects.

Highlights from the Implementation Framework

The Implementation Framework revealed several important new pieces of information about how EPA plans to implement the GGRF program. Some highlights related to equitable implementation of the program are discussed here, but note that this is not intended to be a comprehensive overview of the Framework’s contents.

  • Low-income and Disadvantaged Communities: EPA announced that for all three competitions under GGRF, “low-income and disadvantaged communities” will be defined to include geographically defined disadvantaged communities as identified according to the Climate and Economic Justice Screening Tool (CEJST), the mapping tool developed by the White House Council on Environmental Quality. Additional communities will be identified via the limited supplemental set of census block groups at the 90th percentile or above of EPA’s EJScreen Supplemental Indexes. EPA will provide further guidance on these definitions in the Notices of Funding Opportunity, which may incorporate “geographically dispersed low-income households, and properties providing affordable housing to low-income residents, located outside of geographies identified by CEJST.” 
  • Benefits: EPA revealed that they would define “benefits” as the relief of the burdens identified in CEJST’s Methodology documentation, including climate change, energy, housing, and legacy pollution. In contrast to CEJST’s use of these burdens to identify disadvantaged communities, GGRF “uses them to identify categories of benefits to all American communities, not just disadvantaged communities.”

Notably, only the $7 billion Solar for All competition goes further to define the “meaningful benefits” of residential rooftop and community solar with storage, including delivering at least 20% net savings to low-income households. The Framework indicates that Solar for All applicants may submit a Meaningful Benefits Plan to describe how the applicant will ensure that the planned solar and storage deployment delivers benefits to low-income and disadvantaged households, and also suggests integrating meaningful benefits strategies in various potential components of the application.

  • Justice40: For the first time, EPA officially announced that the GGRF is a “covered program” under the Justice40 initiative. This means that 40% of the benefits from GGRF investments should flow to disadvantaged communities. In the Framework, EPA said that all grantees under all three competitions will be expected to ensure that 40% of benefits from the competition will flow to disadvantaged communities.

Overview of Best Practices for Equity and Governance

While the Implementation Framework provides much needed clarity in several areas, many crucial questions about the program remain unanswered. The number of direct awardees under the NCIF and CCIA competitions may be as few as two each (potentially involving some the same entities), and each awardee may receive billions of dollars. These awardees will likely be newly created entities, so they will not have established track records of working to effectively benefit low-income and environmental justice communities. Understandably, many environmental justice organizations and other stakeholders are concerned about whether the program and eventual awardees will actually benefit the communities they are intended to benefit.

In collaboration with Americans for Financial Reform Education Fund, Center for Biological Diversity, Center for Popular Democracy, Climate + Clean Energy Equity Fund, Climate and Community Project, Emerald Cities Collaborative, and Natural Resources Defense Council, we developed these best practices to address these concerns and to help ensure that environmental justice communities are meaningfully centered and empowered within the Greenhouse Gas Reduction Fund program. Along with over 50 organizational endorsers, we are calling on applicants to publicly commit to adhering to the best practices for equity and governance outlined below.

These best practices should establish a baseline for how applicants can advance equity and good governance, and we encourage applicants to exceed them wherever possible.

  1. Prioritize direct benefits to low-income and disadvantaged communities

Not all projects located in low-income or disadvantaged communities actually benefit the broader community in which the project is sited. For example, installing solar panels on a big box retailer within a low-income neighborhood doesn’t directly benefit the community if the benefits of the solar installation, such as sales of surplus electricity generated that flows back to the grid, only accrue to the store’s out-of-state corporate owner. Some projects may only indirectly benefit the host community, for example through marginal increases in taxes collected by the whole city or state — which in turn may not necessarily be used to benefit the host community.

To advance environmental justice, awardees should prioritize investments that provide direct benefits to low-income or disadvantaged communities by making sure that beneficial projects are first in line to receive financial assistance. This means that awardees must develop and adhere to a business model based on using awarded funds to flow into projects that benefit low-income and disadvantaged communities. Prioritization of direct benefits to these communities also means providing significant technical assistance and capacity-building support to community-based organizations (CBOs), partnering with and supporting Minority, Women, and Disadvantaged Business Enterprises (MWDBEs), cooperatives, and labor, as well as valuing long-term, holistic benefits — including non-economic benefits like reduced air pollution.

  1. Require community engagement

Self-determination is a foundational principle of environmental justice. It means that all communities should be able to participate in decision-making that affects them. In the community development context, robust community engagement is a critical component of self-determination, especially in terms of both sharing information about proposed projects and their expected impacts as well as gathering information from community members about their priorities. To advance environmental justice, community engagement should be incorporated throughout awardees’ operations, including in their overall governance structure and business plan. To ensure that community engagement is effective, it must be conducted by third-party professionals and incorporate cultural competence and language accessibility, especially where there are significant populations with Limited English Proficiency.

The best practices recognize the need for flexibility depending on proposed project types, so that community engagement should only be required for projects which exceed a certain level of scale and potential impacts. For example, community members likely do not need to be informed and solicited for comment if a single-family home in a neighborhood is replacing a gas furnace with an electric heat pump. In contrast, community engagement should be required in the case of a proposed community resilience hub that is intended to meet the needs of the neighborhood.

  1. Accountability to local and impacted communities, especially low-income and disadvantaged communities

Accountability can be thought of as another dimension of self-determination; self-determination requires that the institutions that exercise power in a community must be accountable to that community. An institution is accountable to a community if it is obligated to answer to and explain itself to that community.

Both historically and today, low-income and disadvantaged communities have had to fight for accountability from institutions that affect their lives. In order to advance environmental justice, GGRF awardees should develop structures and processes to ensure that their actions are accountable to the communities they are tasked with benefiting. Individuals with demonstrated expertise (including lived experience) delivering projects that benefit low-income and disadvantaged communities must be part of awardees’ governing boards and senior leadership, to help keep the awardee steering towards accountability.

  1. Operate with transparency

Transparency is a prerequisite for accountability, and helps to build trust with communities and other stakeholders. In particular, awardees and the lenders they work with should regularly provide timely, relevant updates on project selection decisions and related processes, so that community members can know how and when they can weigh in.

The collection and reporting of data under GGRF must be both accessible and aligned with broader equity goals. For example, data about benefits provided through GGRF-supported projects should be compatible with the Justice40 initiative and accountability measures like the Environmental Justice Scorecard, and the methodologies for calculating these benefits should be published as well. Information about project selection and anticipated impacts in low-income and disadvantaged communities should be publicly available and easy to understand.

  1. Apply robust safeguards

Awardees should ensure that awarded funds are not used to support projects that worsen pollution or economic burdens or make existing disparities worse. By law, GGRF-supported projects must reduce or avoid emissions of greenhouse gases and other air pollutants, but they should not be allowed to pollute communities’ water or land, either.

It is also critical that robust tenant protections and anti-displacement measures are applied in the case of any projects that are likely to affect tenants and housing conditions. Where appropriate, this can include the use of affordability covenants and eviction protections, provision of legal assistance, and temporary relocation assistance.

Read the full best practices and see the list of organizational endorsers here.