Three Ways the Cut Inflation Act Advances Green Banking | Burr & Forman

The Inflation Reduction Act was signed into law on Tuesday, August 16 and significantly advances the innovative method of financing known as green banking. Here are three ways the law promotes this investment technique in support of clean technology and reducing air pollution.

The Inflation Reduction Act provisions significantly advance the innovative methods of financing known collectively as green banking. Those interested in taking advantage of the opportunities created by the law should pay particular attention to the grant provisions regarding eligible recipients and qualified projects.

Accelerated Funding

The Inflation Reduction Act provides $27 billion for a Greenhouse Gas Reduction Fund (GGRF) to provide low-cost financing through state or local green banks. The creation of the GGRF aims to accelerate the deployment of these investments. Of these funds, $20 billion is earmarked for financing state and federal green banks to provide direct investments (including private sector partners) to reduce greenhouse gas emissions. Additionally, $7 billion of that $20 billion is earmarked for low-income and disadvantaged communities for green technology projects and emissions reduction activities.

Amendment of the Clean Air Act

Although they often differ in scope and approach, green banks deploy public and private investments to finance low-carbon and climate-resilient infrastructure to address climate change and its effects, thereby minimizing air pollution. Thus, the federal law governing the GGRF is the Clean Air Act. In order for the Environmental Protection Act (EPA) to administer the funds established in the Inflation Reduction Act, the Clean Air Act was amended to authorize it for this use. The EPA administrator will provide funds directly to green banks and has the authority to qualify the use of granted funds, such as those for low-income and disadvantaged communities.

A clear path for private sector participation

Green banks currently exist in California, Connecticut, Colorado, Florida, Maryland and New York. While state, local and tribal governments are all eligible to apply for green bank funds, and it aims to incentivize increased state climate action, the law also paves the way for consulting firms and funds. to get involved in green banking. These non-governmental entities must be non-profit organizations designed to provide and raise capital for renewable energy projects. Qualifying projects include those that deploy zero-emissions technologies, those that reduce or avoid emissions of greenhouse gases or other forms of air pollution, and those that help communities reduce or avoid emissions and air pollution. In addition, government green bank direct investments include provisions for private sector partners.

Green banks are dynamic and are a proven financial model that uses public and philanthropic funds to mobilize private investment in renewable energy, energy efficiency and other decarbonizing technologies. With the Cut Inflation Act, more states will form green banks and more nonprofit nongovernmental organizations will be created to capitalize on federal funding and other green projects.

Pitfalls to avoid

The EPA has indicated in various presentations that subsidy fraud will be taken seriously. Any EPA or other government request should be carefully reviewed to ensure that grant applications do not contain incorrect or exaggerated information about planned expenditures. Green banks and their co-investors should carefully review the information in any application to ensure it is supported. Parties should also note that initiatives such as the GGRF create fertile ground for other crimes, such as embezzlement.

Take action

Those wishing to get involved in the green banking industry now should study the grant provisions of the Cut Inflation Act, monitor its implementation and ensure they meet the criteria of eligible recipients. and qualified projects in order to take advantage of the opportunities created by the law without falling inadvertently. into regulatory traps.

As the EPA begins administering the law and releases more information, the Burr & Forman Green Banking team will continue to share updates.

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