Accelerating Decarbonization in the United States: Technology, Policy, and Societal Dimensions (2024)

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Enhancing and Realizing the Climate Ambitions and Capacities of Subnational Actors: State and Local Government Perspectives

ABSTRACT

Subnational governments—state, county, and local entities—and other non-federal actors play important roles in actions to decarbonize the U.S. economy. Many provisions of recent federal laws will need to be implemented through subnational actors. Some jurisdictions are better prepared and/or more willing than others to engage on these issues. To understand the roles of subnational governments, this chapter explores the current landscape of state and local decarbonization policies, the influences of American federalism, the polarization of climate change as a political issue, and the challenges of uneven national leadership. The chapter then explores how robust, locally relevant, and more flexible federal funding for intergovernmental coordination with subnational agencies with climate-related responsibilities could help lead to more effective decarbonization solutions.

The chapter also examines governance attributes, such as technical capacity, resource availability, and agency coordination, that facilitate the achievement of subnational policy goals. It underscores key provisions of the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) that depend on subnational action, noting the new or expanded responsibilities that subnational governments will need to take on in order to successfully shepherd the implementation of these laws. Some—but not all—provisions in the IIJA and IRA are flexible and can support capacity-building through strategic and dedicated investment in planning, program development, stakeholder engagement, and staffing at the federal, state, and local levels. The chapter concludes with a call for immediate, reliable, and significant investment in state and local government capacity-building to enable the critical policy, regulatory, and bureaucratic environments needed to deploy climate solutions at scale.

INTRODUCTION

The IRA is the latest and the most significant climate-mitigation-related federal legislation in U.S. history. As noted earlier in the report, the IRA holds the potential to address the climate crisis by modernizing American energy infrastructure and decarbonizing the economy. Along with the IIJA, which directed significant investment toward the nation’s energy and transportation infrastructure, the IRA represents a critically important milestone in congressional action and federal investment in U.S. efforts to combat climate change. However, its success is not guaranteed. Non-federal and subnational entities will hold significant influence over whether, when, and how effectively these federal funds are used and implemented.

The many actors in the non-federal ecosystem are described in Figure 13-1: this ecosystem contains a multitude of entities, motivations, and relationships among them, from local, county, state, and tribal governments to private-sector businesses and investors, to civic and community-based organizations, faith groups, political alliances, households and individuals, and others.

This chapter will focus specifically on the roles and capacities of state and local governments that exist and operate in relation to the federal government and the other non-federal stakeholders listed above. While state and local governments do not represent the full subnational ecosystem of climate and clean energy players in the United States, this chapter focuses on them because their roles are foundational and essential to the achievement of the IIJA, the IRA, and net-zero goals. State legislative, executive, and regulatory institutions will play a make-or-break role in the implementation of policies, and the effectiveness of state and local processes for procurement, siting, zoning, infrastructure development, workforce development, and partnership building will be foundational in deploying low-carbon technologies at scale and in an equitable manner.¹

State and local governments have driven a significant amount of U.S. climate progress over the past decade, sometimes in the face of federal inaction. States, cities, and counties that are committed to climate action currently represent two-thirds of the U.S. population and economy (Zhao et al. 2022). Many continue to adopt their own ambitious, jurisdiction-specific climate, clean energy, energy efficiency, and decarbonization policies, including carbon pricing, clean electricity and renewable portfolio standards, emission limits, zero-emission vehicle deployment, low-carbon fuel standards, buy clean standards, building performance and electrification incentives, and energy codes and standards. In addition to decarbonization policies, a growing number of states and cities are taking steps to address issues related to energy affordability and access, ensure community participation in siting and development of energy infrastructure, and advance environmental justice by identifying and reducing pollution burdens in disadvantaged communities and targeting investments in those communities (Hanus et al. 2023; Ricketts et al. 2020).

Subnational governments have played a critical, complementary, and sometimes contentious role to the federal government by enacting regional and local climate policies and regulations. The diversity and range of climate actions adopted by subnational entities have been key in fostering policy, innovation, and experimentation; driving federal action; and delivering near-term emissions reductions. Policy experimentation at the subnational level often creates the potential for best ideas and practices to spread to other states and localities (horizontal diffusion) and even percolate up to the federal government (vertical diffusion). In fact, action by states, particularly those that are more stringent than the federal policy, has historically spurred the federal government to take new or more robust climate action. For example, California was the first state in the country to adopt appliance efficiency standards in 1976. Other states,

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¹ For a closer look at the roles of other non-federal actors, such as businesses and civil society, see Kennedy et al. (2021) and Vandenbergh and Gilligan (2017).

including Massachusetts and New York, followed, eventually leading to federal standards in the National Appliance Energy Conservation Act of 1987 (Bianco et al. 2020). More recently, the federal American Innovation and Manufacturing Act of 2020 directed the Environmental Protection Agency (EPA) to phase down the production and consumption of hydrofluorocarbons (HFCs) and built on leadership by several states that have passed laws limiting HFCs in recent years (Rabe 2021). Maine’s long-standing investments and programs in cold-climate heat pumps have helped set the stage for other state and federal efforts in the electrification of home heating and cooling (Officer of the Governor Janet T. Mills 2021).

State and local initiatives will continue to be central to decarbonization—although recent legislation is a significant enabler, federal support for decarbonization has not been, nor is it likely to be in the future, a guarantee (Bloomberg 2018; Hultman 2020). Relying on a multitude of diverse policies across subnational governments is an effective although insufficient path, and will remain crucial with or without a national strategy.

Recent federal laws represent the boldest action Congress has taken to address climate change—putting the United States on a possible path to cut greenhouse gas (GHG) emissions by 40 percent below 2005 level by 2030. Yet, the combined forces of the IRA, the IIJA, and CHIPS, complemented with existing subnational decarbonization policies, are by themselves not enough to meet the U.S. Nationally Determined Contribution (NDC) to the Paris Agreement of 50–52 percent emissions reduction by 2030 compared to 2005 levels. Effective state and local implementation of these federal laws and additional federal policies (e.g., tailpipe standards for light-duty vehicles) will be required to make progress in addressing the climate crisis. Analyses show that it is possible to close the approximately 10 percent emissions gap between the NDC and recent federal actions, including the IRA, the IIJA, and CHIPS, with additional federal and subnational actions (Orvis et al. 2022; Zhao et al. 2022). Subnational leadership in climate action is particularly important in that it can lower the barriers and costs for other state and local governments to follow (Peng 2021), especially when exemplified in diverse political, market, and geographic contexts.

The operative word in these analyses is that it is possible to close the emissions gap—but by no means a given. For instance, one important action that states can take is to strengthen or adopt clean energy standards in their electricity sector. Yet, currently, fewer than half of the states have laws, executive directives, or voluntary goals committing to 100 percent clean electricity by 2050 or sooner, with Minnesota becoming the latest state to pass legislation requiring electric utilities to use 100 percent clean energy by 2040 (Clean Energy States Alliance 2023). Other critical actions that state

and local governments can take include adopting zero-emission vehicle sale targets and mandates, accelerating the retirement of coal-fired power plants, modernizing building energy codes, preparing the clean energy workforce, and implementing fugitive methane leak recovery (Zhao et al. 2022). However, as this chapter explores, the current landscape of climate policies and subnational capacity for decarbonization may be insufficient without federal–subnational coordination, accelerated investments in capacity-building initiatives at the subnational level, and efforts to soften some states’ and communities’ resistance to climate action by emphasizing the economic, job creation, security, and resilience opportunities that can come from clean energy and climate investments.

In addition to federal action and subnational implementation, private-sector actors are also playing a meaningful role. Further discussion of the importance of private-sector actors in decarbonization efforts is available throughout other chapters in the report; some examples of private-sector impacts on subnational governments’ clean energy and climate goals are highlighted in Box 13-1.

The climate actions of state and local governments represent a patchwork quilt of will, capacity, and influence, with deep variations across different policy, regulatory, geographical, and market environments. The evolution of U.S. climate and energy policy is a story of multi-level, multi-nodal governance, decision-making, and action—or, in some circumstances, inaction. This array of climate policies represents a significant risk to the goal of transitioning the entire U.S. economy to net zero by 2050. As Basseches et al. (2022, p. 4) note, despite pockets of advancement and innovation, more consistent and stringent policy coverage is necessary to meet climate mitigation objectives, “necessitating efforts to reduce obstacles to more robust state climate policy activity.” Deep decarbonization will remain incomplete so long as subnational actors in any part of the country refuse or struggle to implement and engage their policy makers, regulators, business communities, and public in the complex and difficult tasks of transitioning the U.S. energy system laid out in Chapters 6–12.

To understand the many inconsistencies, obstacles, and opportunities surrounding climate and energy policy, this chapter begins with an exploration of the role of American federalism, climate change as a polarizing political issue, uneven national leadership, regional and geographic differences, and the complexity of solutions. It then examines governance attributes that are critical to achieving subnational public policy goals such as decarbonization, including political messaging and will around clean energy and climate efforts, staffing and resources, technical expertise, autonomy from special interests, and the ability to integrate decarbonization into locally relevant

and coherent policy portfolios. Building on this analysis, the chapter recommends strengthening structures that will enhance capacity-building and coordination among subnational actors and the federal government. Next, it highlights key provisions in the IIJA and IRA that will require subnational action and involvement, with a particular focus on the ability of the implementation of these bills to either contribute to more effective state and local policy regimes or, conversely, to deepen existing variations among subnational actors. Last, the chapter concludes with an outlook on how decarbonization policy may continue to play out at the subnational level and among federal, state, and local government actors. Table 13-1, at the end of the chapter, summarizes all the recommendations that appear in this chapter to support subnational actors in policy implementation and advancing decarbonization objectives.

U.S. FEDERALISM AND THE EVOLUTION OF STATE AND LOCAL CLIMATE POLICY

Federalism has been the bedrock of the U.S. system of government for more than two centuries. Over this time, American federalism has evolved to become a mixture of dual powers and responsibilities, and cooperation and conflict between the federal government and the states (Kincaid 2017).

Consistent with the dualism of American federalism, power is divided between the federal government and the states rather than being shared or concentrated at any one level, leading to most policy making as an inherently intergovernmental endeavor.

The U.S. Constitution explicitly recognizes the rights of individual states to function as what Supreme Court Justice Louis Brandeis called “laboratories of democracy,” where states can experiment with innovative policies and have the authority to delegate many of their powers to local governments (New State Ice Co. v. Liebmann 1932; Tyson and Mendonca 2018). At the next level down, state constitutions create a baseline balance between state and local authority. At one end of this spectrum is state supremacy in the form of “Dillon’s rule” (which views local governments as administrative arms of the state, with no inherent lawmaking powers other than what the state expressly grants); on the other, “home rule” (which grants local and municipal governments full capacity to govern affairs within their territorial jurisdiction, subject to state law limitations) (Richardson et al. 2003; Toscano 2018). While 39 states employ Dillon’s rule as a starting principle to define local authority, every state constitution devolves some degree of decision making away from the state apparatus, creating unique dynamics and opportunities for local units of government to exercise autonomy.

Over the past decades, the American system of federalism has shifted between cooperation and conflict in continuous evolution among the federal government, states, and localities. In the cooperative variant, federal officials have shown a willingness to negotiate with state and local officials over formulating and implementing policies, and in turn states and localities have engaged the federal government to advance commonly shared goals. Many federal environmental laws—such as the Clean Air Act, the Clean Water Act, and the Safe Drinking Water Act—have operated under the cooperative federalism model, where states have implemented and enforced federal laws while retaining the power to enact policies that are more stringent (Kastorf 2014; Lin 2020). This model of cooperative federalism is by and large still in place today, although the exact scope of federal, state, and sometimes local authority has shifted through the years.

In the uncooperative or conflict model of federalism, relations between the federal and subnational governments are characterized by resistance or direct opposition. In some cases, states and localities initiate new ideas that the federal government is not yet ready to embrace. For instance, many states and cities have moved ahead of the federal government on climate change, gun control, and policies governing democratic processes, such as automatic voter registration (Rose and Goelzhauser 2018). In other cases, some states have advocated for less federal authority and challenged federal government policies to reduce GHGs. The precise nature of the relationship between the federal and lower levels of government varies depending on the political context and whether the federal government’s policy priorities and political ideology align with or diverge from those of specific states (Konisky and Woods 2018; Tyson and Mendonca 2018).

As explored below, examining the history and evolution of U.S. climate policy through the lens of federalism helps to explain the current fragmentation in climate policy interest and capacity at the subnational level. This variation both propels and impedes decarbonization efforts to this day.

Early U.S. Climate Policy: Foundational Yet Modest Steps

Since the early 19th century, the migration of settlers from the humid east to the arid west created a need to address adaptation to changing climate conditions in U.S. policy deliberations (Holmes 2015). The issue of climate change due to anthropogenic GHG emissions later emerged in the mainstream public and political consciousness beginning in the mid- to late 20th century. These recent decades saw the establishment of key federal agencies and programs that play an important role in national, state, and local decarbonization efforts—among them are the Department of Energy (DOE), EPA, the Federal Energy Regulatory Commission (FERC), and the White House Council on Environmental Quality. State governments, too, took foundational steps in climate, clean energy, and energy efficiency policy during this early era. Throughout the 1960s and 1970s, state legislatures established Departments of Environmental Protection, Pollution Control Agencies, Air Control Boards, and other entities focused on air and water quality and other natural resource management issues. On the energy front, in response to the energy crisis of the early 1970s, the U.S. State Energy Program created by the Energy Policy and Conservation Act of 1975 (P.L. 94-163) prompted governors from all states and territories to establish State and Territory Energy Offices. These agencies are tasked with convening stakeholders, informing legislators and regulators, and funding and financing energy efficiency and conservation programs (DOE 2023a). In the early 1980s, Iowa became the first state to adopt a renewable portfolio standard (Database of State Incentives for Renewables and Efficiency 2022), and by the end of the 1980s, California passed legislation mandating an inventory of state GHG emissions (Farber 2021).

Importantly, early U.S. climate policy was not marked by the political divisiveness and polarization that characterizes decarbonization efforts today (Worland 2017). Rather, many of the defining and foundational milestones in federal environmental policy were achieved through bipartisan action. Such examples include the Nixon administration’s establishment of EPA and the National Oceanic and Atmospheric Administration (NOAA) (Richard Nixon Foundation 2014), widespread bipartisan congressional support for the 1990 Clean Air Act Amendments (S. 1630) (Grassle 2021), and the George H.W. Bush administration’s ratification for the United States of the United Nations Framework Convention on Climate Change (Bush 1992).

Rabe (2011, p. 499) argues that very few of these early steps amounted to a “serious policy initiative” but rather sought to recognize the problem of climate change and set a foundational—if imperfect—governance strategy at the federal and state level. Nevertheless, these moves caught the attention of skeptics. Collomb (2014) notes that in addition to the strength of oil and gas interests in sowing doubt and misinformation about climate science, two additional factors became critical in blocking strong climate policy: opposition among small government conservatives and libertarians to regulation, and the potential loss of American prosperity and competitiveness, particularly in relation to emerging economies. “The fear that strong climate action might reduce American competitiveness with rising giants like China is undoubtedly one of the strongest reasons why the Senate refused to ratify the Kyoto Protocol in 1997” (Collomb 2014, p. 8).

Federal Disengagement and the Rise of Subnational Climate Action

State and local efforts to address climate change increased significantly after the United States failed to ratify the Kyoto Protocol and the federal government repeatedly signaled a lack of interest to pursue climate change mitigation strategies (Bromley-Trujillo and Holman 2020). Between roughly 1998 to 2007, some states took unilateral policy steps to reduce GHG emissions by experimenting with cap-and-trade and GHG auction programs,² renewable portfolio standards,³ and a range of other environmental and economic development policy tools. In this period, local governments also organized around climate action. The International Council for Local Environmental Initiatives (ICLEI) created the most extensive network of city climate mitigation action under its Cities for Climate Protection campaign. By 2007, 171 U.S. municipalities had set emission reduction targets and were pursuing GHG reduction strategies (Byrne et al. 2007). Another 435 cities committed to meeting or exceeding the U.S. Kyoto reduction target as part of the U.S. Mayors Climate Protection Agreement, launched in 2005 (Byrne et al. 2007).

While climate and environmental concerns drove some of this activity, in politically conservative states, perceived economic advantage, job creation, and energy security and reliability were likely even more important impetuses (Engel and Barak 2008; Gallagher 2013). Statehouses across the country recognized an opportunity to lessen their dependence on imported energy and expand the market for “home-grown” energy options and locally manufactured/provided goods and services. Similarly, city

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² For example, the Northeast/Mid-Atlantic states that are members of the Regional Greenhouse Gas Initiative (for more information, see https://www.rggi.org) and California.

³ As of 2007, 25 states had adopted a renewable portfolio standard (Wiser et al. 2008).

officials cited the economic benefits of energy efficiency measures as the primary motivation for actions to reduce GHG emissions (Kousky and Schneider 2003). Addressing health impacts from air pollution, the need for transportation alternatives, and concerns over the livability of their cities were other reasons cited by local governments to justify actions leading to GHG reductions (Betsill 2001).

The framing of the issue as an economic and energy security opportunity rather than as an environmental imperative provided openings for subnational governments on both sides of the political aisle to pursue decarbonization actions, although the most ambitious policy activity at the time tended to be concentrated in regions with Democratic governors and mayors, including the Northeast, Pacific West, and Southwest. Congressional gridlock and federal inaction in this era provided what Rabe describes as “enormous latitude to states to do nothing, pursue a few symbolic steps, enact one or two significant policies, or pursue a far-reaching approach that might position them for regional and national leadership and even global visibility” (Rabe 2011, p. 504).

Federal Reengagement, Mixed Subnational Responses, and Mounting Polarization

Following the Supreme Court’s 2007 decision in Massachusetts v. EPA⁴—where the Supreme Court ruled that carbon dioxide and GHGs were air pollutants under the Clean Air Act and could be regulated by EPA—and throughout the Obama administration, federal policy proposals explored a variety of different weightings of subnational versus national authority. At one extreme, total preemption of state regulation and policy via a national carbon cap-and-trade regime—an option technically available to Congress through a preemption statute—failed to gain political traction due to a

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⁴ Rabe (2011, pp. 504–505) describes this seminal case: “The first significant indication that the American intergovernmental balance on climate policy might be changing occurred when the U.S. Supreme Court performed the role of intergovernmental umpire. Massachusetts and twelve allied states contended that the federal government’s refusal to designate carbon dioxide as an air pollutant under the 1990 Clean Air Act Amendments placed them in danger of such risks as sea level rise owing to climate change. Ten other states took the opposite position, backing the Bush Administration’s claim that the federal government lacked statutory authority and those states had no business being in court on such a matter.” In 2007, a five-to-four majority of justices ruled in favor of forcing EPA to revisit its refusal to designate carbon dioxide as an air pollutant. “Massachusetts cannot invade Rhode Island to force reductions in greenhouse gas emissions, it cannot negotiate an emissions treaty with China or India, and in some circumstances the exercise of its policy powers to reduce in-state motor-vehicle emissions might well be pre-empted,” wrote Associate Justice John Paul Stevens in the majority opinion. “These sovereign prerogatives are now lodged in the Federal Government.” This decision represented a federal court response to state pressure to compel federal executive branch action, with potentially far-reaching intergovernmental consequences (Engel 2009; Massachusetts v. EPA 2007).

variety of factors, including its encroachment on state policy (Rabe 2011). Less extreme approaches led to some successes in climate policy. These included

1. The renewable fuel standard in the 2007 Energy Independence and Security Act (which created a federal floor for the minimum amount of ethanol blended into gasoline, and a schedule of increase for this minimum, but did not preempt any of the states that had already established their own policies) (Rabe 2011);
2. The 2012 54.5 mile per gallon fuel efficiency standard, in which automotive companies in collaboration with EPA, the Department of Transportation (DOT), and the California Air Resources Board developed the first GHG standards for light duty vehicles (Obama White House 2012); and
3. EPA’s granting of a waiver to California in 2013 for its “Advanced Clean Car” regulations (NHTSA 2018), which helped advance what is today a multi-state zero-emissions vehicle program (C2ES 2022).

Similarly, the Obama administration’s Clean Power Plan sought to advance a cooperative federalism approach by assigning emissions reduction targets but allowing considerable flexibility to states in how to achieve them (Engel 2015). Even though it drew polarized reactions at the time and was ultimately stayed by the Supreme Court, it is today recognized for having prompted many states to plan for power sector emissions reductions (UCS 2021).

In the years leading up to the enactments of the IIJA and IRA, the landscape of subnational climate policy featured a deepening of state climate positioning, often along partisan political lines. During the Obama and Trump administrations, subnational governments, especially states, pushed back on implementing federal policies owing to political polarization and the associated level of agreement with the current presidential administration. Mounting politicization of climate change in these years (Jaffe 2018) entrenched climate policy activity further in certain states, cities, and regions; emboldened yet others to use their unique subnational authorities to exert pressure in the opposite direction; and left many in between incapacitated to act meaningfully on decarbonization ambitions. While dozens of California cities have moved to ban gas and propane hookups in new construction, 19 other states, collectively representing nearly one-third of residential and commercial natural gas consumption in the United States, have passed legislation preventing localities from doing so (Gleason 2022),⁵ even as

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⁵ Localities are not the only targets of such efforts, as political and ideological rifts have also affected the movement of clean energy across state lines. One example is playing out in Millard County, Utah, where, to comply with California’s carbon emission standards, the Intermountain Power Agency (IPA) has announced plans to convert its plant, which services the Los Angeles Department of Water and Power, from coal to natural gas by 2025 and eventually be fueled by emission-free hydrogen produced with energy from solar farms under development nearby. In response, the Utah legislature passed a bill stripping IPA of privileges and tax exemptions it has long enjoyed. While this move has not necessarily derailed IPA’s decarbonization plans, it is expected to affect its ability to procure low-cost capital as well as its operating revenue (Maffly 2021).

two-thirds of Americans favor using a mix of fossil fuel and renewable energy sources (Tyson 2022).

Conflicting climate-related policies during the Obama and Trump administrations cast a spotlight on the deeply fragmented landscape of subnational climate and decarbonization policies and demonstrated the significant power of committed subnational and non-federal institutions in propelling climate policy even during times of federal stalemate and inaction. Through executive orders and regulations in President Obama’s second term, the Obama administration advanced high-profile initiatives that sparked widespread support from some states, localities, and companies and deep political and legal ire from others—including the proposed Clean Power Plan designed to reduce carbon dioxide emissions from the U.S. power sector by 32 percent below 2005 levels by 2030,⁶ the rejection of the Keystone XL pipeline, and support for the Paris Agreement (Lavelle 2015).

Following, the Trump administration made moves to reject the previous administration’s climate policies—which included replacing the Clean Power Plan with a much weaker Affordable Clean Energy rule, withdrawing from the Paris Agreement, reducing the social cost of carbon, and increasing oil drilling in the Arctic refuge, to name a few (Nuccitelli 2020). Reversing policies from the previous administration, these moves led to legal challenges from 17 states and gave rise to high-profile coalitions that aimed to leverage state, local, and private-sector climate commitments to work toward decarbonization despite federal inaction (Reuters 2017). In the wake of the Trump administration’s decision to pull out of the Paris Agreement, a coalition of states, cities, businesses, and universities signed the “We Are Still In” declaration, committing themselves to drive down their GHG emissions consistent with the goals of the Paris Agreement. Since its release in June 2017, more than 3,800 mayors, governors, university presidents, and business leaders—representing more than 155 million Americans and $9 trillion of the U.S. economy—have signed the declaration. Simultaneously, New York City Mayor Michael Bloomberg and California Governor Jerry Brown launched the America’s Pledge initiative to aggregate and quantify the actions by these subnational actors to drive down GHG emissions (We Are Still In n.d.). America’s Pledge serves as an analytical companion to the We Are Still In movement (We Are Still In and America’s Pledge publicly merged in 2021 to form America Is All In). Bottom-up actions by these non-federal actors played a crucial role in keeping the momentum on climate action going during the Trump administration.

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⁶ Owing to changes in policies and the economics of fossil-based electricity generation since its announcement and ultimate Supreme Court stay, the U.S. power sector has already surpassed the GHG targets of the Clean Power Plan, more than 10 years ahead of schedule. In this light, it may feel ironic that within months of its release, 28 states sued Obama’s EPA over the plan, and power companies and congressional opponents labeled it “aggressive, impractical, and reckless” (Schaeffer and Pelton 2021).

States and regions doing less to foster clean energy and climate investments risk making their economies vulnerable to the economic transition occurring in the U.S. energy sector (Muro et al. 2019). Resources for the Future finds that regardless of federal climate action through the IIJA and IRA, coal will decline dramatically in the next 2 decades, and impacts will be felt most strongly in localities where public services and local economies continue to rely heavily on revenue and royalties from its production, transportation, processing, and consumption (Raimi et al. 2022).

Similarly, states and regions with poor energy efficiency policies are not only falling behind in helping their industry and businesses capitalize on revenue and productivity gains (Global Alliance for Energy Productivity 2016), but they are also placing economic burdens on their residents, and disproportionately so on disadvantaged communities. Counterintuitively, this holds true especially in regions with the lowest electricity rates in the country: low-income households in Mississippi, South Carolina, Alabama, Georgia, and Arkansas bear the highest energy burdens in the country because of their high levels of consumption owing to low investment in energy efficiency in relation to income (DOE 2018).

On the other hand, jurisdictions that have adopted clean energy and energy efficiency—regardless of partisan positioning or anti-climate positions—are able to embrace tangible opportunities for revenue generation, economic and workforce growth, and technology and business development. For instance, due in large part to public policies and investments, New York’s clean economy includes 165,000 workers, is exceeding other industries in growth, and contributes significantly to local, state, and federal revenues through taxes on production and imports (New York State Energy Development Authority 2022). Texas’s dominance in wind power and utility-scale solar is reaping significant economic benefits for local communities, and particularly rural landowners—up to $8.8 billion in new tax revenue over the lifetime of the existing fleet (Rhodes 2023), an example highlighting the drawbacks of broadly categorizing states as clean energy actors based solely on their political leaning. In another analysis, a study of the impacts of economy-wide investments in zero-carbon power generation and demand-side technologies in Wisconsin finds up to a 3.0 percent increase in gross state product and 68,000 additional jobs across the utility, manufacturing, and construction sectors by 2050 (Hartvig et al. 2022).

These disconnects reveal some of the costs of climate polarization and gridlock in a federalist system: slower decarbonization, but also missed opportunities for state and local economic development, competitiveness, workforce growth, public health, and resilience in the face of inevitable energy market transitions and rising economic costs of climate change. Subnational governments can have a wide variety of reasons for adopting policies and actions that lead to GHG reductions, and understanding

and advocating for those reasons can be an effective way to drive further subnational climate action. At the same time, understanding why some subnational governments are not able or willing to invest, and addressing those concerns, could be key to enhancing adoption of decarbonization policies.

Leading Up to the IIJA and IRA, Subnational Action Falling Short of Decarbonization Goals

Important as they may be for seizing economic development and job creation opportunities, subnational climate ambition and policies remain insufficient and are nowhere near the scale and pace of emissions reduction required across the entire country. An analysis conducted by the Environmental Defense Fund using historical and projected emissions data from Rhodium Group found that even among states that have committed to economy-wide GHG emissions reduction of 26 to 28 percent below 2005 levels by 2025 (in line with the U.S. commitment under the Paris Agreement), the suite of their policies adopted as of 2020—notably, before the passage of the IIJA and IRA—was “not nearly enough” to meet the goals set by the states themselves (Stilson et al. 2020, p. 7). Their remedy called for a significant increase in focus and investment by states to pursue not only “surgical” interventions in clean electricity, vehicle standards, energy efficiency, and electrification, but also comprehensive action with enforceable emissions limits across sectors and equitable outcomes for local communities. Climate scorecards published in 2022 by the Rocky Mountain Institute reveal similar findings for climate “front-runner” states Colorado, California, Illinois, New Jersey, New York, and Washington: none were found to be on track to achieve 50 percent economy-wide emissions reductions by 2030 (RMI 2022). In particular, California, a state well known for its climate policy, will need to triple its historical decarbonization rate in order to meet the target of reducing its economy-wide emissions 40 percent below 1990 levels by 2030. Modeling by Energy Innovation reveals that California’s policy commitments, as of 2022, would produce statewide emissions nearly 20 percent above its 2030 target (Busch et al. 2022).

At the local level, analyses prior to the passage of the IIJA and IRA found that even the most populous and well-funded cities had been falling short of emissions targets. A 2020 analysis by Brookings found that fewer than half of the country’s 100 largest cities have emissions goals, equating to roughly 6 percent of U.S. emissions in 2017. As of 2020, two-thirds of these cities were lagging in achieving their goals, putting even the 6 percent reduction figure into question (Markolf et al. 2020).

Cities were also found to be vastly undercounting their own emissions (on average by 18 percent), as they lack the tools to measure the emissions they are generating and

monitor progress in decarbonization (Gurney et al. 2021). A 2021 study of 167 cities from around the world found that “current inventory methods used by cities significantly vary, making it hard to assess and compare the progress of emission mitigation over time and space” (Wei et al. 2021, p. 2). Accurate data and access to estimations and modeling are critical for making effective decisions. In the absence of accurate emissions data, cities run the risk of not being able to prioritize mitigation solutions, misallocating scarce resources, and failing to course correct. At the same time, research has shown that there are often valid reasons for variability in how cities and communities define and measure sustainability, including GHG emissions. The act of developing locally relevant metrics and inventories is a strong motivator to action and helps ensure that action is consistent with local priorities and values and engages local publics in meaningful ways (Miller 2005, 2007).

The reality that even the best-resourced and most-climate-focused state and local governments had been falling short of meeting self-imposed emissions reductions targets has made the prospects for decarbonizing less populous states, smaller localities, rural and remote communities, and tribal communities especially challenging—even as evidence suggests that many of these places would like to participate in decarbonization and that large majorities of both Republican and Democratic voters support solar and wind expansion (Nicholas Institute for Environmental Policy Solutions 2018; Pew Research Center 2016).

As noted by the Housing Assistance Council, geographic isolation and low levels of economic opportunity have contributed to persistently high poverty for “several predominantly rural regions and populations such as Central Appalachia, the Lower Mississippi Delta, the southern Black Belt, the Colonias region along the U.S.-Mexico border, Native American lands, and migrant and seasonal farmworkers” (Housing Assistance Council 2023). This is often exacerbated by high levels of energy poverty and energy cost burdens in these same communities (Biswas et al. 2022). In this context, even in communities where the will and ambition to reduce emissions are strong, socioeconomic challenges such as lack of access to capital, community capacity, climate threats, poor housing and infrastructure, workforce shortfalls, and the potential disruptions to local (fossil-reliant) economies and workforces are likely to impede efforts (Clean Energy Transition Institute 2023). Even in states and communities with strong climate ambitions, opposition to projects stems from multiple sources: health and safety concerns, institutional and procedural complexities in siting, and fear over diminishing the value (monetary, aesthetic, recreational, and emotional) of the land on which projects are located (Susskind et al. 2022). For more on the equity dimension of the energy transition, see Chapter 2, and for more on the need for federal, subnational, and private-sector investment in public engagement, see Chapter 5.

Today, state and local climate policies continue to be highly variable; Figure 13-2 illustrates the patchwork of subnational ambition and policy making in climate. The hard reality of climate math reveals that there is no likely way to reach U.S. climate targets without achieving significant emission reductions in states with the biggest carbon footprint. Five states alone—Texas, California, Florida, Pennsylvania, and Ohio—account for one-third of total carbon dioxide emissions, while the top 10 emitting states account for 50 percent of the nation’s carbon emissions (EIA 2022a,b). Although the United States reduced its energy-related carbon emissions by almost 16 percent between 2011 and 2020, a handful of states, including Idaho, Mississippi, Oregon, and South Dakota, increased their emissions (EIA 2022a,b).

Renewable Portfolio Standards (RPSs) have been adopted by many states across the country, but they vary in terms of their stringency (Basseches et al. 2022). At one end, California requires 60 percent and 100 percent of its electricity from renewable energy by 2030 and 2045, respectively. Meanwhile, Ohio—one of the top emitters of carbon dioxide from its power sector—requires that 8.5 percent of electricity sold by the state’s utilities be from renewable energy by 2026 (California Energy Commission 2023).⁷ In fact, Ohio weakened its RPS from 12.5 percent to 8.5 percent in 2019—even as much of the rest of the Midwest has sought to strengthen their states’ clean energy commitment and to reduce the region’s reliance on fossil fuels, highlighting the fact that subnational climate policies are not immune to reversal (EIA 2022a,b; Williams 2019). In 2015, West Virginia became the first state to repeal its RPS entirely, even as it was clear the state was running low on easily accessible coal mines, and cheap natural gas was displacing coal generation (Beirne 2015; Bromley-Trujillo and Holman 2020; Tomich 2019).

By changing the fundamental economics of many aspects of the U.S. energy system—notably the power sector—the IRA and IIJA hold the potential to help subnational entities enhance and realize their existing climate goals or, if they have not done so already, begin to take on decarbonization goals and policies. Yet, as this chapter explores further, the question remains as to the willingness and capacity of more subnational entities to enter the climate and clean energy policy arena, and the success of the federal policies in effectively engaging and resonating with a variety of unique state and local priorities and motivations.

A New Era?: The Promise and Complexity of Climate Federalism

The Biden administration policies have heralded a new era of “climate federalism” where federal, state, and local governments collaborate on decarbonization roles and responsibilities (Bianco et al. 2020). Acknowledging the mounting challenges of the global climate crisis, the Biden administration has prioritized progress on climate change more than any previous administration and has also committed to support ambitious climate action by subnational governments (Hale and Hultman 2020).

The urgency and scale of the climate change challenge calls for action and coordination at all levels of government, with each level leveraging its unique areas of strength in the spirit of “climate federalism” (Bianco et al. 2020). There are policy arenas where the federal government can most naturally lead, including in setting national

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⁷ In December 2022, renewable energy including hydro accounted for 38 percent of California’s net electricity generation (EIA 2023a). Ohio obtained less than 5 percent of its net electricity generation from renewable energy in December 2022 (EIA 2023b).

emissions targets consistent with science; setting national standards, incentives, and taxes; engaging the international community to advance global climate action; supporting research, development, and demonstration of clean technologies; developing data and reporting tools; and bolstering other areas where federal resources cannot be easily matched at the subnational level. However, planning and implementation of various programs, projects, and policies requires local context, community input, relationships, and expertise that the federal government is not equipped to manage. Most policy areas for addressing the climate crisis could be served by coordination and constructive partnership among federal, state, and local governments. Given the varying capacity and willingness of subnational actors to tackle climate issues, it will be important for the federal government, with its significantly larger financial and technical resources, to look for opportunities to enhance and drive additional subnational climate action and to develop custom-tailored messaging and resources to include more states and localities.

Notwithstanding the significant recent progress made by the federal government and Congress in addressing climate change (Lashof 2023), the promise of climate federalism cannot be taken for granted. While it could be possible to construe the passage of the IIJA and IRA as the start of a new era where federal leadership can solve U.S. climate challenges, the theme of federalism and the need for federal agencies to defer to—and provide support for—subnational roles and authorities persist to this day. As explained below, the success of the IIJA and IRA in achieving deep decarbonization rests heavily on the shoulders of subnational actors. There is no shortage of analyses of what states and localities should do and must do to achieve decarbonization; however, the questions of whether they will and can at sufficient scale and consistency and what the federal government can do to enable most subnational governments to move forward on addressing climate change remain largely unexamined. The next section discusses key factors for effective governance of clean energy, energy efficiency, and climate policy at the subnational level.

Key Dimensions of Effective Subnational Climate Governance

The literature on U.S. state and local actions to address the climate crisis tends to focus on what state⁸ and local⁹ governments should do—including the development of climate and equity action plans, transportation sector policies promoting low-carbon and alternative fuels, building energy codes and disclosures, and electricity sector policies such as renewable portfolio standards, net metering, decoupling, among many other important policies and initiatives that are emphasized in the preceding chapters of this report. However, research exists when it comes to exploring other factors—such as policy coherence, institutional structures, resources, expertise, and bureaucratic insulation from special interests—that are necessary for effective governance of decarbonization, clean energy, and energy efficiency policies at the subnational level. This section will explore these factors, with a particular eye on the investments and coordination that will be needed at both the subnational and

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⁸ Using modeling, Energy Innovation has identified the most impactful policy strategies for states to achieve deep emissions reductions across key sectors: “renewable portfolio standards, and feed-in tariffs; complementary power sector policies, such as utility business model reform; vehicle performance standards; vehicle fuel fees and feebates; electric vehicle policies; urban mobility policies, such as parking restrictions and increased funding for alternative transit modes; building codes and appliance standards; industrial energy efficiency standards; industrial process emission policies; carbon pricing; and [research and development] policies” (Harvey et al. 2018, p. 65).

⁹ The World Economic Forum contends that the urban transition is based in the integration of smart energy infrastructure, clean electrification, efficient building standards, and public services (Corvidae et al. 2021). Steps for decarbonizing urban areas include such actions as assessing the energy supply, building energy efficiency profiles to transform existing buildings into efficient and renewable infrastructure, determining dominant modes of mobility, and facilitating zero-waste recovery systems and promoting sustainable consumption (Plastrik and Cleveland 2015). Although local, exurban, rural, and remote regions also face decarbonization priorities and challenges distinct from urban and suburban areas, in more isolated communities, Saha et al. (2021a) recommend key actions such as investments in renewable energy; energy efficiency; transmission, distribution, and storage; environmental remediation of abandoned fossil fuel infrastructure; tree restoration on federal and non-federal lands; and wildfire risk management.

national levels, to navigate IIJA and IRA opportunities effectively. Key dimensions include:

• Institutional Breadth and Depth: In analyzing how institutions are structured around climate policy, Dubash (2021, p. 515) emphasizes “the need for an expansive definition of climate institutions, as in many cases new institutions have not been created from the ground up, but have emerged through processes of layering” on existing bodies. Municipal sustainability initiatives, which on average involve seven different units of government,¹⁰ illustrate the breadth of responsibilities and capacities that may be implicated in climate policy making and implementation (Park et al. 2020). Mildenberger (2021, p. S76) highlights both the pros and the cons of this institutional layering. On the one hand, it creates multiple “significant sites of . . . climate policy capacity,” diffusing expertise across a multitude of agencies and offices. On the other hand, it can make policy coordination and durability more difficult, as nodes of expertise can be disintegrated from one administration to the next. Recognizing this dynamic, both the Biden administration at the federal level and some subnational governments have espoused a “whole-of-government” approach to climate change, exemplified by such decisions as the administration of Massachusetts Governor Healey’s appointment of a cabinet-level Climate Chief tasked with coordinating climate policy across all state agencies and in partnership with local communities¹¹ (Healey and Driscoll 2023); San Diego’s efforts to amend its citywide general plan to encourage sustainable development and GHG emissions reductions (City of San Diego 2023); and New York City Mayor Eric Adams’s establishment of the Office of Climate and Environmental Justice, which consolidates key environmental and climate resiliency personnel to promote an integrated approach to the city’s climate goals (New York City Government 2022). Such institutional configurations can help centralize coordination, but also empower a broad range of agencies and offices to act and be held accountable for climate goals, and thus potentially

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¹⁰ “The most common departmental actors include planning, public works, economic and community development, environmental services, municipal utilities, parks and recreation, and the mayor or city manager’s office” (Park et al. 2020, p. 436).

¹¹ While Massachusetts claims to be the first state in the nation to make such an appointment, it is not the first example of governors establishing multi-agency initiatives to address climate change. For example, Louisiana Governor Edwards’s Executive Order (EO) 2020-19 appointed a Chief Resilience Officer and directed state agencies to appoint resilience coordinators to serve point on adaptation and resilience initiatives (EO JBE 2020-19). Connecticut Governor Lamont’s EO 21-3 required executive branch agencies to report progress on climate mitigation and resilience efforts to the Governor’s Council on Climate Change (EO 21-3 2021).

• be shielded from political backlash and budget cuts. They can also be especially helpful as states and cities prepare to coordinate unprecedented levels of federal funding, potentially disruptive construction periods, and market and community transitions through the IIJA and IRA (Badlam et al. 2022). After the passage of the IIJA, some states, including Arkansas, California, Pennsylvania, and New Mexico, have designated an infrastructure advisor, agency, or committee tasked with making recommendations to the governor on determining priorities for the billions of dollars in federal infrastructure funding. These steps are designed to help states maximize access to the recent infusion of federal funding, but these kinds of positions and offices need to become the norm for state- and city-level operations in order to provide an integrated, whole-of-government approach to climate leadership.
• Stable and Adequate Staffing and Access to Resources: Navigating and realizing decarbonization goals requires deep investments in and support for human capital, which includes the teams, organizations, and processes that advance climate, clean energy, and energy efficiency goals (see also Chapter 5). Factors such as knowledge, motivation, and personal stance on environmental issues can affect the ability of policy makers, implementers, regulators, and other civil servants to advance decarbonization goals. Technical and policy expertise and cultural competencies are especially important for the development of effective and sequential policies,¹² to manage networks of diverse stakeholders, and to address unexpected issues (Lipinski et al. 2021). Such job responsibilities warrant high levels of compensation and benefits, but state and local governments often face hiring and fiscal challenges (Brey 2022). The need for large, high-budget staff and agencies can potentially be offset by access to professional development opportunities (such as networking opportunities and educational conferences that enable staff to understand and apply best practices learned from other jurisdictions’ experiences in decarbonization), informational and technical assistance resources, and strategic partnerships with trusted non-governmental partners, such as universities, think-tanks, and others who can provide analytical assistance to governmental entities.
• Cushioning from Special or Conflicting Interests: Special interests can pose a significant impediment to climate receptivity and policies (see Chapter 12).

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¹² The National Renewable Energy Laboratory’s “policy-stacking” framework illustrates the complexity and level of expertise needed to navigate effective climate policy at the subnational level. The theory posits that interdependencies among and the sequencing of clean energy policies are important to promoting market certainty, investor confidence, and the likelihood of achieving state policy goals. Successive stages of policy first prepare, then establish, and last expand markets (Krasko and Doris 2012), relying heavily on effective agency planning, expertise, and long-term engagement on clean energy initiatives.

• For example, many fossil fuel–dependent states tend to have weaker environmental and climate policies (Basseches et al. 2022) and may export power to neighboring jurisdictions (Popovich and Plumer 2020). Even in states traditionally aligned with the climate movement, special interests can stall or dilute climate bills and regulations (Culhane et al. 2021). Recognizing this challenge, Meckling and Nahm (2022) contend that a cornerstone of state governmental capacity to advance climate policy lies in the ability to mobilize or demobilize interest groups in pursuit of goals, with this ability being especially useful when there are constructive partnerships between the legislative and executive branch. In California’s signature 2006 climate policy act, AB 32 Global Warming Solutions Act, the legislature succeeded in limiting the influence of special interest groups by establishing overall emissions targets in statute but delegating contentious policy decisions to an independent regulatory agency, the California Air Resources Board. The board was subsequently able to develop a sweeping, economy-wide plan targeting the transportation and electricity sectors and establishing a statewide carbon trading system. This strategic choice helped to shield climate goals from powerful interests at a pivotal time in California’s climate policy trajectory (Meckling and Nahm 2022). Basseches et al. (2022, p. 5) add to this analysis: “when state legislatures delegate significant policy making authority to executive branch agencies, the latter tend to be relatively depoliticized and less susceptible to powerful interest groups. However, the success of administrative delegation is contingent on administrative capacity,” emphasizing once more the need for adequate staffing, expertise, and resources at the agency level. In parts of the country where state agencies are limited in their power and authority, broad stakeholder networks that cut across the private and public sectors in support of decarbonization goals are critical to minimizing the ability of any individual interest group to prevent progress.
• Access to Peer Sharing Networks: Wiseman (2014) identifies the problem of “regulatory islands” that stem from state and local government failures to share policy insights, experiences, and results, and highlights the importance of shared content in supporting policy experimentation and improvement. Drawing on state clean energy and energy efficiency policy as one positive example, Wiseman notes the positive role federal involvement and support has played in the production of information and peer exchange networks, whether directly through federal agencies or, when state mistrust of federal actors prevents more active involvement, through representative associations, regional organizations, and intermediaries that receive federal support.

Effective governance of decarbonization at the subnational level will require greater investment and focus at all levels of government—federal, state, and local. The potential reward for this subnational capacity building is significant, as state and local authorities and actions will be critical to unlocking the potentially immense environmental and economic development benefits of the IIJA and IRA. However, questions remain as to how to enable state and local government institutions to attain these rewards, particularly in jurisdictions that may lack the history, institutional capacity, and political consensus to navigate the complexities of decarbonization. The following section explores whether and how subnational governments can leverage the IIJA and IRA provisions strategically to build their capacity to advance decarbonization policy.

EXPANDING AND ENHANCING SUBNATIONAL ACTION

Maintaining Policy Coherence by Mainstreaming Net-Zero Goals in Subnational Policy

When presented or perceived as a climate issue, decarbonization may fail to garner sufficient public support and policy attention; yet, when it is tied to immediate and tangible benefits important to local populations, electorates, and economies, the prospects may improve (Li et al. 2023; Tyson et al. 2023; Victor et al. 2017). Kok and de Coninck (2007, p. 588) find that this process of “mainstreaming” climate change concerns into policy domains and priorities that capture locally relevant priorities, goals, and motivators enhances the effectiveness of decarbonization policy by “increasing policy coherence [and] minimizing duplications and contradictory policies.” They advise tying decarbonization to adjacent policy motivations such as security of energy supply, air pollution and public health, poverty reduction, agricultural development, and disaster reduction. For more on the energy justice aspect of decarbonization policy, see Chapter 2.

The promise of many clean energy policies is that they can flexibly adapt to different (non-climate) motivators and values that drive political and policy action. In Utah (a net exporter of natural gas, coal, and electricity), for example, former Governor Gary Herbert used local energy production, rural business development, economic competitiveness, and air quality goals to drive efforts in large-scale clean energy storage, electric transportation, and clean energy science, technology, engineering, and mathematics education (Barrett 2019; Citizens for Responsible Energy Solutions 2018; Fazeli 2020; Maffly 2019; Utah Geological Survey 2020). During this term, he also signed into law the 2019 Community Renewable Energy Act to assist communities in achieving 100 percent clean energy by 2030.

Implications for Federal–Subnational Coordination and Technical Assistance

Examples like Governor Herbert’s, above, illustrate that it is possible to achieve greater GHG reductions, even in areas that may ostensibly appear as unfavorable policy environments for addressing climate change. These examples highlight the possibility that with greater levels of engagement of and deference to state and local champions, authorities, and messengers, federal climate action can resonate in places where it has failed to do so in the past. Hendricks et al. (2020) propose one potential model:

Federal agencies and offices are well positioned to promote federal–subnational coordination, most notably through strategic partnerships and the delivery of targeted technical assistance resources. For instance, the Joint Office of Energy and Transportation (2022, p. 2) brokered a Memorandum of Understanding (MOU) among DOE, DOT, the National Association of State Energy Officials, and the American Association of State Highway and Transportation Officials to ensure the “strategic, coordinated, efficient, and equitable” investment of electric vehicle charging infrastructure. The MOU identifies activities that will support this coordination, including convenings of national, state, local, tribal, and private-sector actors; the elevation of data, technical, and program assistance needs of states to federal agencies; and communications channels.

Additionally, the Solar Energy Technologies Office has established a States Collaborative as part of its National Community Solar Partnership as a peer exchange space for states interested in accelerating community solar development (DOE n.d.). EPA’s State and Local Climate and Energy Program offers targeted, voluntary resources—such as GHG inventory, energy savings, and building energy benchmarking resources—that subnational entities have applied to their own policy making and program design

(EPA 2023c). Similarly, DOE’s Office of Cybersecurity, Energy Security, and Emergency Response has made analyses, coordination services, and experts available to help regions and communities navigate energy disruptions and outages through the State, Local, Tribal, and Territorial Program (DOE 2023c).

However, not all federal technical assistance is created equal. In an open letter highlighting the pitfalls of technical assistance that fails to respond to on-the-ground realities and needs, the City of Savannah’s clean energy program manager Alicia Brown notes: “federally funded technical assistance often provides little in the way of additional expertise” because local sustainability professionals already have topical knowledge [on clean energy and climate solutions] and access to private sector partners (Brown 2023). It also comes “at the expense of directing cold hard cash to organizations that need it.”

As Brown’s op-ed implies, subnational entities have been excluded from programmatic determinations that directly affect their ability to plan and make use of IIJA and IRA funds—decisions such as the amount of program funding that will be retained for federal agencies to deliver technical assistance; the content, source, and value of the technical assistance delivered to state and local governments; and even the timing of the release of program funds. A 2022 exchange between DOE and the National Association of State Energy Officials (NASEO), representing the state and territory agency recipients of U.S. State Energy Program (SEP) funds, helps illustrate this dynamic. Nearly 9 months after the passage of the IIJA, NASEO called for the immediate release of the $500 million authorized to support state and territory capacity-building and planning:

In DOE’s ensuing program guidance, the allocations to be distributed to states and territories totaled $425,152,000, reserving nearly $75 million (about 15 percent) for overhead and for the newly formed Office of State and Community Energy Programs (SCEP) to oversee existing programs and provide technical assistance in new areas (DOE 2022b). These new areas include transmission and distribution planning; system-wide planning for grid expansion, modernization, and clean energy technology integration; energy security; community energy planning; and clean energy

manufacturing—with no acknowledgment that states and localities may already be accessing federal technical assistance on these topics from other parts of DOE, such as the Office of Electricity, Grid Deployment Office, Building Technologies Office, and others. DOE’s SCEP began dispersing the IIJA funds for the U.S. State Energy Program in 2023—more than a year after the passage of IIJA—and, as of the writing of this report, has not released any of the $550 million (effectively $430 million after DOE overhead and technical assistance cuts) in Energy Efficiency and Conservation Block Grants authorized for states and localities (DOE 2023b). Both are existing, non-competitive programs with formula allocations that would have been relatively straightforward for DOE procurement and administration to issue.

The failure to prioritize the release of these funds and listen to the needs of states and localities is very likely to hold repercussions for IIJA and IRA implementation. It all but ensures that lesser-resourced states and local governments will be hard-pressed to plan for, staff for, convene stakeholders around, and pursue clean energy funding opportunities competitively.¹³ That is, if they choose to do so at all—without the support of planning and capacity-building funds and transparency into federal technical assistance—jurisdictions may be deterred from pursuing funds altogether, which may hit rural, disadvantaged, or lower-income communities hardest, as noted in Chapter 2.

For their part, subnational governments do also need to dedicate resources to communicate and coordinate with federal agencies, and with one another, on IIJA and IRA implementation. Some states, cities, and counties may be well-resourced and driven to interface directly, whether through direct relationships or opportunities, such as Requests for Information, to submit comments and feedback on federal programs and initiatives. For others, active participation in state-, city-, county-, and regional-facing associations and organizations (such as the National Association of Counties, the National Leagues of Cities, the National Association of State Energy Officials, the National Association of Regulatory Utility Commissioners, and others) can provide an efficient throughway to elevate subnational needs and innovations and inform federal technical assistance and processes. While it does not necessarily guarantee outcomes, these organizations offer platforms to deliver messages on behalf of subnational entities

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¹³ Additionally, requirements for local-match can be a deterrent. Analysis from Headwaters Economics reveals that 60 percent of the IIJA’s funding for projects designed to help communities prepare for natural disasters requires communities to contribute between 20–30 percent of the project cost. This can put rural communities at a disadvantage. Many lack the resources to both apply for grants and sustain their financial contribution (Headwater Economics 2023).

about the size, scope, and timing of federal programs that they will be responsible for implementing. They can also be critical in relationship-building between federal and subnational agencies, which can heighten accountability and trust on both ends. More systematic coordination can also help federal agencies understand the various ways states and localities are applying federal decarbonization resources on the ground to achieve their unique priorities and goals—whether climate-driven or not—and advance streamlined and equitable processes, particularly for under-resourced civil and public entities.

THE IIJA AND IRA AND IMPLEMENTATION AT THE SUBNATIONAL LEVEL

The IIJA provides billions of dollars to modernize the grid, build needed electric transmission, enhance energy system resilience, expand electric vehicle charging infrastructure, and advance building energy efficiency, smart manufacturing, carbon capture and utilization, renewables, and other important energy actions (see Chapter 6). In particular, the IIJA promises an enormous amount of investment into the nation’s transportation infrastructure, with surface transportation accounting for $600 billion of the approximately $1 trillion authorized over 5 years (Saha et al. 2022).

The more recent IRA contains an estimated $370 billion in provisions for energy security and climate change, including support for domestic clean energy manufacturing, residential energy efficiency, and electrification rebates, affordable housing grants, environmental and climate justice block grants, and a slew of tax credits expected to ramp up investments in energy efficiency, renewable energy, geothermal, carbon capture and sequestration, and other emissions reductions efforts (see Chapter 6) (White House n.d.).

State and local governments and other subnational actors will play a make-or-break role in the implementation of the IIJA and IRA. All told, approximately $470 billion in the IIJA and as much as $139 billion in the IRA rely on proactive action and investment in state and local governments (Badlam et al. 2022; Elliot and Hettinger 2022). Early implementation moves seem to suggest that at the state level, state energy offices, transportation departments, and/or public utility commissions are likely and well-positioned to lead on coordinating applications, organizing partners, assessing market barriers and opportunities, collecting stakeholder feedback, and implementing project management, oversight, and reporting tools. Although this leadership risks being patchy at the county and local level, Sustainability Offices, Governmental Affairs liaisons, and Public Works Departments are all likely to be in the driver’s seat and will need to act effectively to ensure that implementation is successful.

More broadly, the success of IIJA and IRA programs and incentives may also depend on several policy, programmatic, organizational, and regulatory factors that may or may not be in place at the subnational level. For instance, states and localities that have been slow in the past to submit designations to DOT for alternative fuels corridors, or whose electric utilities may not be adequately prepared for vehicle electrification, may have a harder time using their allocation of the $5 billion National Electric Vehicle Infrastructure Formula Program authorized by the IIJA (DOT 2022).

Similarly, if a state has complicated or burdensome electric generator interconnection standards and rules, the effectiveness and value of IRA incentives for grid-connected

renewables may be compromised (NREL 2023). As emphasized in Chapter 6, investments in long-range transmission will be another critical success factor in the power sector, but only a few states and localities have invested in strategies to navigate competing interests and accelerate and streamline arduous siting and approval processes (Smith 2021). Further still, analyses suggest that states that participate in regionally organized, wholesale electricity markets can make better use of IRA incentives than those in fragmented systems, as they can support clean energy integration on the grid while preserving reliability and affordability (Lehr and Groves 2022). In the (non-organized) West, two states—Colorado and Nevada—have enacted legislation requiring transmission utilities to join an organized wholesale market by 2030 (Senate Bill 21-072 2021; Senate Bill 448 2021).

As Chapter 7 highlights, states that do not have robust networks in place to ensure that low-income communities can take advantage of investments in energy efficiency upgrades and other clean energy technologies may fall short of meeting key equity goals in these laws.

Further complicating matters, subnational governments have significant discretion on spending in these bills, owing in part to the flexibility built into key provisions. For instance, DOE’s program guidance for IIJA §40101(d) “Preventing Outages and Enhancing the Resilience of the Electric Grid” provides $459 million annually over 5 years to state and tribal governments to improve the resilience of the electric grid. While all the eligible projects promote resilience, they vary in terms of their emissions reduction potential, ranging from vegetation management and fire prevention systems to the construction of distributed renewables and battery storage solutions (DOE 2022a).

Similarly, the majority of the IIJA’s transportation funding is dedicated to bolstering highway programs, which are for the most part distributed to states via formula funding. A large portion of IIJA funding goes to DOT and flows through state transportation agencies; the increased budget is expected to foster 40 new grant programs, many of which are climate-focused (Alexander et al. 2022). Guidance released by the Federal Highway Administration in December 2021 stressed that the federal government would like to see the influx of highway funding from the IIJA go toward fixing existing roads (over building new highways) and cleaner modes of transportation including public transit and bike lanes (Pollack 2021). However, one transportation-specific analysis concluded that investments funded by the IIJA could have the effect of increasing carbon emissions, depending on how highway funding and other programs are implemented by states, cities, and regional agencies (Georgetown Climate Center 2021).

As noted previously, there is high variability and inconsistency in subnational climate policy governance. While some states and localities with longer histories of climate, clean energy, and energy efficiency policy leadership may be sufficiently staffed, adequately resourced, and have suitable policies and regulations in place to pursue IIJA and IRA funding, most will likely need to build this capacity and fill gaps as swiftly as possible.

Most of the provisions in the IIJA and IRA flowing to subnational governments seem to place new or expanded responsibilities on recipients, with de minimis amounts

(typically 10 percent of the allocation) available for use for administrative purposes, and some provisions for planning, data analysis, professional development and education opportunities, and other aspects related to capacity building. Table J-1 in Appendix J highlights key provisions from the IIJA and IRA that engage and implicate state and local governments. Many of these funding opportunities are competitive and opening simultaneously, and therefore will require significant time and attention from applicants even though funding is not guaranteed. Even formula (non-competitive) provisions still require extensive plans to be submitted to federal agencies, reporting on program outcomes, and compliance with sometimes-complex federal rules such as the National Environmental Protection Act, Davis-Bacon, and Buy American and other domestic content requirements. Additionally, while the billions of dollars in IRA clean energy tax incentives will flow directly from the Internal Revenue Service, states and localities will likely need to provide information and answers to their constituents on how to take advantage of them and how they may interact with state and local programs. The fact that subnational governments will need to navigate significant new program development, administrative, program oversight, and stakeholder communications responsibilities, with limited or delayed opportunities to build their own staff and expertise, may deter them from applying for some pots of funding at all—not because of a strategic choice, but owing to strains in capacity. This poses the risk of deepening existing inequities and inconsistencies between climate-leading jurisdictions and state and local governments with less experience and expertise.

On the positive side, the IIJA and IRA do contain a handful of more flexible provisions that can support state and local capacity-building via investments in planning, analysis, program development, stakeholder engagement, and staffing. Key examples for states include $500 million in IIJA funds for the U.S. SEP and a portion of the $550 million in funds under the Energy Efficiency and Conservation Block Grant (EECBG) Program (DOE 2023b). For localities and community-based organizations, these include a portion of the EECBG funds as well as $3 billion in the Environmental and Climate Justice Block Grants from the IRA (EPA 2023a).

These are not insignificant levels of funding. However, when spread across hundreds of state and local jurisdictions and other community-based recipients (not to mention federal agencies’ share for administration and technical assistance), it is logical to question whether they will be adequate in positioning subnational actors to make the most of the opportunity, including integrating and braiding disparate funding streams across different types of agencies (environmental, energy, regulatory, etc.) to maximize their impact. Additionally, as previously noted, the formula SEP and EECBG funds authorized in the IIJA have been slow to reach states and localities, placing additional strain on smaller and less-resourced agencies.

The upfront effort it takes for state and local agencies to respond to competitive grant opportunities is significant. To alleviate this burden, the Climate Pollution Reduction Grants (IRA §60114) were designed by Congress as a two-staged program. In the first stage, states and localities may apply to access non-competitive planning grants (up to $3 million per state, $1 million to the 67 most populous metropolitan areas, and $2 million to U.S. territories, and $25 million to tribes) to develop or update climate, energy, or sustainability plans. These planning grants can help position state and local governments to apply for the second, competitive, stage of the program: $4.6 billion focused on implementation (EPA 2023c). While it remains to be seen how the program will play out over the coming years, the non-competitive planning stage structure of CPRG is promising because it does not automatically deter lower-resourced or lower-capacity entities from pursuing funds.

There is a need for increased and more consistent federal and state investment in subnational governance and capacity building, with a particular focus on providing easy-to-access funding and financial opportunities to state agencies and communities that have not typically led in climate, clean energy, energy efficiency, and decarbonization policy.

CONCLUSION

The formation, evolution, and implementation of decarbonization and clean energy goals depend on responsibilities, investments, and authorities delegated across a multitude of federal, state, local, private-sector, and civic actors. In this regard, deep decarbonization in the United States represents an especially complex goal to navigate, not only for its technical and societal dimensions but also for its need to mobilize action by diffuse governmental, private, and civic sector actors, all with varying priorities and motivations.

State and local decarbonization policies have been critical drivers of emissions reductions, economic and community development, resilience, and security; yet they are also highly variable and insufficient in the face of the climate crisis. This reality underscores the need for greater investment at all levels of government in subnational capacity-building and governance to shepherd the transition to a decarbonized economy—not just in traditionally climate-leading states and cities, but more broadly to include actors with the will, interest, and motivation to decarbonize but who may lack the capacity or support to do so.

The implementation of the IIJA and IRA holds promise as a means of catalyzing significant financial investment in clean energy, energy efficiency, and climate solutions across the United States. While states and localities with sufficient budgets, sophisticated staff, and experience in climate policy and regulatory experimentation may be well positioned to tap into the IIJA and IRA’s significant benefits, many others may lack the capacity to navigate these laws and maximize their impact in the context of state and local goals and priorities. Shortfalls in climate-forward state and city emissions reduction achievements demonstrate that it is critical for more states, cities, regions, and communities to adopt and implement decarbonization goals. These goals can be aligned with a variety of priorities, including economic development, security, and adaptation, so that all localities can benefit from federal investment, regardless of existing climate policies and politics. Without broader and more stringent efforts, there is a serious risk that the United States will fail to meet its net-zero targets.

Governments at all levels—federal, state, and local—must invest immediately and significantly to build subnational readiness and capacity to meet the historic moment presented by the IIJA and IRA and the challenge posed by deep decarbonization. This will require a thoughtful balance between national leadership and deference to on-the-ground actors. With the IIJA and IRA helping to fundamentally transform the economics and potential reach of decarbonization efforts, subnational action will be more essential than ever to seize the opportunity. For many jurisdictions, taking the first steps—diverting scarce staff time to tracking opportunities, developing project and program ideas, designating lead agencies and individuals, submitting applications, and tying these actions to the immediate and tangible needs and priorities of their constituents can unlock myriad benefits for states, regions, counties, cities, communities, and individuals. Table 13-1 summarizes all the recommendations in this chapter to support subnational actors in policy implementation and advancing decarbonization objectives.

SUMMARY OF RECOMMENDATIONS FOR ENHANCING AND REALIZING THE CLIMATE AMBITIONS AND CAPACITIES OF SUBNATIONAL ACTORS: STATE AND LOCAL GOVERNMENT PERSPECTIVES

TABLE 13-1 Summary of Recommendations for Enhancing and Realizing the Climate Ambitions and Capacities of Subnational Actors: State and Local Government Perspectives

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