Over the past year, the federal government has been making up for lost time on climate-related investment. The Infrastructure Investment and Jobs Act (enacted in November 2021) and the more recent Inflation Reduction Act (enacted this past August) provide hundreds of billions of dollars in federal funding to support a broad range of much-needed investments in renewable energy generation and storage, electric vehicles and charging infrastructure, energy efficiency upgrades, and other climate-related concerns.
These investments can play a vital role in the transition to carbon-zero, but they are far from easy for cities and metros to access and deploy. Stove-piped and siloed across dozens of federal agencies and programs, each has different requirements, reporting guidelines, and delivery mechanisms, including block grants, competitive grants, tax incentives, and low-cost finance programs.
For these investments to have maximum impact, they must be able to move smoothly from federal appropriation to local implementation—a task which the country is not yet fully prepared to undertake, particularly given our relative inexperience in organizing and financing wholesale climate initiatives. The task before cities and larger metropolitan areas, then, is multi-fold:
- How do cities and metros align disparate investments for cumulative impact, maximizing outcomes such as job creation, business formation, and worker upskilling?
- How do cities and metros ensure that climate investments incorporate mechanisms to boost inclusive outcomes, such as supplier diversity, workforce diversity, and locational diversity?
- How do cities and metros help unlock the full power of tax incentives via educational campaigns for consumers (as with the Earned Income Tax Credit) and efforts to raise syndicated tax equity (as with the Low-Income Housing Tax Credit)?
Fortunately, local communities naturally derive their power from the horizontal, multi-sectoral cooperation that is their strong suit, as we’ve written before. They must now turn those capabilities towards the climate challenge.
For local leaders to do this well, they must first understand their position in the emerging decarbonization project. We group cities into two categories: consumers and producers. Consumer cities adopt green technology, clean energy and new building techniques and residential patterns to achieve two main goals: reducing emissions and increasing climate resilience. With cities responsible for approximately three quarters of U.S. emissions, virtually all major cities have a responsibility to track and reduce their carbon footprint; some, such as those in coastal areas, have the added challenge of adapting the built environment to withstand impending climate events. Meanwhile, a smaller cadre of metros drive innovation in the climate economy itself. These are the producers, home to the R&D, commercialization, manufacturing and innovation in the energy, transportation and building sectors that together will drive rapid decarbonization. These regions create the climate-aware goods and services that consumer cities—including themselves—use to cut emissions and boost resiliency.
Consuming and producing, as used in this context, each require different considerations as metros organize. As consumers, the central question will be how to derive economic benefits from actions with primarily environmental goals, all while maximizing outcomes on both fronts. Multi-sector coalitions will be key to these efforts, but impact will require more than just being organized. It will also demand smart strategizing around investments to ensure that projects get funded and complement each other in ways that bring out economic and social benefits as well as environmental ones.
Across the Atlantic, several efforts are trying to do this. The European Bank on Reconstruction and Development (EBRD), for example, launched a €3 billion Green Cities initiative in 2016. Now encompassing more than 40 cities, the heart of the project is the formulation of a Green City Action Plan (GCAP) by each city that sets out location-specific climate goals and identifies the policy tools and infrastructure investments needed to reach them. GCAPs lay out high-impact actions that are discrete and attainable, such as extending a city or metro’s train and tram system or renovating a certain percentage of local buildings to use renewable energy sources.
The Green Cities framework encourages the type of holistic thinking that American metros would benefit from. On the one hand, the EBRD uses the GCAPs to push participating cities to identify the overlapping environmental, economic, and social “co-benefits” of each individual project. For instance, Belgrade’s GCAP found significant employment potential in its plans to retrofit municipal and residential buildings. This finding might pique the interest of some U.S. metros, given that the IRA includes $200 million to train workers for precisely this task. In order to properly take advantage of available funding, however, local leaders must do their due diligence to understand the economic potential of energy upgrades in their own region and the kind of training local workers will need for the task.
In addition to highlighting co-benefits within individual projects, the EBRD also emphasizes the potential for synergy between projects. Every action proposed in Belgrade’s GCAP explicitly identifies other mutually reinforcing projects. The plan notes, for instance, that the mapping and implementation of electric vehicle charging stations ought to support a related program that incentivizes the uptake of commercial electric vehicles—a suggestion which might seem obvious, but will require intentional coordination between city authorities and firm-facing intermediaries.
On top of all of this, the EBRD also recognizes that projects must be financed. Every proposed action in a GCAP is accompanied by a note outlining actual and potential funding sources, both public and private, and their level of fit with the project. Thus, every action is anchored in financial reality and stakeholders understand what must be done to get projects off the ground.
The European Union’s Cities Mission provides another model for this new way of working. The 100 cities selected for this initiative were each given two years to develop a Climate City Contract—a customized non-binding memorandum of understanding that acts as a visible commitment to climate action, with a concrete plan and investment strategy for achieving climate neutrality by 2030. Using a “systemic, holistic approach focusing on the medium to long term,” each city brought together area residents, businesses, nonprofit organizations, government entities, and research institutions to co-create a comprehensive plan for climate action.
Innovative governance is at the heart of the Cities Mission project. Mission Cities were called on to “reassess…the role and position of the local government vis-à-vis the citizens” and devise new governance structures that “take into account the specific circumstances and traditions of each city.” Climate City Contract development began with thorough baseline research to understand the city’s starting point “in its societal, economic, ecological, and political dimensions.” Scientific experts analyzed emissions levels and energy consumption so that goals and milestones could be grounded in present-day realities. In many cases, they also developed projections based on the status quo so that everyone could see the danger of failing to act. Existing climate plans were gathered and assessed to learn where efforts were underway and where new actions were needed. As communities proceed with formulating and implementing solutions, the Mission Cities will work to disseminate their successful ideas between each other and across Europe.
The road ahead for producer cities looks considerably different: in addition to meeting consumer-side goals, they will have to undertake a parallel process that will be primarily about market-making.
Fortunately, the recent Build Back Better Regional Challenge (BBBRC) shows us what this means and how it’s done. Take the example of the New Energy New York (NENY) coalition, a BBBRC winner fostering a battery development and manufacturing cluster in upstate New York. As with a consumer-side process, the foundation of any successful effort is a strong group of well-aligned stakeholders. NENY’s main coalition included various universities, nonprofits with different areas of expertise, and public agencies. Unlike their peers, however, the success of producer cities hinges on identifying market opportunities and realistically assessing how their assets position them to take advantage of these opportunities.
The NENY coalition’s proposal made the case the U.S. would soon see increased domestic demand for energy storage and that their region was primed to answer this trend given its research expertise, manufacturing capacity, investment environment, workforce potential, and network of intermediaries. Moreover—and this is where NENY showcases the type of holistic thinking that all producer cities should employ—the coalition contextualized their efforts within other initiatives totaling more than $100 million, all geared towards revitalizing the region and powering its energy storage cluster. The Inflation Reduction Act will be another source of complementary funding, given its support for energy storage and green technology manufacturing. Finally, it’s imperative that as producers aim to supercharge their local economies with this influx of funds, they pull in diverse suppliers, workers, and business owners—a key component of NENY’s strategy.
The bottom line is that whether aiming for net-zero, protecting residents from climate events, or producing goods and services in the green economy, American cities can meet the moment, but only if they act with intention. As for what this looks like in concrete terms, we have three suggestions.
First, local leaders must organize for success. As recognized by the European Commission, “the main obstacle to climate transition is not a lack of climate-friendly and smart technologies, but the capacity to implement them.” Local governments, business organizations, philanthropies, intermediaries, and anchor institutions are just some of the types of organizations that might have this capacity. For regions lacking in climate expertise, there might be an opportunity for experienced or high-capacity institutions to pivot towards the climate space, or for local funding to drive the creation of new organizations. Bottomline: a Climate Action Team needs to be put together ASAP to pull all the climate threads together.
Second, all of this organizational capacity must then be put towards creating cohesive, locally customized climate strategies. This might take the form of an Investment Playbook, which has been a consistent New Localism topic. While existing Investment Playbooks in Buffalo, Erie and elsewhere have focused on identifying priority projects in specific geographies (enabling them to be matched to federal, state, private and civic capital), Climate Playbooks could focus on identifying and prioritizing projects to lower carbon emissions radically in the transportation, building and energy sectors and ensure they have inclusive outcomes via supplier and workforce diversity efforts. The result will be a portfolio of concrete, costed out projects that are ready to access capital as expeditiously as possible given funding flows.
Finally, civic and private capital and support needs to be put to work so that local organizing and prioritizing can actually happen. A city like Tulsa, Oklahoma or Flint, Michigan, for example, might be flush with philanthropic cash, while a place like Philadelphia benefits from the power of locally-focused anchor institutions. At the national scale, a Climate Opportunity Council of industry, philanthropy and finance should be formed to codify solutions and financial instruments. A body of this sort would help even out cross-city disparities in capacity and share successful innovations.
As with other parts of the federal agenda, effective implementation of climate investments will not just happen. Cities and metropolitan areas will need to collaborate radically to unlock federal investments if they hope to achieve maximum impact on the ground. The European models identified above provide inspiration as well as models for adaptation. One thing is clear: the game has now decidedly shifted from federal policy makers to local problem solvers.
Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University. Brian Reyes is a Graduate Research Analyst at the Nowak Lab. Jessica A. Lee is a Senior Advisor to New Localism Associates.