2023 has seen large-scale political commitments to climate action; from enabling green tech industries to thrive across Europe and the US. The governmental actors are taking at-scale action to address the issue, with two notable pieces of legislation being the Inflation Reduction Act in the US and the EU Green Deal – including Net Zero Industry Act – in the EU.
What's in it for cities? Let's have look.
The Inflation Reduction Act and cities
The Biden administration’s announcement of the Inflation Reduction Act marked the unofficial re-entry of the US in the climate game. While it may have been packaged as something else to tap into citizens’ most pressing concerns – inflation and the price of gas – the Inflation Reduction Act has been heralded as the biggest climate legislation to date by promising a staggering $369 billion through an array of programs.
It has also provided many opportunities for cities to benefit from it, including up to $250 million in grants through Climate Pollution Reduction Grants via the Environmental Protection Agency, if cities present climate action plans. Local US governments can navigate the Inflation Reduction Act through six broad ways:
- Directly drawing financial support from federal agencies;
- Maximizing direct-to-consumer tax credits and grants for vehicle and building electrification and distributed energy generation;
- Accessing funds routed through states and state energy offices;
- Benefiting from clean energy tax credits for municipal utilities;
- Benefiting from appropriations for port decarbonization;
- Accessing set-asides for disadvantaged and low-income communities and "energy communities”.
The Net Zero Industry Act and cities
This legislation, part of the EU Green Deal, was introduced in the EU after simmering over months. It provides better conditions for net-zero projects and investment and plans to scale up cleantech manufacturing for at least 40% of needs and demand to be met domestically.
The Net Zero Industry Act aims to promote the use of clean technologies in the EU and provides better conditions for net-zero projects and investments. While it does open the door to subsidies at the discretion of member states, it does not offer direct financial support to cities and local governments. The legislation, however, can indirectly benefit cities and local governments by creating quality jobs and boosting competitiveness, which can translate into economic benefits for local communities.
The bill, however, was met with mixed reviews. It is not as ambitious as the Inflation Reduction Act and does not compete enough with the generous tax incentives offered by the Inflation Reduction Act.
Comparing the two legislations
Both the Net Zero Industry Act and the Inflation Reduction Act have provisions that can benefit cities and local governments. However, the Inflation Reduction Act seems to provide more direct support to cities and local governments than the Net Zero Industry Act.
The Inflation Reduction Act offers more direct opportunities for cities to benefit from it. For example, the Climate Pollution Reduction Grants via the Environmental Protection Agency offer up to $250 million in grants to cities that present climate action plans. Local US governments can also access funds through six broad ways, including directly drawing financial support from federal agencies, maximizing direct-to-consumer tax credits and grants, benefiting from clean energy tax credits, and accessing set-asides for disadvantaged and low-income communities and energy communities.
The Net Zero Industry Act on other hand sits in a mosaic of EU programs that cater specifically to cities. These include the EU Mission Cities and the Intelligent Cities Challenge, which are likely to be further galvanized by the recent bill. Bristol City Council shared its experience of having won a €1.5 million bid through the NetZeroCities Pilot Cities Programme in a recent webinar.
Conclusion?
It's been a story in two Acts – one for Inflation Reduction and one for the Net Zero Industry. What's the verdict?
While the Inflation Reduction Act as a single piece of legislation is more ambitious and has more direct implications for cities – the EU has an array of other aces up its sleeve that benefit cities.
Both legislations are seen as part of a global shift towards a "race to the top" approach in tackling climate change, with world leaders seeing the energy transition as a source for economic prosperity, security, and geostrategic benefits.
