Catalyzing Climate Solutions: Assessing IRA's Use of Public Funds to Spur Private Investment

Written by Tim Profeta, Ian Hitchcock, and Tatjana Vujic

Novi Strategies is delighted to have partnered with the Sustainable Energy & Environment Coalition (SEEC) Institute to produce the SEEC Institute’s inaugural report, Catalyzing Climate Solutions: Assessing the IRA and IIJA's Use of Public Funds to Spur Private Investment. Two years into the implementation of the Inflation Reduction Act (IRA) and three years into the IIJA, Novi conducted interviews of key stakeholders to gain and share insight about some of the most significant of the IRA and IIJA’s public-private partnership approaches to driving GHG emission reductions through what is becoming known as the United States' climate industrial policy regime. The interviews and other research conducted on early implementation of the IIJA and IRA yielded several important recommendations for future implementation practices as well as potential statutory action to improve how these programs are implemented and hasten the climate and domestic manufacturing benefits intended.  

The provisions considered in the SEEC report include (1) the expansion of the Department of Energy's (DOE's) Loan Program Office (LPO), (2) the creation of the Greenhouse Gas Reduction Fund (GGRF), (3) the Climate Pollution Reduction Grant (CPRG) program at EPA; (4) various cost share programs aimed at technology demonstration and deployment, and (5) the transferability and direct pay provisions of the tax code, each of which in their unique ways seeks to blend public financing with private investment, require cost-share private investment to gain generous public grants, or invite public entities into the tax credit market. The actional recommendations and guidance for yielding the statutes' intended outcomes focus on ways that implementing entities are currently empowered to immediately improve implementation practices, ways that Congress might adjust the underlying statutes, and a mixture of both. Key takeaways and recommendations can be distilled to 9 main points:

1.       Improve and simplify government interactions with the private sector to attract and facilitate joint projects.

2.       Increase capacity in government departments to improve program execution.

3.       Embrace geographic variability and subfederal direction for certain public investment programs to improve outcomes.

4.       Direct deeper investments to essential technologies to ensure that the economic feasibility of the "Nth of a Kind" application are identified.

5.       Better tolerate risk and failures in public investments to allow for investments in the frontier that private capital does not reach.

6.       Ensure that public investment programs push private investment towards societal priorities that it would not reach otherwise.

7.       Provide programs that increase the demand function for the technologies and products produced by the IIJA and IRA's industrial policy to ensure the market grows.

8.       Embrace tax chaining to deepen the involvement of public and nonprofit entities in the tax credit financing market, creating wider opportunities for structures of public-private investment.

9.       Develop more public investment programming for the agricultural and industrial sectors.

For a detailed look at the assessments and the full report, please visit Catalyzing Climate Solutions: Assessing the IRA and IIJA's Use of Public Funds to Spur Private Investment. The webinar regarding the report will be available for viewing shortly.