How the green transition can revitalize American democracy

The Inflation Reduction Act (IRA) is not only the most significant piece of climate change legislation in U.S. history. It also could be a critical mechanism for revitalizing democracy. But as the clock ticks to begin disbursing billions of grant dollars, that will only happen if the Biden administration shares decision-making power with local communities, shifting the role of federal agencies from problem-solvers to distributors of the ability to solve. 

Climate change and the weakening of democracy — the two defining crises of our time — are closely linked by misinformation, the influence of special interests, partisan gridlock as well as a decline in social capital and a growing disaffection with the institutions of collective American life that have left individuals feeling powerless and isolated.  

At the same time, dealing with the climate crisis will require strengthening democracy — especially at the local level. The federal government can muster resources and set incentives to create the conditions for the green transition, but the hard work of implementation will happen in communities, counties and municipalities. Thus, the breakdown in local civic life that imperils democracy also directly undermines our ability to counter the growing climate catastrophe.

Under the Inflation Reduction Act, the federal government will allocate close to $400 billion for energy security and climate change investments. This includes $82 billion in grants, of which $60 billion are directed toward environmental justice priorities in disadvantaged communities. In making the decisions about where and how to disburse those funds, federal agencies should break from the typical processes for distributing grants that tend to put a premium on existing connections, rely on siloed and centralized federal decision making, and involve a large amount of “inside baseball.”

Instead, the Biden administration should directly involve local community leaders and experts in deciding how funds are spent. They have contextual knowledge and local expertise that even the sharpest technocrats in Washington will lack, and they will be more apt to implement and maintain projects with fidelity if they have ownership from the beginning. The principle of “nothing decided for us without us” is not just ethically correct. It also breeds results.

How exactly would the administration do this? One opportunity lies in a $27-billion IRA program called the Greenhouse Gas Reduction Fund, under which the Environmental Protection Agency (EPA) will allocate grants for deploying technologies and financing projects that reduce greenhouse gas emissions, especially in low-income and disadvantaged communities — things like residential solar, heat pumps and home weatherization. 

The challenge for the EPA is that the communities that need the most help are those least able to ask for it. They are unlikely to have the experience, information and time needed to apply for a federal grant and comply with reporting requirements. The EPA has limited staff to locate and vet trusted points of contact. And time is short: the new law requires that the EPA begin disbursing funds within 180 days of the passage of the IRA, with all the money being allocated by September 30, 2024.

There is a push to create a national green bank, a centralized institution that, in addition to its core function of lending public and private money to clean energy projects, would process applications and make decisions about where and to whom to allocate the grants. Green banks are essential institutions for spurring investment in clean energy, but for a program focused on environmental justice, a national green bank is the wrong tool. Even if it could bulldoze through the usual political and bureaucratic wrangling to set itself up in a timely fashion, a centralized institution in Washington would struggle to reach and empower low-income and disadvantaged communities.

Instead, the EPA should distribute the power to decide how the money is spent among community-level partners, such as Community Development Financial Institutions (CDFIs). These are mission-driven depository institutions — either banks, credit unions, nonprofit loan funds, or venture capital funds — that serve economically distressed communities, whether urban or rural. There are around 1,300 in all 50 states, Washington, D.C. and Puerto Rico, managing an estimated $222 billion. They have experience administering federal grants and awards, deep relationships in the communities they serve, and many have already been providing financing for clean energy and energy efficiency projects.

Partnering with Community Development Financial Institutions (CDFIs) — or other local entities such as housing authorities — to administer the IRA is but one path to greater community engagement. Participatory budgeting, which allows residents to help decide municipal funding priorities, is being used from Lisbon to New York City to set sustainability budgets. Some countries are experimenting with climate-focused citizen’s assemblies, randomly selected representative bodies that identify and build consensus for environmental policies. 

In addition to enlisting a wider swath of society in the green energy transition, these approaches can help build trust, belonging and social capital. In disconnected rural communities and neglected urban ones alike, many Americans can view the government as imperious, distant and even harmful. Empowering communities to shape policy and allocate funding can help dispel that image. 

Gordon LaForge is a senior policy analyst at New America.

Ann Florini is a fellow in the Political Reform Program at New America.

Hollie Russon Gilman is a senior fellow at New America’s Political Reform Program and affiliate fellow at Harvard Ash Center.