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State and Local Climate and Energy Program

Establishing Funding Sources and Financing Vehicles

Overview

Transitioning from traditional energy generation, transportation systems, and waste management approaches to clean energy and other greenhouse gas reducing strategies may involve an up-front capital expenditure to cover the costs of new equipment or systems.

Many governments have overcome this initial hurdle by establishing: (1) a funding source or mechanism to generate funding and (2) a vehicle for delivering those funds to the customers and businesses seeking to invest in energy efficiency, renewable energy, or other climate change mitigation strategies.

  • Funding sources are created by the government and refer to the money used to provide funds for financial vehicles that can be accessed for climate and clean energy improvements. This money can come from:
    • A surcharge on electricity or gas consumption
    • Bond issuances
    • Tax revenue
    • Other sources
  • Financial vehicles refer to the use of various mechanisms that deliver funding to the customer to pay for climate and clean energy activities. Examples include:
    • Loans
    • Energy performance contracts
    • Lease-purchase agreements
    • Grants

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Examples of Funding Sources and Financial Vehicles

Type of Policy: Funding sources: Financial vehicles:
Advancing clean energy or climate change programs targeting all major sectors including the government sector to lead by example. Policies can be administered by utilities, states, local governments, or third parties.

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Funding Databases

Clean Energy

Combined Heat and Power (CHP) Funding Opportunities - Provides information on state and federal incentives applicable to CHP and biomass/biogas projects. EPA's Combined Heat and Power Partnership updates the information twice a month. The financial incentives page includes grants, tax incentives, low-interest loans, favorable utility rates, tradable allowances, and renewable portfolio standards.

Database of State Incentives for Renewables and Efficiency (DSIRE) Exit EPA disclaimer - Routinely updated information about renewable energy and energy efficiency policies and incentives offered by federal and state agencies, utilities, and local organizations in each state.

Landfill Methane Outreach Program (LMOP) Funding Guide - Features innovative funding programs and strategies that can help developers overcome financial barriers, including loans, grants, renewable portfolio standards, renewable energy trust funds, and property, sales, and use tax exemptions. The Guide is intended to provide information about a broad range of the types of funding options available for landfill gas-to-energy (LFGE) projects.

RE-Powering America's Lands - Features information about federal and state incentives that are available for renewable energy generation and contaminated land redevelopment in each state. Each fact sheet includes information on available funding (grants, loans, bonds, etc.), tax incentives (abatements, deductions, credits, etc.), technical assistance and other incentives offered at the state level.

Transportation

Clean Cities - A U.S. Department of Energy program designed to encourage the use of alternative fuel vehicles (AFVs) and its supporting infrastructure throughout the nation. Clean Cities tracks transportation-related funding opportunities.

National Clean Diesel Campaign Funding Opportunities - Includes national, emerging technologies, SmartWay Finance, and state funding opportunities.

State and Local Transportation Resources Grants & Funding - Features federal funding sources available to state and local agencies for projects relating to transportation and air quality. The funding sources listed are both within and outside of EPA.

SmartWay Finance Center - Provides information on financial institutions that provide loans for purchase of SmartWay Certified Tractors, SmartWay Certified Trailers, or new or pre-owned trucks with SmartWay approved fuel savings and emissions reducing technologies.

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Tools and Resources

Cash Flow Opportunity Calculator

The Cash Flow Opportunity Calculator (XLS) (415K, About XLS Exit EPA disclaimer), developed for the ENERGY STAR program, uses building-specific data to help decision-makers quantify the financial benefits of energy efficient investments. The calculator estimates how much new energy efficiency equipment can be purchased with anticipated savings, compares financing options for energy efficiency purchases, and evaluates project economics under different interest rates.

Clean Energy Funds Manual

The Clean Energy Funds Manual (55 pp, 1.4M, About PDF) is intended to help policy and program decision-makers identify the clean energy funding and administration approaches that make sense for their jurisdiction. For each approach, it provides an overview of advantages and disadvantages, implementation options, and state examples. The manual also references other policies for promoting clean energy and briefly describes interactions and considerations related to establishing a clean energy fund.

ENERGY STAR Webcasts

ENERGY STAR offers free online training to help improve the energy performance of organizations. Live and pre-recorded training Webcasts are available, including the following sessions: Maximize Stimulus Funding with Performance Contracting and ENERGY STAR, ENERGY STAR and Revolving Loan Funds, and Innovative Financial Solutions for Efficiency in Drinking Water Systems and Wastewater Treatment Plants.

Environmental Finance Center Network

EPA's Environmental Finance Center Network provides state and local officials and small businesses with advisory services; education, publications, and training; technical assistance; and analyses on financing alternatives.

Environmentally Preferable Purchasing Program

Environmentally preferable purchasing (EPP) helps governments "buy green" and use their buying power to stimulate market demand for green products and services. EPA's Environmentally Preferable Purchasing Program can help state government purchasers to:

  • Find and evaluate information about green products and services
  • Calculate the costs and benefits of purchasing choices
  • Manage green purchasing processes

Local Government Climate and Energy Strategy Series

The Local Government Climate and Energy Strategy Series provide a comprehensive, straightforward overview of local government greenhouse gas (GHG) emission reduction strategies. Staff can use these guides to plan, implement, and evaluate climate and energy projects. Each guide provides an overview of project benefits, policy mechanisms, investments, key stakeholders, and other implementation considerations. Examples and case studies are incorporated throughout the guides. Topics covered in the guides include energy efficiency, transportation, urban planning and design, solid waste and materials management, and renewable energy.

State Lead by Example (LBE) Guide

States lead by example (LBE) by establishing programs that achieve substantial energy cost savings within their own buildings and operations, and demonstrate the feasibility and benefits of clean energy to the larger market. EPA's State Lead by Example Guide identifies best practices and state examples of clean energy activities; highlights the benefits and costs of taking action; and identifies issues, strategies, and resources for implementing key steps in the development of a comprehensive LBE program. Section 5.2 of the guide discusses how to finance an LBE program, including identifying financing vehicles and funding sources and addressing financial barriers.

Supplemental Environmental Projects Toolkit

The Supplemental Environmental Projects Toolkit (PDF) (66 pp, 1.9M, About PDF) provides state and local governments information and resources for pursuing energy efficiency or renewable energy projects through non-federal enforcement settlements. The toolkit contains information about Supplemental Environmental Projects at the local and state level, particular highlighting opportunities with energy efficiency and renewable energy.

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