Why State Climate Plans Prioritize Upgrades to Homes and Buildings
US states across the country are planning near-term actions to improve buildings, support health, and boost economic opportunity.
The landmark Inflation Reduction Act (IRA) includes $5 billion for states, metropolitan areas, Tribes, and territories to create climate pollution reduction plans, and, importantly, begin to make those plans reality. This program — the Climate Pollution Reduction Grants (CPRG) — opens the door for these entities to get serious about reducing pollution while creating new economic opportunities for their residents and local businesses.
This spring, 45 states — in addition to the District of Columbia and nearly 200 metropolitan areas, Tribes, and territories — completed the first phase of the CPRG program by developing Priority Climate Action Plans that outline immediate steps to reduce pollution. Although not required to cover all sectors of the economy, each state Climate Plan includes statewide measures to make buildings cleaner, safer, and more energy efficient, while supporting lower energy bills and local jobs. Buildings are the only sector to have statewide pollution reduction measures in every state plan, signaling national consensus that upgrading homes, workplaces, and schools is key to delivering meaningful health, economic, and climate benefits for all.
This week, the EPA announced $4.3 billion in Implementation Grants for the second phase of the CPRG program, which funds public agencies and partners to execute measures from submitted Climate Plans. The Implementation Grant awards further highlight the momentum to improve buildings: 15 of the 25 awards include buildings-focused measures, and the buildings sector received a total of $1.06 billion (second only to the transportation sector).
Key trends
RMI examined the state-level Climate Plans and Implementation Grant awards to identify key building sector trends and opportunities. Themes include improving affordability, scaling decarbonization, supporting comprehensive retrofits, and leading by example.
Improving affordability
Illinois’ plan seeks to make energy efficient, all-electric buildings more affordable by strategically targeting gaps in energy retrofit incentives. Illinois identified shortfalls in funding and financing for specific customer types (e.g., multifamily residential buildings, low- and moderate-income households) and technologies (e.g., cold climate heat pumps, heat pump water heaters). The state was selected for a $430 million Implementation Grant to fill those gaps via low-cost financing for residential and small commercial energy retrofits, a lease-to-own program for low-income households, and a new whole-home decarbonization incentive.
Vermont’s plan proposes improving energy efficiency and housing affordability together via an incentive for affordable housing developers to exceed the state’s energy code. Although Vermont currently offers such an incentive, the current per-unit funding level is as much as 10 times too small to effectively encourage high-performance buildings. By increasing the incentive amount, Vermont can support the construction of much-needed affordable housing and ensure that future residents benefit from lower utility bills. Similarly, Oregon’s plan outlines expanded incentives for construction of energy efficient affordable housing, part of the state’s $197 million award that also includes funding for weatherization and heat pumps.
Scaling up building decarbonization
Other Climate Plans emphasize strategies to achieve scale. Maryland’s plan, for instance, includes a Zero-Emission Heating Equipment Standard that will require new heating equipment to produce zero on-site emissions. The standard, which echoes ongoing work from California regulators, is anticipated to result in nearly 100 percent of Maryland’s existing buildings having zero-emission space and water heating by 2045, which RMI predicts will lower energy bills.
Of course, scale and affordability often go together. North Carolina’s and Ohio’s plans each identify bulk purchase agreements as a strategy to lower the cost of all-electric heating equipment. Several plans also propose networked geothermal systems to provide efficient, neighborhood-scale heating and cooling. Connecticut’s and Illinois’ plans call for pilot community-scale geothermal networks to affordably heat and cool residential and commercial buildings, while Washington’s plan identifies opportunities to decarbonize costly legacy district energy systems on educational and public agency campuses.
Leading by example
Several states — including Maine, Michigan, Nevada, and North Dakota — plan to lead by example via energy efficiency improvements and clean energy installations at public facilities. For instance, West Virginia’s plan proposes energy audits of state, county, and municipal buildings, followed by energy efficiency improvements based on the results. Because state and local governments own approximately one‑sixth of US building space, upgrading public facilities is not only essential for pollution reduction, but can also send important market signals and increase workforce demand in the local economy. States can deliver further benefits by following the federal government’s lead to set measurable goals for phasing out fossil fuel use in public facilities, like the Clean Energy for Federal Buildings rule, which requires the elimination of on-site fossil fuel use in new and retrofitted federal buildings by 2030.
Supporting comprehensive retrofits
Numerous state Climate Plans call for steps to facilitate health, safety, and energy retrofits for homes and commercial buildings. Popular solutions include incentives for energy efficiency and electrification upgrades in residential and commercial buildings, state navigator services to make accessing incentives easier, and home weatherization programs. Crucially, several states like New Hampshire, South Carolina, and Wisconsin also identified pre-weatherization funding as a priority in their Climate Plans. Pre-weatherization programs, such as the one in Nebraska’s $307 million award, remediate structural issues and other health and safety hazards that could otherwise disqualify households from energy upgrade programs like the federal Weatherization Assistance Program.
Advancing equity
As part of each Climate Plan, the CPRG guidance requires an analysis of benefits to low-income and disadvantaged communities. Buildings-focused actions are positioned to deliver direct benefits to Justice40 communities, such as better air quality, improved health and safety at home, and lower utility bills. For the one in seven American families who live in energy poverty (spending more than 10 percent of household income on electricity and fuel), incentives, technical assistance, and direct install programs that reach low- and moderate-income households in their homes are especially important. In addition, buildings-focused measures can enhance resilience at the neighborhood scale, such as through Nevada’s proposal to prioritize deep energy retrofits for schools in low-income and environmental justice communities.
Key opportunities
There are several upcoming opportunities to continue the buildings sector momentum demonstrated in submitted Climate Plans and Implementation Grant awards.
Funding
The EPA estimates that the $1.06 billion in Implementation Grants for buildings-focused measures will support energy efficiency upgrades to 700,000 homes, 50 million square feet of commercial buildings, and 250 public buildings. For measures not funded through the CPRG Implementation Grants, states and partners can explore other funding opportunities for Climate Plan measures. For example, RMI’s and WRI’s AFFORD tool identifies more than a dozen federal funding sources that can support whole-home energy retrofits, including grants, rebates, and tax credits.
Planning
Now that Priority Climate Action Plans are complete, states will start on the next deliverable for the CPRG Planning Grants — Comprehensive Climate Action Plans — which are due in 2025.
In these plans, states will flesh out priority measures with pollution projections and targets, broader benefits analysis, funding plans, and workforce planning analysis. States will also develop long-term pollution reduction measures. Through additional analysis and outreach in this phase, states can refine and expand upon priority buildings-focused measures, identify strategic investments, incorporate further public input, and learn from other states’ plans.
Collaboration
The CPRG program presents an opportunity for collaboration across and within states. States with similar measures in their Climate Plans can leverage economies of scale for regional implementation. In fact, a coalition of five states was selected for a $450 million Implementation Grant to accelerate heat pump deployment across New England.
In parallel, local organizations, service providers, and policymakers can leverage learnings from state Climate Plans. Many of the submitted Climate Plans contain analysis — such as Illinois’ identification of key funding and financing gaps for energy retrofits or South Carolina’s quantification of utility bill benefits from comprehensive home energy retrofits — that can be used to inform program design, educate decision makers, and refine existing programs.
A valuable resource
For state policymakers and advocates seeking to advance ambitious buildings sector policies, state Climate Plans are a valuable new resource. This is the right time for advocates and policymakers to use these plans to identify opportunities for collaboration, funding, technical assistance, and advocacy. Our health, economy, and future generations who will live, work, and play in these buildings depend on it.
To learn about additional insights, opportunities, and examples from the Priority Climate Action Plans, view RMI’s full spreadsheet.
