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Climate Pollution Reduction Grants: Industrial pathways to decarbonization

January 11, 2024

In December, CATF released a framework for state policymakers to use in development of their Climate Pollution Reduction Grant (CPRG) planning and implementation grant applications. See John Carlson’s blog here describing the framework and its useful application to Medium- and Heavy-Duty Vehicles.

The CPRG program is a significant opportunity to develop pollution reduction plans and obtain the resources to put those plans into effect. Because the range of possibilities is so vast, the framework is organized into five categories of measures that states can undertake.

  1. Critical analysis. To identify focus areas for decarbonization and ensure complementary programs are well designed and implemented.
  2. Regulatory programs. Develop, staff, and enforce regulatory programs, one of the most direct tools for emission reductions.
  3. Financial incentives. Provide subsidies and loans, enforce fees, and enable other mechanisms that improve the underlying economics of an activity.
  4. Economic and community benefits. Successful plans will have community support and develop the workforce necessary for long term viability of decarbonization technologies.
  5. Leveraging additional funding sources. State plans should leverage non-CPRG sources of funding to maximize impact and develop the strongest grant applications.

This blog and associated resource shows how state officials can use the framework to support the development of a clean industrial sector. The industrial sector is one of the largest contributing sectors to national emissions at 23% and is projected to be the highest emitting sector to U.S. emissions by 2030. Steel and primary metals, cement, bulk chemicals, and petroleum refining are primary subsectors responsible for industrial emissions. Each subsector operates differently, requiring tailored measures to decarbonize.

Below are twenty tangible measures, organized by category, that states can utilize in their Priority Climate Action Plan and CPRG implementation grants. CATF gathered these concepts from existing state planning and policy best practices, industrial sector expertise, and innovative policy ideas. States can select from and add to these actions to customize implementation grant applications.

1. Critical Analysis

To reduce emissions in the industrial sector, states may need to conduct critical analysis to evaluate options, determine areas of focus, and ensure actions are well designed and implemented. With the industrial sector, critical analyses may include:

  • Completing an emissions pathway analysis for the state’s industrial sector to time and sequence intentional policy design, new market development, and clean energy technology deployment that maximizes costs savings, pollution reduction, and community benefits over the coming decades.
  • Designing a state guidebook of analyses and strategies to synergize power sector and industrial decarbonization. Low-carbon hydrogen, carbon capture, and industrial electrification require increased power usage to varying degrees; without synergized grid expansion and power sector decarbonization, emissions will be moved to a grid that is unprepared for rapidly increased demand. Developing a guidebook of state-level modeling scenarios, policies, and strategies can align supply and demand, engage public and private sectors, and drive coordinated sectoral planning and design.
  • Developing a state roadmap for a CO2 and H2 pipeline network that minimizes distance traveled, avoids communities and environmental impacts, employs advanced safety standards and emergency protocols, considers interstate/regional infrastructure, and meets or exceeds federal regulations.
  • Performing an economic valuation analysis for unit switching and equipment upgrades that reduce emissions at steel facilities, including but not limited to electric arc furnaces, low-carbon hydrogen, carbon capture and storage, and more efficient combustion units. (Steel and Primary Metals)
  • Providing front-end engineering and design studies for carbon capture and storage applications on hard-to-abate industrial facilities, such as cement and steel, to reduce barriers for deployment. Track, monitor, and report success of technology through quantitative local air monitors and qualitative community narratives.

2. Regulatory Programs

Regulatory programs and standards are one of the most effective tools for achieving tangible emission reductions. CPRG funds can provide states with the resources needed to develop, staff, and enforce regulatory programs. In the industrial decarbonization space, these can include:

  • Setting an industrial efficiency standard to maximize facility operational efficiency. 
  • Setting GHG emissions intensity standards that decrease over time. For example, Colorado recently placed direct emission limits on individual industrial and manufacturing sources and established an emissions trading program to enable compliance flexibility. The regulation can include cost protections and prioritize actions that maximize co-pollutant reductions.
  • Establishing clean energy requirements for industrial users to source a percentage of their energy – onsite and offsite electricity generation – from clean sources by a certain date (e.g., 100% by 2050). 
  • Adopting clean cement and concrete standards that would lead to increased production and use of cement with a lower carbon intensity over time. (Cement)
  • Establishing a low-carbon fuel standard, based on carbon intensity, for fossil-based fuels to bring about production, distribution, and end use of cleaner, more economically competitive fuels. (Petroleum Refining)

3. Financial Incentives

Financial incentives have been instrumental in the deployment of clean technologies, and CPRG awards can be used to design, staff, and fund incentive programs that support industrial decarbonization, among other state priorities. Incentive programs can receive CPRG (and other) funds and subgrant them to businesses and residents or be used to finance tax credits, fee enforcement, and other mechanisms that improve the underlying economics of an activity. Examples of these include:

  • Offering tax credits for deployment of carbon capture and storage at industrial facilities that need an additional incentive for projects to be economically viable in subsectors such as cement, steel, and bulk chemicals.
  • Providing incentives for replacing fossil fuel–powered combustion units with units that operate on clean electricity or achieve significant efficiencies. Electric replacement units may include industrial boilers, process heaters, and motors. To maximize program effectiveness, the state could limit replacement incentives to older or less efficient units. 
  • Providing tax credits or grants for low-carbon hydrogen-based steel production that achieves a low- or zero-carbon intensity rate and meets other parameters. Greenfield steel producers in particular have few decarbonization options, so supporting the clean hydrogen market is essential to propelling the sector’s decarbonization. (Steel and Primary Metals)
  • Leading an industrial innovation competition with a financial award for industries to develop innovative technologies for cement material efficiencies, that use less material and release significantly less pollution. (Cement)
  • Initiating a grant program that lowers financial barriers for chemical industry owners and operators to deploy low-carbon hydrogen feedstock demonstrations for bulk chemical synthesis. (Bulk Chemicals)

4. Economic and Community Benefits

The most durable and successful public sector programs build a meaningful coalition of stakeholders, including community support, workforce development, and real-world benefits to residents and citizens. Benefits to low-income and disadvantaged communities will be considered as part of CPRG implementation grant applications, as will the quality of jobs produced from any grant. A holistic decarbonization plan addresses the careers and skilled employees required to create the long-term demand and viability required for continued investment and deployment of the technology. States should consider:

  • Offering incentive packages for in-state workers to participate more easily in nearby clean energy projects, including wrap-around services that facilitate travel to jobsites, access to apprenticeship and workforce training, childcare assistance, access to financial counseling, and other relevant services.
  • Helping small- and medium-sized manufacturers utilize existing federal programs such as the Manufacturing Extension Partnerships and Industrial Assessment Centers to support industrial electrification and energy efficient practices.
  • Leading a state program that supports durable partnerships between project teams and impacted communities to design community benefits programs that are tailored to meet their unique needs and create benefits realized by the impacted communities.

5. Leverage Additional Funding Sources

EPA’s guidance for implementation grant applications makes clear the agency wants CPRG funds to be used to fill gaps. In other words, CPRG funds should not be used for activities that other federal funding programs are designed to address. At the same time, applications will be strengthened by showing that a CPRG award will be leveraged alongside other funding sources.

A strong CPRG application will ensure competitiveness by referencing and leveraging other relevant federal programs, tax incentives, and state/local awards to demonstrate intentional program design and front-end coordination.

There are unprecedented opportunities to decarbonize the industrial sector.

The industrial sector is ripe with opportunity for CPRG planning and implementation grants. States and municipalities can lead with measures that support emission reductions in the industrial sector and hard-to-abate subsectors. These measures can spur innovation, bring in new perspectives, increase competitiveness, and promote holistic but practical solutions.

CATF is available to assist states in developing their plans and concepts across sectors and in different aspects of their framework.

Review a fact sheet on CPRG measures in the industrial sector.

Review a CATF tracker on industrial decarbonization funding programs.

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