Feature image: The LEED Platinum Seattle Fire Station 22. Image credit: Lara Swimmer.

Public buildings account for about one in every six buildings in the U.S. – think schools, post offices, universities, fire stations and courthouses. That represents an enormous opportunity for cities, states and the federal government to demonstrate green building leadership.

While many governments are doing just that, too often, upfront costs and deference to the status quo are obstacles to progress, with leaders making short-term decisions that ignore the long-term benefits of green buildings, including saving taxpayers money through lower energy bills, reducing GHG emissions, and creating more resilient and comfortable workplaces.

With the passage of the Inflation Reduction Act, that dynamic should be changing. New tax incentives, low-cost financing and grant programs under the law make a compelling case for incorporating green practices into all public building projects. Sure, we don’t have all the answers yet on how the programs will be implemented. But we will soon, and from what we do know, the economics for green public buildings may have never been better.

Among the many improvements under the new law is that many of the tax incentives encouraging green building are not only more generous, but they are also much more accessible to public and nonprofit entities through mechanisms that allow the incentives to be easily transferred or, in some cases, provided essentially as rebates through direct pay provisions.

Additionally, the U.S. Department of Energy, the EPA and other agencies are busy implementing a variety of programs that states and local governments can use for building projects, providing low-cost capital and, in some cases, outright grants to fund all or a portion of a project.

Below are some highlights that every green building practitioner and government facilities leader should know about. For an even fuller picture, check out our resource on public and nonprofit building programs under the IRA and the Infrastructure Investment and Jobs Act.

A large concrete courthouse in a modern take on a traditional style — The LEED Gold Carroll A. Campbell Jr. U.S. Courthouse in Greenville, South Carolina. Image credit: Tim Hursley.

Tax incentives

The IRA expands and extends key green building tax incentives, including the Sec. 48 Investment Tax Credit (ITC), the Sec. 179D energy efficiency deduction and the Sec. 30C credit for alternative vehicle charging infrastructure. Many of the credits can now be taken by local governments and nonprofit organizations as direct pay – essentially a refundable tax credit, even when there is no tax liability.

The ITC, for example, could be used to receive a tax credit of 30% of the cost for installing rooftop solar (and up to 70% if certain conditions are met). Previously, to access this credit, public or private entities without enough tax liability to use the credit would have had to navigate complicated and expensive tax equity markets where the incentives were bought and sold like commodities, and where much of the value was lost in the process.

Under the new law, the ITC and others are available as “direct pay” to a local government, school district, university or other public or nonprofit entity – meaning the federal government writes them a check for the value of the credit. Similarly, the Sec. 179D deduction allows public or nonprofit entities to transfer the deduction to the architect or engineer of the project.

Children on stairs and in the hallway of a large school atrium with natural light. — The LEED Silver AISD Ann Richards School for Young Women Leaders in Austin, Texas. Image credit: Sterling Stevens.

Low-cost financing

The star here is the EPA’s $27 billion Greenhouse Gas Reduction Fund, often referred to as the new green bank. The intent of this program is to provide low- or no-cost financing, as well as potentially outright grants, for green projects nationwide. It remains unsettled how the program will be set up and what the process will be for applying.

We expect more clarity soon, though, and also that a good share of this massive new funding source will be directed at buildings. Another key program is $1 billion through HUD, authorized to seed up to $4 billion in financing for energy efficiency and clean energy improvements to multifamily affordable housing projects.

Grant programs

There are almost too many grant opportunities to count. From $5 billion for airport terminals to $500 million for public school improvements to $5 billion for state and local climate pollution reduction grants,the options are many. Some are particularly targeted at buildings, while others are more broad and flexible, but include building projects as eligible for funding.

The climate pollution reduction grants, for example, call on states and cities to apply for grants of up to $3 million to map out comprehensive climate reduction plans ($250 million total grants), with another $4.6 billion available for subsequent implementation grants for putting those plans into action. With buildings accounting for the vast majority of urban GHG emissions, we anticipate that building projects will be a major component of this program.

IRA update: The new economics for allowing public sector buildings to go green