Center for American Progress

How State Future Funds Can Help States Build Resilient Infrastructure and Cut Carbon Pollution

How State Future Funds Can Help States Build Resilient Infrastructure and Cut Carbon Pollution

Through new revolving loan funds that CAP has dubbed State Future Funds, Congress can partner with state and local leaders to address the increasing challenges of climate change.

Cyclists cross the Hot Metal Bridge over the Monongahela River during the evening rush hour. (AP/Gene J. Puskar)
Cyclists cross the Hot Metal Bridge over the Monongahela River during the evening rush hour. (AP/Gene J. Puskar)

This column contains a correction.

Efforts to address climate change have made important progress in the past two years. Landmark domestic and international scientific reports have added clarity to the certainty and severity of the challenge. President Barack Obama has stepped up with a comprehensive, ambitious plan to cut carbon pollution, and his administration worked for a year to achieve a game-changing joint announcement with China responding to climate change. At the December 2014 United Nations international climate conference in Lima, Peru, world leaders took essential steps toward creating a new global climate agreement, which countries expect to lock in at the climate negotiations in Paris at the end of this year.

Despite these critically important national and international advances, action at the state and local levels is becoming even more critical. Congress should support this action by helping states establish new revolving loan funds—what the Center for American Progress has dubbed State Future Funds—to strengthen the resilience of our nation’s infrastructure and to bolster state efforts to cut carbon pollution.

State and local action on climate change

Many states and cities are already rising to the challenge of climate change on their own. First, they are working to reduce their emissions of carbon pollution. This is a natural role given the states’ historic responsibility of regulating air pollution and electric utilities within their borders. They have initiated programs to cut pollution, boost energy efficiency, and expand electricity generation from clean, renewable resources. The U.S. Environmental Protection Agency’s, or EPA’s, Clean Power Plan elevates state leadership by putting states on the front lines of the effort to cut carbon pollution from the nation’s power plants. Under the plan, the EPA sets state goals and gives states the latitude to decide how to meet them. Many states have welcomed this flexible approach.

Second, some states and cities are beginning to factor climate change into their infrastructure and community development plans, particularly in the wake of costly extreme weather events. Here as well, President Obama has sought ways for the federal government to strengthen state and local efforts. In November 2014, the president’s bipartisan task force of 26 state, local, and tribal officials from across the nation shared with the White House its recommendations for ways the federal government can help communities—and the infrastructure on which they depend—withstand the rising risks of floods, extreme storms, droughts, heat waves, and other climate change impacts.

According to the report, Midwestern states will need to invest more than $6 billion by 2050 in upgrading and strengthening infrastructure to answer the challenges of more extreme weather events, including extreme heat and floods. California’s drinking water system will require an investment of more than $4 billion per year for the next 10 years in order to cope with more frequent and longer periods of drought. A recent Center for American Progress column showed that published studies estimate that the annual costs of climate change adaptation could be between several billion dollars and tens of billions of dollars per sector for just a portion of the necessary actions. The full costs—which include rebuilding and restoring services after extreme weather events and maintaining and making design changes to all critical infrastructure—could easily rise to hundreds of billions of dollars per year. Unchecked climate change creates an unfunded mandate for state and local governments, as well as the American people, to manage the rising risks of extreme weather events and to foot the bill for the damages. For example, decades of underinvestment in the housing and infrastructure of poverty-stricken areas, coupled with risky environmental conditions and economic instability, make low-income families particularly vulnerable to the costly damages and health risks of flooding, extreme heat, and other climate change threats.*

Federally capitalized State Future Funds can assist state and local action

Given states’ important role in cutting carbon pollution and building resilience to climate change, Congress should take steps to ensure that they have the resources they need to achieve these goals, which will deliver substantial public health, safety, and economic benefits.

Specifically, Congress should take a page from the nation’s water programs. The federal government has helped capitalize state-level revolving loan funds for both drinking water and wastewater infrastructure. These funds have had tremendous success helping states meet a minimum level of environmental performance by ensuring that Americans have access to safe drinking water, improving water quality, and preserving the nation’s waters for recreational use. Consequently, approximately 95 percent of the U.S. population received their drinking water from systems that met all of the federal health-based drinking water standards in 2012.

Many states have already experimented with revolving loan funds when financing their energy efficiency efforts. Congress should help states establish new revolving loan funds to meet their energy and infrastructure goals. CAP calls these funds State Future Funds in recognition of the fact that immediate action to reduce the economic, security, and public health risks of climate change has tremendous potential to improve our future. The funds could be capitalized with revenue from reforming tax code depreciation rules or from other one-time sources of tax-reform revenue. According to CAP, these one-time revenue sources could generate as much as $200 billion. The federal government should contribute at least $500 million to each State Future Fund. States could then use the State Future Funds to supplement their resources and to leverage private investment in order to cut carbon pollution and upgrade infrastructure, including low-carbon and resilient electricity grids. This level of capitalization may not get the job done, but it would help prime the pump for immediate state action. Federal guidance could be issued to ensure that funds are not used on business-as-usual projects.

This proposal builds on the state flexibility inherent in the EPA’s Clean Power Plan. States are taking the lead on developing plans to reduce carbon pollution from power plants; the State Future Funds will provide them with additional resources to reduce pollution and to build resilient and safe infrastructure that can withstand the unavoidable impacts of climate change.

Federal resources can help state and local leaders do the technical work needed to support these goals. The president’s bipartisan State, Local, and Tribal Leaders Task Force on Climate Preparedness and Resilience has called for more federal support for resilient infrastructure planning, including more coastal climate vulnerability assessments by the U.S. Army Corps of Engineers to support cross-jurisdictional resilience planning; more federal support for local sea-level rise and coastal-erosion research and planning; and technical assistance for coastal and island communities to reduce the risks of sea-level rise, increased storm surge, and other climate change effects. Furthermore, bulk power systems have become increasingly complex due to market innovations, intermittent generation, and new technologies. For this reason, states increasingly need strong analytic capability for sound long-term energy planning.

A better long-term outcome

Americans have a right to expect the infrastructure they rely on daily—electricity grids, roads and bridges, public transit, drinking water, and wastewater treatment facilities—to be safe, structurally sound, and still standing after a storm. Sadly, in 2013, the American Society of Civil Engineers gave the nation’s infrastructure a D+ rating and estimated that the investments needed to modernize it would reach $3.6 trillion by 2020.

Investing in resilient infrastructure will create jobs, drive economic growth, and improve the nation’s prosperity. Investing in public transit unclogs commuter routes, increases access to good jobs, and cleans the air while increasing vital evacuation options that save lives when superstorms strike. Strengthening our infrastructure’s resilience will help keep America open for business in the wake of extreme weather events while creating construction jobs, supporting the economy, reducing disaster costs, and improving the quality of life in low-income areas and other communities in the process.

A partnership to meet the climate challenge

In many cases, the federal government has found a willing partner in the states and localities to address the challenges of preventing and responding to the threats of climate change. State and local leaders have asked the federal government for help to make local communities’ infrastructure safer and more resilient. Congress has an opportunity to answer the call by creating State Future Funds that will strengthen our nation’s infrastructure and economy and pave the way for all Americans to prosper in safe and resilient low-carbon communities.

Cathleen Kelly is a Senior Fellow at the Center for American Progress. Greg Dotson is the Vice President for Energy Policy at the Center.

Thanks to Alison Cassady, Fran Sussman, Meghan Miller, and Katherine Downs for their contributions.

* Correction, January 26, 2015: This column has been corrected to clarify that underinvestment in low-income communities increases extreme heat and other climate threats.

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Cathleen Kelly

Senior Fellow

Greg Dotson

Senior Fellow