50 Cities are Finding Creative Ways to Fund Decarbonization - and Using C-PACE is a Key Strategy
A recent Brookings Institution Report, “How U.S. Cities are Finding Creative Ways to Fund Climate Progress” highlights decarbonization efforts by 50 of the largest cities in the U.S.1 The report explains that there is progress to be made, but there is encouraging forward momentum – and C-PACE is an important part of that.
- Plans are ambitious but lack specificity: While many cities have prepared ambitious decarbonization plans, which “outline the specific steps cities will take to eliminate greenhouse gas emissions (GHG) from their electricity systems, buildings, transportation networks and related sectors,” the study found that the plans tend to lack specificity around the funding and implementation of those plans.
- Cost concerns need to be addressed: Decarbonization efforts can be costly, requiring “billions of dollars” to retrofit buildings and invest in sustainable, citywide upgrades. Consequently, the study showed that only 70% of cities integrated such cost concerns into their plans; only 66% identified current/existing funding sources; 54% identified innovative new/innovative funding sources, followed by 34% that estimated the financial impact of decarbonization efforts.
- C-PACE can be an invaluable tool to address cost concerns related to cities’ decarbonization efforts. As a public-private financing mechanism, C-PACE offers low-cost, long-term, fixed-rate funding for commercial real estate projects including ground-up new construction, retrofits, and recapitalization projects. C-PACE is currently available in 37 states and Washington D.C., and Nuveen Green Capital’s Programs and Policy team is entirely dedicated to implementing C-PACE in more cities and states. The program continues to garner support -- from both sides of the aisle -- as it aids in job creation, bolsters local economies, and supports decarbonization efforts.
- While plans may not be complete, various local policies and funding programs are being implemented: While many policies and programs were adopted prior to the passage of the Inflation Reduction Act (IRA) on a national level, they play a crucial role in helping to fund local green banks and other similar institutions on a local level.
- In addition, because many cities and municipalities are enacting clean energy mandates, such as Local Law 96 in New York City, recently added Title 24 requirements for California’s Buildings Standard Code as well as BERDO in Boston, C-PACE can help address ambitious sustainability targets, while providing significant savings – thereby acting as a ‘carrot’ for property owners to have a source of funds available to make the necessary capital improvements to meet these strict new requirements.
- Portland, OR and Denver, CO - two cities designating funds to pay for climate change: In 2018, Portland passed the Clean Energy Community Fund Initiative and required major retailers to pay a 1% surcharge on retail sales, “excluding basic groceries, medicines and health care services,” to fund climate action projects. Similarly, in 2019, Denver designated a Climate Action Task Force which created a Climate Protection Fund Five-Year Plan, which designated a .25% sales tax increase to replace the energy use cost.
The creation of these two funds “have not only provided each city with the ability to fund their existing decarbonization planning efforts, but have also introduced new levels of engagement, transparency, and oversight into local climate governance. Originating from resident-led coalitions, these funds also formalize monetary and procedural commitments to equity, whereas unfunded climate plans offer only words.”
- “C-PACE (Commercial Property Assessed Clean Energy is a popular tool for climate investments”
C-PACE is a financing solution to fund climate action in cities, given its ability to finance energy efficiency improvements “by fully financing all upfront costs.” C-PACE is being utilized in many cities, some of which are rolling out new programs, including:
Not only is C-PACE seen as a popular tool, it is also considered a solution to the above mentioned issues. Nuveen Green Capital has been proud to provide C-PACE financing for many CRE projects in cities that have clean energy mandates, including parent company and TIAA Financial Services' headquarters, 730 Third Avenue, New York, enabling the project to comply with New York’s Local Law 97, as well as a cold storage project, FreezPak Logistics in Philadelphia, which complied with -and exceeded- energy efficiency requirements mandated by Philadelphia Energy Code ASHRAE 90.1-2016.
C-PACE not only impacts the ability of CRE owners, developers, and lenders to move forward with cost effective financing, while addressing decarbonization mandates – it also has a measured impact on the environment and local economies. Since its founding, Nuveen Green Capital has enabled hundreds of projects that employ sustainability measures to be complete, resulting in a projected $1.62B in energy savings for property owners, the creation of 25,917 energy jobs, as well as 2,640,527 MWh lifetime energy generated/saved.
The report highlights that the use of C-PACE, in addition to other creative financing strategies, such as the creation of local financing authorities, funding partnerships, and one-time investments, is showing that significant efforts are effectively being implemented to decarbonize cities.
Nuveen Green Capital was established by some of the C-PACE industry’s state program founders and standard-setters,2 Nuveen Green Capital’s mission is to show that ‘Saving Energy is Smart Business.’ To learn more, visit: https://www.nuveen.com/greencapital/get-started-with-c-pace
1 Published February 22, 2023. https://www.brookings.edu/articles/how-us-cities-are-finding-creative-ways-to-fund-climate-progress/. The Brookings Institution is a nonprofit organization whose mission is to conduct in-depth, nonpartisan research to improve policy and governance at local, national, and global levels.2 The United States Department of Energy: 2016 C-PACE Report, lists the Connecticut C-PACE program as the first statewide C-PACE program in the U.S.