April 22, 2021
Climate Change: Selected Federal Economic Development Tools
and Policy Considerations
Social, economic, and ecological risks associated with
entities provide incentives for research, development, and
climate change, such as those documented in the U.S.
deployment of renewable energy (RE) systems that reduce
Fourth National Climate Assessment and by the
emissions. The President’s FY2022 budget requests
Intergovernmental Panel on Climate Change, have
technology demonstration funding to advance renewable
significant economic development implications. These
technologies and to support new economic bases and jobs.
include increased demand for federal economic
In existing programs,
development interventions, such as for infrastructure
resiliency, and support for labor and economic dislocations
The Department of Agriculture’s (USDA) Rural Energy for
resulting from energy transition. This In Focus considers
America program, first established to support rural
potential federal economic development tools to help
economic development, funds energy audits and RE
address climate change, as well as policy considerations.
technical assistance for small businesses. See CRS Report
R40913, Renewable Energy and Energy Efficiency
Climate and Economic Development
Incentives: A Summary of Federal Programs, by Lynn J.
Climate change countermeasures take two general
Cunningham and Rachel J. Eck.
approaches: (1) mitigation, to reduce greenhouse gas
(GHG) emissions or enhance GHG removals from the
The Department of Energy’s (DOE) State Energy
atmosphere; and (2) adaptation, to increase resilience to
Program funds states to deploy RE and promote energy
climate change’s effects. Some measures span both
efficiency.
approaches. Economic development activities can also play
a role in both.
DOE’s Renewable Energy Production Incentive
provides payments to eligible facilities to encourage
Mitigation options typically target (1) supply-side
private investment and subsidize initial operations.
technologies or physical assets, such as transitioning from
fossil fuel to renewable energy sources; or (2) redirecting
Energy Transition Programs
demand-side consumer choice or social behavior, such as
Historically, the federal government has subsidized (largely
through improved consumer information, GHG pricing
via tax policies) fossil fuel and nuclear power industries and
mechanisms, or tax incentives for GHG-reducing actions.
electricity generation, though the emphasis of federal
However, even with globally aggressive actions to abate
investment has shifted over the past decade. See CRS
GHGs, the future global average temperature would likely
Report R44852, The Value of Energy Tax Incentives for
increase above 1.5o Celsius (from a preindustrial baseline)
Different Types of Energy Resources, by Molly F. Sherlock.
by mid-century. Therefore, climate change adaptation has
become an increasingly bipartisan objective (for example,
Regions and businesses continue to make major transitions
H.R. 4058 in the 116th Congress).
in their energy systems and fuel trade. Transition efforts
and considerations include increasing access to reliable
Increases in the frequency and severity of natural disasters
energy supplies, developing more efficient energy
has raised congressional awareness of, and interest in,
technologies, and reducing energy poverty; rapid changes in
disaster resilience and response. Adaptation could avoid
the relative costs of energy technologies and fuels,
human and societal losses and reduce fiscal risks of federal
particularly for certain RE equipment, natural gas, and oil;
relief and recovery expenses. Adaptation may include new
and the expanding natural gas supply and associated
policies, such as disaster funding reforms, or technologies
pollution risks. Transitions also relate to various regulatory
such as resilient building technologies and other
and financial incentives aimed at decreasing fossil fuel use.
infrastructure. Climate change also creates other changed
circumstances, including shifting growing seasons, opening
Although these transitions are driven primarily by market
of Arctic navigation routes, and the impetus to develop new
forces and public policy, they may also be influenced by
technologies.
efforts to curb high-emissions energy uses, such as coal
combustion. Several federal programs address the economic
Direct Tools and Programs
impact of the coal industry’s decline, including:
Several federal economic development programs have
direct application to climate mitigation and adaptation.
the Partnerships for Opportunity and Workforce and
Economic Revitalization (POWER) Initiative, an
Renewable Energy Incentives
Appalachian Regional Commission (ARC) program
Energy infrastructure is a common target for economic
available to applicants within its service area;
development investment. A number of federal agencies and
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Climate Change: Selected Federal Economic Development Tools and Policy Considerations
the Assistance to Coal Communities (ACC) program,
HUD’s CDBG program provides flexible funding which
provided nationwide by the Economic Development
may be used for GHG mitigation and adaptation, such as
Administration (EDA); and
“green” or resilient infrastructure, energy efficiency,
weatherization, and technical assistance. See CRS
a pilot economic development fund to states for
Report R43520, Community Development Block Grants
Abandoned Mine Reclamation (AML) efforts.
and Related Programs: A Primer, by Joseph V.
Jaroscak. In 2016, for example, HUD required grantees
These programs provide assistance to communities affected
to include climate change considerations as part of
by the coal industry’s decline. Funding may be used for a
CDBG planning (81 Federal Register 90997).
variety of economic and community development activities
and programs, such as workforce training and development,
The EDA’s Economic Adjustment Assistance and
entrepreneurship and business development, infrastructure,
Public Works programs provide flexible funding for a
and community capacity. Although the POWER Initiative
variety of uses, including infrastructure, revolving loan
and ACC address the impacts of the coal industry’s decline,
funds, or planning. See CRS Report R41241, Economic
they are not intended to facilitate or incentivize energy
Development Administration: A Review of Elements of
transition away from fossil fuels. The EDA’s Nuclear
Its Statutory History, by Julie M. Lawhorn.
Closure Communities program funds similar uses to
address economic dislocation from the nuclear power
Active federal regional commissions like the ARC
industry’s decline. See CRS Report R46015, The POWER
provide flexible economic development grants within
Initiative: Energy Transition as Economic Development, by
their service areas. See CRS Report R45997, Federal
Michael H. Cecire; and CRS Report R46266, The
Regional Commissions and Authorities: Structural
Abandoned Mine Reclamation Fund: Reauthorization
Features and Function, by Michael H. Cecire.
Issues in the 116th Congress, by Lance N. Larson.
USDA offers grants, loans, and credit programs for
Resiliency and Hazard Mitigation
community and economic development purposes. See
The federal government also promotes resilience in the built
CRS Report RL31837, An Overview of USDA Rural
environment through various programs. Although often
Development Programs, by Tadlock Cowan.
described as risk “mitigation” measures (i.e., to mitigate the
future impact of hazards or disasters), they can be
Policy Considerations
considered climate adaptation measures.
Congress may consider several policy options while
considering climate and economic development objectives:
The Federal Emergency Management Agency provides
both pre- and post-disaster mitigation assistance through the
Consolidate and expand direct climate-relevant
Hazard Mitigation Grant Program (HMGP), the Flood
economic development programs—such as in energy
Mitigation Assistance (FMA) program, the Building
transition and economic diversification—or provide
Resilient Infrastructure and Communities (BRIC) program,
targeted guaranteed income/employment for climate-
and the Public Assistance (PA) program. FMA and BRIC
related industry dislocations;
grants are awarded competitively for pre-disaster
investments. HMGP and PA are only available within a
Adapt large economic development efforts, like CDBG
presidentially declared disaster area for post-disaster
or the EDA’s programs, to include more robust
reconstruction, which may include resilience projects. See
sustainability criteria;
CRS Insight IN11187, Federal Emergency Management
Agency (FEMA) Hazard Mitigation Assistance, by Diane P.
Scale intergovernmental economic development models
Horn; and CRS Report R46749, FEMA’s Public Assistance
like the federal regional commissions to cover all U.S.
Program: A Primer and Considerations for Congress, by
regions, with direction and resources to make strategic
Erica A. Lee.
investments in climate mitigation and adaptation; or
Following major disasters, Congress has used the
Leverage the federal government’s influence and market
Department of Housing and Urban Development (HUD)
power to promote climate-sensitive policies, such as in
Community Development Block Grant (CDBG) authorities
fleet vehicle electrification, broad telework adoption,
to fund long-term disaster recovery (CDBG-DR). In recent
and sustainability-oriented contracting and procurement.
years, CDBG-DR appropriations have included dedicated
set-asides for relocation assistance and resilience-building
To complement and support such measures, Congress may
to mitigate future disaster risk (CDBG-MIT). For more
also assess the effectiveness of strategic research,
information, see CRS Report R46475, The Community
development, and deployment to reduce GHGs, enhance
Development Block Grant’s Disaster Recovery (CDBG-DR)
economic opportunities, and adapt to climate change.
Component: Background and Issues, by Michael H. Cecire
and Joseph V. Jaroscak.
Michael H. Cecire, Analyst in Intergovernmental Relations
Permissive Tools and Programs
and Economic Development Policy
Jane A. Leggett, Specialist in Energy and Environmental
While some federal programs exist with direct application
Policy
to climate mitigation or adaptation, other programs also
could be used to address climate change.
IF11815
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Climate Change: Selected Federal Economic Development Tools and Policy Considerations
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