- Financing Innovation
- City Innovation
- Incentive Programs
- Emissions Reductions
Ithaca Addresses City Decarbonization Challenges through Financing Innovation
The City of Ithaca’s Green New Deal aims to reach carbon neutrality by 2030 and make sure that “benefits are shared among all local communities to reduce historical social and economic inequities.” Two of the largest impediments to cities reaching carbon neutrality are figuring out where to start and figuring out the best way to finance these transitions. As noted in a previous Guidehouse Insights blog, Ithaca has tackled the first impediment by becoming the first US city to formally approve a plan to decarbonize its building sector. Ithaca financing its building decarbonization program using a type of public-private partnership (PPP) provides an example of how to address the second challenge.
How Ithaca Is Decarbonizing
Ithaca’s Common Council unanimously adopted the city’s Green New Deal in June 2019. While Ithaca already receives 80% of its power supply from hydroelectric and nuclear power plants and has implemented other climate mitigation measures (such as rolling out its Energy Smart Community plan that included installing smart meters), further steps to decarbonization may prove more difficult and costly. The biggest remaining decarbonization challenges relate to buildings and transportation.
To implement its Green New Deal, the City of Ithaca hired Luis Aguirre-Torres as Director of Sustainability in March 2021. Aguirre-Torres began with buildings, which make up approximately 40% of the city’s carbon footprint. His initiatives include making new structures carbon net zero and retrofitting old buildings, of which Ithaca has approximately 6,000. Retrofitting includes installing electric heating systems, rooftop solar panels, and energy storage systems.
Financing Innovation Is Funding Ithaca’s Plans
Retrofitting 6,000 different structures from single-family homes to large-scale office buildings in under a decade is unprecedented and expensive. Ithaca’s building decarbonization is funded by a combination of private sector as well as local, state, and federal government funding.
The budget for the building decarbonization program alone is $600 million. Ithaca’s total city budget is roughly $80 million. New York State grants and the federal Infrastructure Investment and Jobs Act can add to available funding, but some form of PPP is essential for acquiring the rest of the necessary funding.
Aguirre-Torres’ plan to attract private investment includes providing low to zero interest loans for homeowners and building owners to retrofit their infrastructure with heat pumps and more with raised funds. The loans can be repaid with energy savings or cash incentives for making the sustainable switch, and the investments pose low risk because they are highly diversified (spread across thousands of homeowners). Additionally, Ithaca created the Loan Loss Reserve program backed by the New York State Energy Research and Development Authority, which qualifies Ithaca residents with lower credit scores to participate. Decarbonizing many buildings at once also allows for economies of scale to work for material costs and for consistent jobs and training for green contract work—potentially leading to a more durable economy.
Other Forms of Financing Are Necessary
While low to zero interest loans and potential cash incentives should entice many Ithaca residents to retrofit their homes to be carbon neutral, mandates will eventually be necessary to reach 100% compliance. Ithaca still needs to raise significant funds. The city must continue pursuing a blend of private financing and federal and state funding. Because funding from the federal Build Back Better bill is stalled, Ithaca will need to focus on private investment, philanthropic donations, and federal and state incentives.
Finally, Ithaca will need to plan beyond decarbonizing buildings. For instance, transportation makes up another 40% of the city’s carbon footprint. Ithaca plans to reduce its carbon footprint from the city vehicle fleet by 50% by 2025, but it will need to go further in planning how to pitch financing for transportation.