Four Innovations Driving Climate Progress in State Government
Subnational governments—cities, states, and counties—took some of the earliest steps in the United States to protect air quality, water quality, and public health. Over the last several decades, as the federal government has wavered in its commitment or failed to take a leadership role on climate change, states and cities have continued to act, both by bold pronouncements and aggressive targets and in more quiet, subtle ways that have eased the path for clean energy and other investments. This has resulted in a diverse cohort of cities and states that have made great progress in advancing clean energy and other climate solutions and are well-positioned to continue this leadership and innovation.
However, the federal government is taking aim at subnational authority and leadership, including threats to states’ actions deemed “overreach.” This threat from the federal government not only limits the ability of subnational governments to develop innovative tools to address climate challenges, but can hinder opportunities for economic development by limiting access to lower cost energy solutions, stifling innovation in emerging industries, and hampering global competitiveness.
Subnational Governments as Innovators and Leaders
Subnational governments, in liberal and conservative states, have long been the drivers of clean energy and climate progress in the United States.
Iowa adopted the first renewable portfolio standard in the United States in 1983, which laid the foundation for the state to remain one of the top renewable energy producing states in the country. George W. Bush and Christine Todd Whitman took aggressive actions as governors to reduce greenhouse gas emissions. Like Iowa, this early commitment in Texas has proven durable as the state continues to lead on renewable energy and energy storage deployment – due in large part to the state’s work to accelerate deployment of renewable energy projects, including permit streamlining and speeding interconnection for new projects. Renewable electricity generation reached a new high in the United States in 2024 and four of the top five producing states were “red” states .
U.S. cities and states have also taken a lead to affirm global commitments to achieve greenhouse gas emission reductions. In 2005, the U.S. Conference of Mayors launched its climate commitment when 141 mayors committed to meeting the emission targets included in the Kyoto Protocol. That same year, Governor Arnold Schwarzenegger issued an executive order in California, establishing economy-wide greenhouse gas emission reduction targets for 2010, 2020, and 2050.
Subnational actions are far more than symbolic. As of today, 33 states have climate action plans, 24 states have economy-wide greenhouse gas emission reduction targets, and 36 states have renewable energy or clean electricity standards. These commitments spotlight state leadership and serve as a reminder of the role of states’ authority and commitment to environmental leadership and their ability to serve as a backstop to federal inaction. They are important in several important ways. These commitments to reduced emissions and clean energy targets send a signal to developers, investors, and other governments that they have customers, markets, and willing partners. This has driven investment in companies and created opportunities for workers and industries in these states.
Subnational leadership is equally important for reimagining the systems, governance, and institutions to make these targets, goals, and investments a reality. For example, cities and states have developed streamlined permitting and inspecting processes for residential solar and energy storage installations (167 jurisdictions in 47 states), identified least conflict areas for large scale renewable energy projects (California and Washington), and developed innovative finance structures and institutions to support clean energy investment and development (e.g., Green Banks in 29 states, the District of Columbia, and Puerto Rico). Scaling these innovations can accelerate the energy transition and boost economic development, workforce development, and local communities.
The Need for Subnational Leadership
Subnational leadership on decarbonization is a practical necessity. Modeling shows that meeting global emission reduction commitments requires actions by subnational governments and businesses. In the United States, existing commitments by subnational governments and businesses could reduce national emissions 25% below 2005 levels by 2030. State level action can be approximately cost-comparable to federal (top-down) action and it tends to focus more on electrification of energy end uses, clean energy, and direct air capture, all solutions that fall under the authority of subnational.
Subnational governments hold primary authority over infrastructure development, siting and development of energy generation and transmission, energy efficiency in buildings, and land use decisions that determine development and conservation patterns. For example, scaling electrification to levels needed to achieve climate goals requires massive build out of clean energy resources and installation of heat pumps and other electric appliances at the household level. At the same time, state and local economies and communities are intimately connected to legacy industries that have shaped local fiscal structures, workforce, and cultures. Therefore, realizing the transformation necessary to decarbonize requires strategic action by state and local government.
Current regulatory structures are not optimized to navigate the challenges of decarbonization. Decarbonization is a systems challenge that depends on successful transformation of technical, social, and economic systems. Decarbonizing the energy system requires building new, clean energy and transportation systems, while at the same time making the investments needed for an orderly transition away from carbon in legacy industries like oil and gas. This dual approach enables environmental progress, while also protecting the workers and communities reliant on legacy industry. This requires linking environmental goals and policy in alignment with economic development, industrial policy, and environmental justice and equity goals. Failing to take an integrated approach repeating patterns of earlier transitions that concentrated pollution and contributed to growing inequity and environmental justice problems. Subnational governments are well positioned to take this integrated approach.
Working at a state or local level means that policies can be tailored to meet local contexts (e.g., economic, political, or social) in a way that top-down federal policies cannot. This is especially important because “successful implementation” means more than reducing emissions. Successful implementation means meeting climate and environmental goals while promoting prosperity and equitable opportunities for all residents, businesses, and communities. Success depends on accelerating project implementation while also addressing affordability issues and promoting society-wide benefits. Successful implementation stories are needed across a diversity of places to demonstrate approaches that are easy for others to follow and will resonate with cities and states that face different political, economic, and social situations. State and local government provide the right scale for building these solutions.
Challenges to Subnational Leadership and Innovation
It must be noted, especially at this point in time, that while the United States has a strong tradition of subnational leadership, it is not guaranteed. Subnational governments are experiencing many challenges that threaten to erode their leadership position—some inherent in the nature of the energy transition and other external factors.
A challenge of the energy transition is the need to build up new, clean energy systems while also carefully phasing out old, polluting systems. Governments need to accelerate investment in new clean energy, while continuing to invest in legacy industries. Failing to do both can introduce threats that can erode or even stall progress on decarbonization. California is experiencing this challenge now as the state navigates the impact of reduced demand for gasoline, a success of the state’s clean transportation policies, and what that means for the state’s oil and gas industry. The instability for oil and gas has resulted in the planned closure of two of the state’s refineries. While these closures will reduce pollution in host communities, they will also result in lost jobs and revenue and have the potential to increase the price of gasoline for California consumers. These dynamics have required the state to take actions to stabilize the oil and gas industry, while also accelerating its clean energy investments.
These challenges, inherent to the transition, are being exacerbated by other factors that threaten to erode subnational leadership and innovation, including:
- Rapid policy shifts at the federal level including termination of federal funding for clean energy projects, permitting uncertainty, and other disruptions that create significant uncertainty for governments, project developers, and labor.
- Growing inequity resulting from systematic racism, economic structures, and lack of opportunity poses a risk that some communities and populations will be left behind in the energy transition.
- Attacks on subnational authority to establish and implement climate, energy, and environmental policies.
While daunting, these challenges make the need for subnational innovation more important than ever.
Current Opportunities for Subnational Leadership and Innovation
Now, more than ever, subnational governments need to be places for regulatory ingenuity and action in the face of strong headwinds. The urgency of climate change requires immediate acceleration of the implementation of climate solutions—to reduce greenhouse gas emissions, protect public health and wellbeing, align economic development with environmental goals, and build resilience to changing climate and extreme events. Cities and states are best positioned to design policies to accelerate clean energy, innovation, and economic development because they can design approaches that work in different social, political, and economic contexts.
Innovation lies in the “how”—how to scope the challenges and design solutions that recognize the complexity of the decarbonization challenge. Subnational governments have already demonstrated several the power of regulatory innovation in several areas that show how rethinking regulatory and governance systems can accelerate progress:
- Innovation 1: Least conflict siting
- Innovation 2: Automated permitting
- Innovation 3: Making projects work for all
- Innovation 4: Deploying innovative approaches to funding and finance
These innovations by subnational governments show how government can accelerate the deployment of clean energy and other climate projects, implement projects that work in specific contexts, and deliver benefits to people and local economies.
Innovation 1. Least Conflict Siting
Uncertainty, conflict, and complex permitting and siting processes are major impediments to project implementation. Developing new approaches to siting and permitting can reduce uncertainty and delays that can increase project costs and diminish developer confidence. State and local governments can develop and deploy several innovative tools that can make it easier and less expensive to implement climate solutions, while also increasing transparency and engagement.
Cities, states, and counties can improve the siting and permitting processes by removing barriers to implementation, engaging with diverse stakeholders, and reducing costs for developers, government, and residents and businesses. For siting, this can include thinking at a regional or multi-project scale to identify priority areas for development. Engaging stakeholders early in the process can reduce objections and challenges later in the project process. Least-conflict siting processes provide one approach to innovate in the siting process.
Siting Innovation: Least Conflict Siting Process
Least conflict siting is a data-driven, participatory siting process guided by stakeholder priorities. A least conflict siting process uses spatial data that reflect stakeholder priorities (e.g., prime agricultural lands, sensitive habitat, etc.) to identify areas for infrastructure siting that avoid areas of high conflict. Using a participatory, stakeholder-driven process can avoid conflict at later stages in the development process, reduce uncertainty for developers, and provide a more transparent process for local residents, business, and other stakeholders. By identifying least conflict lands, stakeholders can then focus on removing obstacles to development on those lands (e.g., access to transmission). The process is non-binding, so can be adjusted as conditions or priorities change.
A least conflict siting process has been used in two regional contexts. The Center for Law, Energy, and the Environment and the Conservation Biology Institute piloted a least conflict siting approach for solar energy development in the western San Joaquin Valley in California in 2016. The project aimed to identify areas with least conflict for renewable energy development in a six-month process. A least conflict siting process has also been piloted for the Columbia Plateau in Washington. The project spanned eight months and concluded in 2023.
Both processes used geospatial data made accessible to all stakeholders through a collaborative gateway. Following this pilot program, Washington State passed a law in 2023 to improve project siting and permitting includes this least-conflict approach as a tool to be referenced for large scale renewable projects.
While this approach was developed in the context of large-scale renewable development, a least conflict-type process can be applied to a range of project types. This could include minerals mining, carbon removal, or transmission projects. The least conflict approach surfaces priorities and concerns in each region and the results of the process can be applied to different types of climate and energy projects, providing an opportunity to provide efficiency. A least conflict siting process requires commitment from a local permitting authority (e.g., local government), project developers, and stakeholders, including environmental, business, economic development, and other groups. The process also requires some investment to establish a robust process, including: spatial data showing energy, environmental, and other characteristics on the landscape, robust engagement, and strong facilitation.
Innovation 2. Automated Permitting
Delays in permitting increase project costs for developers and households. Developing transparent and simpler approaches to permitting can reduce delays, errors, and costs. Analysis of rooftop solar permitting in the United States shows that nearly 80% of a system’s cost is attributable to “soft costs.” These include design, project management, permitting, inspections, and interconnection. Reducing these soft costs through streamlined and/or automated processes can significantly reduce the costs of these projects. Streamlining can address many stages of the permitting process, including application, evaluation, and inspection – saving time and money for applicants, installers, and permitting agencies. For large-scale projects, mapping the permitting process to identify opportunities for creativity, flexibility, and efficiency can improve the permitting process.
Permitting Innovation: Automated Permitting and Inspection
Cities and counties are the permitting authorities for many clean energy projects, including rooftop solar and storage systems. Permit Power is a U.S.-based non-profit organization focused on reducing the bureaucratic impediments to deploying residential solar and battery storage. The organization’s research finds that a typical residential solar installation in the United States is up to seven times more expensive than a similar installation in Australia or Germany. To address this disparity, Permit Power is working at the state and local level to advance permitting and interconnection reform to reduce barriers to residential solar and battery storage projects.
Developers have identified permitting and inspection as major barriers to residential solar and storage project deployment—increasing both the cost and timeline for projects. Several states have adopted laws allowing or requiring cities and counties implement automated or streamlined permitting processes, while others have opted in on their own. The state laws that encourage or require automated permitting for solar projects have taken different approaches, generally with a nod to maintaining flexibility. New Jersey’s law directed a state agency to develop an automated permitting platform, but also to allow local jurisdictions to adopt an alternate platform with oversight from the state agency. Texas and Florida passed laws allowing the use of automated platforms but not requiring them. Maryland passed a law requiring local jurisdictions to use an automated permitting platform.
The Solar Automated Permit Processing Plus (SolarAPP+) provides a free, widely applicable platform to streamline permitting for rooftop solar and solar plus storage projects. SolarAPP+ is available free to jurisdictions designed to make the installation process easier for contractors and permitters, reducing needed staff resources, project timelines, and permitting delays. The National Renewable Energy Laboratory (NREL) developed SolarAPP+ in collaboration with industry and building inspectors. The platform streamlines permit approval for installations that meet specific requirements.
SolarAPP+ was launched in 2021. At the end of 2023, 167 permitting jurisdictions have adopted or piloted use of the SolarAPP+, and close to 600 additional jurisdictions have expressed interest in the application. Annual evaluations of the platform’s use show that permits for code-compliant systems is nearly instantaneous and that SolarAPP+ projects complete the full permitting process faster than installations that use the traditional permitting process. The evaluations also document savings in staff time and reductions in project delays.
SolarAPP+ is now managed by an independent foundation and is available to all jurisdictions free of charge.
Innovation 3. Making Projects Work for All By Using Community Benefit Tools
A risk of moving projects at a more rapid pace is the potential for harmful, unintended impacts on communities and the environment, including concentration of industrial activities, damage to habitat and natural systems, and reductions local quality of life. At the same time, these projects can bring economic development, workforce, and associated benefits to host communities. Community benefits tools can reduce conflict and improve project delivery by minimizing harms and harnessing benefits from these investments.
Community benefit tools can provide a mechanism for ongoing accountability and transparency for host communities, businesses, residents, and other stakeholder groups. These tools include community benefits agreements, community and cooperative ownership structures, and community oversight structures. If carefully crafted, community benefits tools have the potential to deliver meaningful benefits to infrastructure host communities, provide opportunities for community oversight and shared governance of projects, and reduce friction between developers and communities. Including community organizations and stakeholders as planning and implementation partners is vital to the success of these tools.
Subnational governments can require or create incentives for the development and use of community benefits tools for project deployment and they also have an important role to play in building community capacity to engage in the development and deployment of community benefits tools. They are also well-positioned to create the guidance and accountability tools to create the conditions for more effective community benefits structures. However, the existence of a community benefits agreement or related tool is not sufficient in and of itself, these tools need to be developed and designed well to deliver benefits to communities.
Importantly, linking community benefits to siting and permitting innovations can provide durable assurances of project performance and that a project will deliver benefits to a host community.
While requirements and incentive structures have promise, it is critical that tools are available to ensure that community benefits agreements are done well. These include guidelines for agreement development and technical and legal assistance for communities to ensure that agreements deliver real benefits to communities. It is worth noting that developing project by project community benefits agreements could result in two unintended and undesirable outcomes: the added process could slow down or discourage wanted projects and host communities end up with piecemeal benefits that cannot deliver meaningful and transformative investments in a community (e.g., comprehensive workforce development, integrated infrastructure investments, etc). Imagining scaled approaches (e.g., across a city or county scale) to deliver community benefits in a holistic manner across multiple projects in that area could increase efficiency for developers and support transformative investments in places hosting multiple projects or project elements.
Community Innovation: Models to Deliver Community Benefits
Community benefits agreements associated with development projects can deliver meaningful benefits to host communities, including investments in infrastructure, workforce development, and other community investments. State or local governments can require community benefits frameworks for projects in a specific geography (e.g., a community benefit ordinance) or create incentives for the development community benefits agreements or other structures to streamline project development (e.g., California Assembly Bill 205).
Detroit adopted a Community Benefit Ordinance in 2016. The ordinance requires that projects valued above $75 million or that receive significant subsidies from the city provide additional benefits to the community where a project is sited. When the ordinance is triggered, a Neighborhood Advisory Council from the project’s impact area is formed to work directly with the developer. The City of Detroit tracks progress on the commitments made through the agreements developed under the ordinance. Since its passage, eleven projects have finalized agreements under the ordinance and four more are in progress. Regular review of the ordinance’s performance has identified areas for improvement but monitoring shows that it has delivered measurable benefits in Detroit communities.
In accordance with California Assembly Bill 205 (2022), the California Energy Commission (CEC) has developed an Opt-In Certification program for clean energy projects including large-scale renewable energy (i.e., greater than 50MW), energy storage, and some clean technology industrial facilities. Through the opt-in certification program, the CEC can issue a permit for the project and enable it to forego permitting by local land use authorities and most, but not all, state permits. To qualify for the Opt-In Program, a project must meet a set of requirements, including entering into at least one legally-binding and enforceable agreement that benefits one of more community-based organizations in the project area (e.g., a community benefits agreement). For most qualifying projects, the Opt-in Program provides a faster timeline for environmental review (within 270 days of a project’s complete application, in most cases). However, implementation of the Opt-In Program is limited to date.
Innovation 4. Develop Innovative Financing Tools
Funding and finance for climate actions is a major barrier to advancing action, especially as the federal government claws back and reduces federal funding for energy, environmental, emergency response, and other programs that states, cities, and project developers have depended on. Now more than ever, developers, cities, and states need to be innovative in how they access and deploy funding and finance tools to support project development.
Subnational jurisdictions can initiate various revenue generation strategies to support project development. They can also access or establish different funding (i.e., grants) and financing strategies (i.e., loans) to support public and private project development. Subnational revenue generation tools include bonding authority, taxing structures, credits programs, and implementation of pricing programs (e.g., congestion pricing in New York City). They can also establish and/or access financing institutions like green banks and public-private structures to finance project development.
Subnational governments need to deploy a suite of revenue generation, funding, and financing strategies to support implementation and unlock access to private capital and investment. This is especially true given current threats to municipal finance, including withdrawal of federal funds, increasing climate risks and disasters, and the fiscal dimensions of the energy transition that affect local revenue structures. An analysis of options to support implementation of San Francisco’s Climate Action Plan found that the City needed to access all tools available to it to achieve the levels of investment necessary to implement the plan. This included development of new tax and fee structures, use of financing districts, integrating climate actions in the City’s schedule of general obligation bonds, establishment of a green bank, and implementation of pricing policies, including congestion pricing. Since the time of the analysis, the City of San Francisco passed Proposition A in March 2024, the city integrated climate-related actions into a scheduled general obligation bond to support affordable housing.
Financing Innovation: Public Finance for Transmission Infrastructure
Thirty states either have or are considering development of a green bank. A green bank provides access to capital for clean energy and other sustainable projects by issuing loans to projects that might otherwise have difficulty accessing capital. Programs within the California’s Infrastructure and Economic Development Bank (I-Bank), the State’s financing institution to support public infrastructure and private development projects that benefit California’s economy and quality of life, serve as the state’s green bank. Recent legislation established a program within the I-Bank to support investment in transmission infrastructure.
Transmission infrastructure is needed in many regions to distribute clean, renewable energy from where it is generated to load centers. California anticipates a quadrupling of in-state renewable energy generation by 2045, which will include offshore wind generation off the northern and central coasts, large scale solar generation in the Central Valley, and geothermal energy from the inland south regions of the State. Currently new transmission is funded though investor-owned utilities that pass costs on to ratepayers or by private developers.
To provide an alternative model, California recently established a public financing mechanism for new transmission infrastructure, the California Transmission Accelerator Revolving Loan Fund Program. The Accelerator will exist in the State’s I-Bank, the State’s financing institution to support public infrastructure and private development projects that will benefit California’s economy, jobs, and quality of life. The Governor’s Office of Business and Economic Development will develop a financing and development strategy in coordination with the State’s energy agencies to guide the implementation of the Transmission Accelerator. The program is designed to reduce burdens on ratepayers by using State funds to support needed transmission infrastructure development.
Closing Thoughts
We are at a critical moment for climate progress—given both the urgency of climate change and political polarization in the United States. However, this combination provides an opportunity for creative thinking and innovation at the subnational level. State and local governments have an opportunity, and perhaps obligation, to reimagine the regulatory, institutional, and governance structures to design decarbonization strategies that work for state and local economies, communities, and the environment. If undertaken at scale and implemented quickly, these subnational actions can have a significant impact on carbon emission reductions.
Some ways to help realize this innovation include:
- Build Subnational Capacity. Cities and states need additional resources and capacity to develop policies and programs, access funding and financing to implement projects, and partner with industry, communities, and labor to build durable solutions—especially in rural and under-resources areas. Building additional capacity requires creative use of existing public resources; partnership with the private sector, non-governmental organizations, research institutions, and philanthropy; and building networks for peer to peer learning, sharing, and collaboration.
- Leverage Networks to Replicate and Scale Successes. Subnational governments have strong platforms to share and scale successful policy actions. When President Trump withdrew the United States from the Paris Agreement in 2017, a bipartisan group of states established the U.S. Climate Alliance. The members of the U.S. Climate Alliance have committed, collectively, to achieve net-zero emissions as soon as possible and by 2050 at the latest. Climate Mayors, established in 2014, is a network of almost 350 mayors from nearly all fifty states that are committed to upholding the Paris Agreement. Together, these networks—and others—represent a significant share of the U.S. population and economy and provide a community of practice to support policy development and implementation. Subnational collaboration extends beyond the United States, with subnational networks like the Under2 Coalition that includes over 180 subnational governments across six continents committed to achieving deep GHG emission reductions. These networks can provide durable platforms for replication and scaling of successful policy innovations.
- Respect the Power and Potential of Subnational Governments. Subnational governments have a long legacy of leadership and innovation, due in large part to the country’s history of cooperative federalism. This system has provided room for creative solutions and policies tailored to each state’s unique economy, environment, and culture. Congress and the White House need to respect this and build capacity in cities and states to enable them to align economic and environmental goals.
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