You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:

Decarbonizing the global economy requires replacing stuff that emits carbon dioxide with stuff that doesn’t. At its heart, this challenge is financial: All these high-emitting assets ― coal plants, gas stoves, airplanes ― were at some point financed into existence by investors seeking returns. Climate policymakers’ greatest challenge is not just figuring out how to phase out existing, dangerous capital investments in fossil fuels, but also how to finance into existence new, climate-stabilizing clean assets.
This is all much easier said than done. Central banks’ high interest rates are strangling clean energy and adaptation infrastructure investments in the United States and abroad. Recent struggles to develop offshore wind and small modular nuclear reactors in the United States exemplify how deeply hesitant private developers are to commit to long-term capital expenditures. Investors view these projects as too risky, their expected profits too low to meet their minimum return thresholds. Absent policies to stabilize supply chains and other factors affecting the financing environment for clean energy, the United States ― to say nothing about the rest of the world ― won’t meet its climate goals.
The Inflation Reduction Act is, to its credit, a paradigm-shifting attempt to finance better, cleaner stuff. One of the most potentially transformative initiatives in the IRA is, in fact, financial: the Greenhouse Gas Reduction Fund offers $27 billion in startup capital to state green banks, community development financial institutions, and nonprofits to lend to decarbonization projects primarily in vulnerable communities.
By any standard, the GGRF is an incredible infusion of cash into nascent sectors that might otherwise be neglected by mainstream investors, including community-scale renewable energy and building weatherization. Most of that cash was awarded in early April, including $14 billion divided among three separate clean energy financing coalitions made up of green banks, impact investors, and CDFIs; and $6 billion divided among various technical assistance providers for project development in low-income areas. GGRF funding recipients can use their awards to finance all kinds of community improvements ― not just through grants, but also through debt and equity. In the process, they will make a market for investments in local climate mitigation and resilience, particularly in vulnerable communities.
The GGRF is about more than simply using this seed funding to make private projects profitable. The truth is, there aren’t that many private investors rushing to structure local decarbonization projects ― not even because they don’t want to enter these market segments, but because they’re really just too busy to try anything unconventional. Some markets, like those for rooftop solar assets, are fairly standardized and liquid, insofar as investors can tranche and trade rooftop solar loans like government bonds or mortgages.
But the nascent markets for many other kinds of mitigation and resilience investments like home retrofits are illiquid. Making them liquid — and getting investors interested — requires GGRF awardees to underwrite, structure, and sequence project development themselves. They must set lending guidelines, standardize financial products, and create architectures for risk management where none exist.
If GGRF recipients build up significant financial and legal capacities to finance community decarbonization, not to mention the technical and regulatory expertise needed to coordinate state and federal funding sources in the process, then they will position themselves to help alleviate significant constraints on the flow of financing toward local decarbonization projects. This is how the IRA promises state and local governments the chance to provide unprecedented liquidity to green investments.
Cities and states currently get the liquidity they need to fund most of our public infrastructure and services through the American municipal bond market. Why not use this market to finance decarbonization, too?
It’s a good idea — except that municipal bond markets are dysfunctional. Cities and states rely heavily on private banks to structure their municipal bonds and sell them to private investors, and on credit rating agencies to certify them; these dependencies have historically forced local governments to tailor their bond issuances to the interests of a few private buyers, which are skewed against spending on longer-term priorities with lower expected returns.
Borrowing big is more often punished than rewarded, especially where governments already have smaller tax bases and less borrowing capacity. In 2018, the rating agency Moody’s downgraded Jackson, Mississippi on account of its “financially stressed” water system and its residents’ low average incomes, raising the city’s future cost of borrowing on bond markets. Last year, its water system spiraled into crisis on account of severe underinvestment, leading to a foregone conclusion: At a time when Jackson, a predominantly black city, needed more low-cost, long-term investment to fix its infrastructure, its government was structurally unable to raise enough of it.
Increasingly frequent climate disasters will set in motion the same process again and again across the country. Greater perceived climate risks are increasing municipal borrowing costs and insurance premiums, thereby driving investment away from vulnerable areas, preventing communities from investing in adaptation and resilience, and increasing their future vulnerability. Proactive disaster prevention policy requires breaking this financial doom loop.
It doesn’t help that municipal bonds are a volatile asset class, seeing sharp price drops and prolonged sell-offs during periods of market uncertainty and, lately, rapid interest rate hikes. Their dependence on risk-averse private buyers is a primary culprit. Indeed, private investors’ muni bond fire sales at the start of the pandemic nearly broke this market. Had it not been for the Federal Reserve’s emergency creation of the Municipal Liquidity Facility, which committed the Fed to buying muni bonds that no other investor wanted to hold, cities and states would not have been able to fund crucial social and community services, pay employees, and undertake necessary capital investments. The mere announcement of this backstop program preserved cities’ ability to raise debt during the first phase of the pandemic, but Congress forced it to wind down at the end of 2020.
That’s a shame: Absent this kind of backstop for public bond markets to stabilize local governments’ long-term borrowing costs, policymakers literally cannot secure the liquidity they need to keep their climate promises. There really is no way to flood-proof New York, storm-proof Miami, summer-proof Amtrak, or manage wildfire out West without the long-term public debt finance that would allow states and cities to spend responsibly and consistently on resilience.
This is a problem not just for long-term adaptation and resilience investments, but also for the mitigation investments the IRA is designed to facilitate. Considering that green banks, state financing authorities, and public-sector power developers will have to issue considerable amounts of debt to accelerate the deployment of renewable energy ― and especially because no comprehensive decarbonization program can neglect public housing or schools, which finance themselves via municipal bonds ― state and federal policymakers should not let their investment priorities fall victim to the whims of our illiquid, volatile public debt markets.
Where climate mitigation is concerned, there are some provisions of the IRA that demonstrate how rewiring the financial system to power decarbonization works in practice. Tax credits that pump a functionally unlimited amount of money into private and public clean energy development allow developers to take on more debt at better terms, facilitating greater investment. (Bonus tax credits for investments in disadvantaged communities should help mitigate against geographic biases, too.) And expanded lending authority at the Department of Energy makes financing higher-risk, longer-term decarbonization investments of all kinds vastly less expensive. The United States has seen over $200 billion in new decarbonization investments in the past year, suggesting that, despite the lack of finalized regulations on tax credit financing and “chaining,” a set of provisions that could allow public and nonprofit entities to engage in tax credit financing of private projects, the Biden administration’s political down payment on decarbonization is already paying off.
Not in every sector, though. Private investors are fickle, risk-averse, and face considerable restrictions on where they can put direct money. The developers they finance, particularly those behind the most ambitious decarbonization projects, are under similar pressures. As Ørsted, the world’s leading offshore wind developer, retreats from projects in the U.S. and elsewhere, its CEO has admitted that “what our investors need” is for Ørsted to “create value.” If expected returns aren’t high enough, then its projects won’t pencil out. Time is of the essence; this outcome shouldn’t be acceptable.
New York’s recently passed Build Public Renewables Act mandates that New York’s public energy authority build renewable energy itself for just this reason — its proponents doubted that relying on private developers made good business sense. But it may not have passed without the IRA’s financial firepower behind it. The IRA allows the public sector to access many of the same decarbonization incentives it gives private firms, balancing the playing field and empowering transformative public sector policymaking.
The public sector can also compete against risk-averse private lenders to finance project development — public financing authorities can lend for longer, on cheaper terms, and with a higher risk tolerance than most private lenders could. By offering cost-share agreements, low-cost construction loans, equity injections to buy out troubled projects, or even by building up critical component stockpiles, the public sector can set the pace of the transition.
To that end, the IRA empowers state and local governments and community lenders to seed ambitious decarbonization projects of all types and sizes where private investors alone might hesitate. This brings us back to the GGRF and all it could do for local decarbonization ― and to carveouts in the Department of Energy’s lending authorities which enable state green banks to pass on extremely low-interest loans to eligible project developers. So long as public and private entities take the effort to access them, these programs create considerable liquidity for ambitious mitigation programs and resilience investments.
But the GGRF does not target larger infrastructure improvements, and the IRA’s other grant programs for adaptation and resilience, however ambitious they may be on the scale of U.S. history, are also wholly inadequate. If policymakers and legislators want to make nationwide climate adaptation feasible, they will still have to fix public debt markets.
Maximizing the potential of the IRA to replace bad assets with better ones requires giving local and state governments the chance to throw money at mitigation and adaptation problems that money can actually solve. Leave the financial system as is, however, and the private investors that mediate it will steer the benefits of decarbonization and adaptation toward the communities wealthy enough to make doing so a good investment. Meanwhile, the communities experiencing climate disasters first and worst ― spread across underinvested rural and urban pockets, here and globally ― will struggle to secure the long-term financing they urgently need both to lessen their contributions to climate change and also to prepare for its inevitable effects.
The financial status quo forces a kind of trickle-down decarbonization that is wholly inadequate to the scale of the climate challenge. Responsible climate policymaking, then, requires the elimination of this liquidity constraint everywhere, to the greatest extent possible, and the creation of coordination mechanisms to ensure that what people need is what gets built. Public liquidity is, without a doubt, a public good.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
A conversation with Emma Uridge of the Kansas Health Institute.
This week’s conversation is with Emma Uridge, analyst with the Kansas Health Institute. Uridge spent copious hours analyzing state and local laws on data center development to best understand how policymakers are responding to the potential environmental public health impacts of large AI infrastructure, including power and water. The report, which came out this week, also goes in depth into those health impacts. I reached out to her to discuss what she sees as must-watch territory for our readers on this emerging policy arena.
Our conversation was lightly edited for clarity.
What is actually being done on policy when it comes to data centers — beyond moratoria of course?
So first I’d like to just talk about the point of moratoria. It’s helpful to talk about how these policies emerge in the first place. One area where moratoria are helpful is when a data center is proposed but the county has no approach for how they’d like to potentially regulate them. That’s temporary, most of the time. It lets local governments conduct research on the various impacts and also negotiate community benefits, ones that can mitigate any potential negative impacts — like Lancaster Pennsylvania, which instituted a community benefit agreement that maximized the potential benefits of development while mitigating what large data centers can do. That agreement looked at capping municipal water use at 20,000 gallons per day and requiring 100% clean energy. It had financial penalties for non-compliance. The company also committed $20 million to their local economic development and clean energy fund. There are ways to negotiate with developers.
We also see amendments to existing zoning. Data center proposals are increasingly popping up in rural areas, many of which are unzoned, so there’s no way a county can negotiate unless there’s a moratorium in place.
Other policy solutions include different performance standards or requiring on-site renewable energy, like what Jefferson County, Missouri, looked at. Also setback requirements, mandatory noise buffers, ending by-right zoning.
Where are local governments getting ideas for regulating data centers?
A lot of the technical information comes from developers. That can in cases be seen as a biased source of information. I wouldn’t say there’s a dedicated group providing assistance to local governments when a project is proposed — which is a similar story to wind industry development, where we have only a handful of consultants who provide technical advice. It can be really helpful to get a multi-disciplinary approach to hearing information. It can be helpful to have the utility commission, public health folks, those in academia, as well as the developer.
As of right now, especially in rural areas, local governments have a hard task of balancing pushback while getting the most accurate, evidence-based, neutral information to make decisions. That balance can be contentious.
What is the federal government doing on data center policy? How is the Trump administration approaching it?
A few things there. In the early days, the drive was for AI expansion and to be competitive with foreign adversaries. Now due to the amount of public pushback in red and blue localities and a more cautious approach.
I’m not seeing a lot of actual policy movement at this time.
I know the EPA is looking at the chemicals used in cooling data centers because when that water is cycled through the system, some of it is discharged into the water system, so they’re looking at the Toxic Substances and Control Act for monitoring that.
How much of an impact does this minimal federal role have on industry behavior?
Y’know, this isn’t specific to data centers. This is true for all kinds of large-scale development: there’s a need to require some sort of federal monitoring and regulation.
That’s where I see an emerging role for public health. At the federal level, there could be policy movement towards requiring some sort of environmental monitoring at data centers to make sure they’re operating responsibility. Looking at specific water use relative to water availability and what happens when there’s a time of severe, persistent drought. With air quality too — we’ve seen areas where the grid isn’t as reliable so their diesel generators are kicking on more and affecting air quality for residents.
We’re just not seeing all of that right now. We need corporate disclosure.
What do you see as the most important public health impacts from data center development?
It varies by localities. The most discussed obviously is water usage. One thing I’d note about my conversations with folks enthusiastic around emerging tech is, there are still questions that need to be asked about the capacity of localities to support a data center. Like a small town in Kansas may only be using 40% of their water for their utility needs. If a data center came online, how much of that water goes to the data center?
One area underexplored within the public health discipline is energy poverty and energy security. The ability of a household to meet the needs of everything energy provides in our lives. It’s known we have an aging electric grid but we’re not talking enough about large-scale blackouts when the grid is not sufficient to support some of these new data centers.
Plus more of the week’s big development fights.
1. Laramie County, Wyoming — Meta is fighting the fine it received in the Cheyenne data center water pollution controversy, and the conflict between the tech giant and the city’s small board of public utilities is continuing to spill out into the public.
2. Niagara County, New York — This county just rejected a solar project’s highway work permits in a show of retaliation against the state’s Office of Renewable Energy Siting.
3. Barron County, Wisconsin — The anti-solar protest is the new campaign stop in deep red Wisconsin.
4. Chesapeake, Virginia — A large battery storage project on the Virginia coastline is on the rocks amidst rampant local opposition.
5. Lewis County, West Virginia — West Virginia is now a key battleground in the fight over transmission, as a line spanning all of West Virginia and Maryland — and cutting through Data Center Alley in Virginia — causes compounding consternation.
The local government of Boulder City, Nevada had previously rejected a proposal for the computing facility, which would draw power from the existing electricity supply.
The U.S. government for the first time approved a data center on federal lands. What the Trump administration is pitching as a demonstration of bureaucratic speed and ambition in the era of artificial intelligence, however, is turning into the same sort of mysterious backroom deal that’s upsetting other communities.
On Monday, the Bureau of Land Management announced that it would allow a large AI data center to be built on a plot of federal land technically within the limits of Boulder City, Nevada. The approval was initially granted as a right-of-way in 2023 for the second phase of a solar project known as Townsite Solar, to be built by a joint venture between Skylar Opportunities LLC, a subsidiary of Houston energy trader Bill Perkins’ investment firm, and renewables developer Arevon. (Ironically, Perkins also just launched an ETF to profit from higher electricity demand.)
Earlier this year, the LLC overseeing the project — itself named Townsite Solar 2 — notified the city that it would change tack and instead construct a large data center on the site. There would be no new power generation installed — rather, the facility would hook up directly to an existing substation. This time, the backlash was immediate and fierce, and led Boulder City’s planning commission to reject the data center within city limits.
Quietly, Townsite Solar 2 had prepared a backup plan: The project would shift to federal land that was already approved to use for the second phase of the solar farm. It wasn’t until early July that the Boulder City government and its residents learned that BLM had given Townsite Solar 2 permission to advance the data center without any new public hearings or comment periods. According to BLM, the data center would be essentially like a solar farm, so it wouldn’t require any new review.
“The BLM concluded that the new proposed action — a data center — is essentially the same,” city government attorney Brittany Walker told the Boulder City council at a July 14 public hearing. “This is a departure from previous precedent and procedure as the BLM essentially sweepingly approved a new land use without following processes in federal law.”
Boulder City is now fighting the federal assessment. Walker claimed at the July 14 hearing they weren’t notified ahead of time that Townsite Solar 2 would be so quickly approved and built on this parcel of federal acreage, a form of government-to-government communication often required under federal land use planning statutes.
Mystery continues to swirl around what BLM did here — and how Townsite Solar 2 got the agency to do it.
Nada Culver, who served as No. 2 at BLM under the Biden administration, told me that BLM had veered from the usual course of business in approving this data center. Consulting local governments before a decision is made “sits at the heart” of the Federal Land Management and Policy Act, which is the primary statute governing BLM’s land use decision-making, she said. Both that law and the National Environmental Policy Act are “supposed to involve the government actually looking at environmental impacts and sharing them. so it’s not responsible or arguably even legal for the BLM to say, ‘We aren’t going to look at those impacts or share them with the public,” she added.
Boulder City officials have said this is the first major data center approval on federal lands, to their knowledge. Culver told me she believed that to be true, and hadn’t heard of such a thing happening before. “This isn’t a niche BLM issue, so to try and say this is just another use when we’re all surrounded with this loud discussion at the national level about data centers is particularly stark.”
Patrick Donnelly of the Center for Biological Diversity told me his organization and the Sierra Club, another legacy conservation group, are planning a separate legal challenge, one they say is intended to stop more such swaps from happening. Donnelly noted that at least two more data center projects — both powered by on-site gas — are poised to start the federal permitting process at any moment, according to the BLM’s online materials.
“This is the first one, and it’s going to set the stage for these things on public lands, and we can’t let this happen,” he told me.
The timing of this fight couldn’t be worse for the Trump White House, as officials try to pivot towards a “feel your pain” message ahead of the 2026 midterm elections. On Thursday, utilities and data center developers joined Trump cabinet officials at the Environmental Protection Agency for a joint event promoting the administration’s Ratepayer Protection Pledge, a voluntary set of industry practices geared toward ensuring the cost of AI infrastructure isn’t borne by those living near it.
With the BLM’s decision to advance the data center on federal land, Boulder City will lose an estimated $2.3 million in annual leasing and taxation revenue that it would’ve received if the project were built on city land, according to the Las Vegas Review-Journal. If the project is built on BLM land, Boulder City officials have said they’ll still be forced to front the cost for water and sewage hookup to the facility, as well as road maintenance.
Townsite Solar 2 told me in an unattributed statement that it wants Boulder City “to receive the greatest possible revenue and contribution benefits from the project, regardless of siting on federally-owned or city-owned land.”
“TS2 wants the project to provide meaningful, measurable benefits for Boulder City residents, local businesses, and the broader community. Our goal is to develop a responsible, sustainable project that Boulder City can be proud of and that can serve as a national model.”
The people I talked to for this story were largely flummoxed at BLM’s determination that the data center would be “essentially like” the solar farm that was approved in 2023. “These are two unrelated projects,” Culver told me. “I find it very hard to see how this would not trigger the need for a new analysis or public engagement.”
BLM’s logic made my head hurt, too. Among other things, the agency said “both proposals will use the exact same location, same acreage, and same perimeter,” and “both are proposals for industrial uses that will operationalize cutting-edge technologies that are predominantly electrical and solid state in nature.” The agency also claimed the data center was just like the solar farm because construction would take approximately the same amount of time, and would involve facilities and changes that “are visually geometric and less than 30 feet in height.”
You could describe a data center this way, but you could also describe any other number of things this way: a grocery store, a factory, a rollercoaster.
When I asked BLM for comment, a spokesperson simply sent me back the text used in the press release announcing Townsite Solar 2’s data center approval. A press representative for Townsite Solar 2 declined to provide details about who handled government affairs for the data center project, except to say that it hadn’t hired any federal lobbyists.
Some of Trump’s loudest critics told me they think this deal happened because Arevon, a joint partner described as a key financier in the project’s application with Boulder City, hired lobbyists with The Bernhardt Group, a government relations firm created last year by former Trump Interior Secretary David Bernhardt. Arevon hired the firm around the same time Townsite Solar 2 initiated the process to use the federal land for the data center, according to federal disclosures.
I have a history with Bernhardt. After leaving the Trump administration in 2021, Bernhardt went on to run the Trumpworld think tank America First Policy Institute and released a tell-all book, You Report to Me, that called for the bureaucracy to stand down against — as he put it to me — “the interests of the executive.” (I interviewed him around the time of its publication, after which he gave me an unsolicited copy of the book that I keep at my bedside as a form of dark humor.)
These days Bernhardt’s firm represents oil interests, including energy companies, mining, and large-scale agricultural interests that use lots of water (think: almonds). But it’s also pitching itself to the AI energy commentariat. In May, the former Interior secretary authored an op-ed in The Washington Examiner calling for rapid investment in U.S. artificial intelligence infrastructure. He then took to right-wing TV network Newsmax to promote the column, arguing that people fighting to stop data centers were just trying to “oppose the president’s vision for energy dominance.”
It would be easy to point at these federal disclosures and online comments and claim this bizarre data center land use swap is the work of a familiar Trump-era boogeyan. Except Arevon was effusive to me in saying that is not what happened here. In a statement, the company said that it’s a passive member of the joint venture, holds less than 25% ownership stake, and has “not directly hired consultants or lobbyists for this project.”
I didn’t get a response from Overwatch, a data center engineering and design firm contracted to help with the project. Overwatch does have a director of government affairs, but their hire was announced months after the application would have been submitted to BLM.
This leaves us sleuths to conclude the likeliest reason this happened is also the most obvious one: Trump just wants data centers on federal lands, and this was a way to make that happen. What happens next will have enormous implications for the future of data center development and federal land use in the United States, especially if more companies facing federal permit stonewalling seek to turn their solar farm permits into permission to build AI infrastructure.