Show me the money: 5 key insights from our Climate Innovation Funding Tracker

November 15, 2022

Funding from the federal government is essential for driving climate innovation – for kickstarting, testing and scaling up the solutions we need to combat the climate crisis. As a result, it seems that it should be straightforward to analyze where the public dollars flow. To answer questions, such as: how much does the United States government spend on innovation in solar and wind technologies, relative to electric vehicles or biomass? Are we prioritizing sectors, like industry or transportation, at levels that are proportionate to their climate impacts? 

However, due to the complexity of the federal budget, the many federal agencies involved, the relative newness of “climate” as an organizing principle, and the natural overlaps between many climate innovation areas, achieving a clear understanding of how the government funds climate innovation opportunities is a remarkable challenge. We have many, many spreadsheets to prove it!  

For example, budgets are often siloed by agency, with supporting programs characterized by different levels of budgeting detail and mission focus. Budgeted funding can also be qualified as serving for different purposes – it can be divided up among major-emitting economic sectors (such as power, transportation, industry and buildings), or among solutions (e.g., electrification, energy efficiency, alternative fuels). There is also a greater interest in understanding whether current funding provides full coverage of the innovation cycle (research and development, demonstrations, or deployments). 

To make this critical topic more accessible, EDF is pleased to present the Climate Innovation Funding Tracker. The first module of this data visualization tool is intended to allow users to explore climate innovation funding in fiscal year 2021 across three key agencies: the Department of Energy, Department of Transportation, and U.S. Department of Agriculture. It provides the ability to sort climate innovation spending across agencies, sectors, solutions and according to their stage of the innovation cycle. 

It is worth noting that our methodology to characterize federal spending has emphasized transparency, reproducibility, and a close adherence to agency descriptions of their own programs. Nonetheless, we welcome the natural debate that accompanies these characterizations, and we welcome feedback. (If you want a tutorial on how to use the Tracker, check out this “how to” blog).

Here are 5 key insights on climate innovation made visible by the Tracker in fiscal year 2021 across DOE, DOT and USDA.

1. Federal spending on climate innovation was a drop in the bucket compared to other spending.

The Climate Innovation Funding Tracker estimates that total federal climate mitigation spending in FY2021 was $13.9 billion dollars. This dwarfs in comparison to other federal spending. For example, Medicare spending in 2020 alone was 60 times greater than funding for climate innovation (at $829.5 billion).

To give a sense of scale, this expense is comparable to the development of a single, next-generation aircraft carrier, the USS Gerald R. Ford, which cost a total of $13.3 billion.

Important reminder: this climate funding was for 2021, and a lot has changed. In the past year, we’ve seen a massive influx of climate and clean energy investment through the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA) and authorizations in the CHIPS and Science Act. By our rough estimations, these laws will increase overall funding to $520 – 540 billion over the next 10 years or roughly $50 billion per year. These new sources of federal funding are not included in the first iteration of the Tracker, but we hope to include them in the next version. (If you’d like to see that or have other ideas for future versions, send us a note here!). 

2. More than half of FY21 funding went to the Department of Energy.

DOE received more than twice the amount of climate innovation funding of either DOT and USDA and more than the two of them combined.

The agency with the most distributed funding across innovation stages was DOE, which accounted for almost all research and development funding (89.6%). Most DOT and USDA funding went towards the deployment of climate solutions; however, all three agencies had some level of funding go to each innovation stage.

3. Some key sectors are under-funded relative to their emissions, but new funding from the IRA and IIJA addresses these gaps.

Together, the power and transportation sectors accounted for almost 60% of funding while industry, agriculture, buildings, and forestry made up the final 40%. 

Notably, industry received only 8.6% of funding (or $1.19 billion), despite accounting for 24% of U.S. greenhouse gas emissions. This has been a major gap in our policy response, especially since industry faces numerous challenges in deploying clean energy solutions

But thankfully, there is new funding authorized from the IRA, IIJA and CHIPs laws to help fill this gap, scaling up funding for industry to roughly $16.5 billion from 2022 through to 2031.

4. Electrification and clean electricity solutions received the most funding, while carbon management received the least.

Funding by solution is more evenly split than other filters, however, electrification and clean electricity each receive around a fifth of funding (22.9% and 19.7%, respectively) in FY 2021. 

On the other hand, carbon management (referring to strategies to capture, store and/or use carbon pollution) received the least funding at 1.9% (or $263.75 million). However, that is changing with investments from the three federal laws, which will massively increase funding for carbon management to roughly $19.2 billion over the next five years – about 73 times the FY21 amount.

5. Pilot and demonstration of solutions received the least funding in FY21, but it’s positioned for a big boost.

Almost half of funding went to the deployment (46.8%) of climate solutions. In fact, most funding for transportation (70.8%), agriculture (66.6%) and forestry (62%) went towards deployment.

The piloting and demonstration of solutions, a critical stage to overcoming the “valley of death,” received the least amount of funding at 14.9% (or just over $2 billion) compared to other stages, but it’s gotten a huge boost since then. With new funding from the three federal laws, this funding if all appropriated will increase to over $35 billion from the next ten years. This is largely thanks to the IIJA, which will inject over $20 billion into building commercial-scale clean energy demonstration projects over the next five years and established a new Office of Clean Energy Demonstrations in DOE to house this new cross-cutting initiative.

These are just a handful of insights we found using the Climate Innovation Funding Tracker – there’s a lot more to explore. Whether you’re curious about how much funding has gone toward specific solutions or you need more of a 40,000 foot view across agencies, the Tracker can help answer those questions. Plus, you can easily take a screengrab of what you find and share it with your colleagues and networks. 

Finally, it’s worth repeating: We’re just getting started. As we build on this first iteration of the Tracker, let us know if you have any comments or suggestions on different aspects that you’d like to see in the future by reaching out to!

Want updates on new insights, new versions and more on the Climate Innovation Funding Tracker? Sign up for our mailing list here.