Pew senior officer Fatima Yousofi found states are considering diverse funding and financing tools to administer climate threats to their infrastructure.

Pew

Because the municipal bond market expects issuance to swell over the following decade to accommodate climate-related infrastructure needs, states are also eying cap-and-invest and superfund programs to enhance what is anticipated to be substantial needs within the face of maximum weather.

That is the finding from Pew in a Nov. 21 temporary, “States are exploring paths to finance climate resilient infrastructure.” The article follows a September piece examining the risks that climate change poses to public transportation and water systems.

After that article, co-authors senior officer Fatima Yousofi and associate Eli Gullett began to contemplate how the states “were getting their heads around these added costs,” Yousofi said. They reviewed all state-level climate resiliency-related laws and policy proposals in fiscal 2023 and most of 2024, and located that many states are taking the difficulty seriously.

“It is a pervasive issue for states, and it’s something they’ll proceed to tackle going forward,” Yousofi said. “It’s on the highest of their minds.”

The pair outline a couple of most important funding and financing tools that states are eying: climate bonds, superfund or “polluter pay” models, and cap-and-invest programs. States are also tapping federal programs within the Infrastructure Investment and Jobs Act, Pew found.

States and cities finance 80% of infrastructure within the U.S., and will probably be answerable for managing climate risk whilst federal lawmakers concentrate on the necessity to shore up the Federal Emergency Management Agency’s disaster relief fund. Municipal Market Analytics has estimated the approaching era of “adaptation finance” could lead on to a 100% increase in muni bond volume by the mid-2030s.

Yousofi and Gullett found “common themes” among the many funding and financing options that states are considering or have already enacted. Vermont this 12 months became the primary state to enact climate superfund laws, a proposal that can also be being eyed by lawmakers in Maryland, California and Massachusetts. Recent York has passed similar laws.

The states are projecting substantial funds raised by the superfund programs. Pew said Recent York and Massachusetts expect to gather $75 billion over the following 25 years, and Maryland expects to attain $9 billion.

Cap-and-trade or cap-and-invest programs, where firms can purchase or sell permits to remain inside a certain cap and the federal government reinvests the cash in climate-resilient projects, are also gaining momentum amongst states, Pew found.

California’s cap-and-trade program, which help funds the California high-speed rail system amongst other projects, went into effect in 2012. Washington last 12 months enacted a cap-and-invest program, which survived a ballot challenge in November, and 12 East Coast states have similar programs through the East Coast Regional Greenhouse Gas Initiative, Pew said.

“Recent York estimates that its cap-and-invest program, launched in 2024, could generate between $6 billion and $12 billion annually by 2030, with $4 billion to $8 billion available for investments,” the Pew temporary said.

On the more traditional bond front, more states have considered high-profile, large borrowing plans where the proceeds are restricted to climate-related projects. California voters in November approved $10 billion of bonds for climate change mitigation. Voters in Recent York State in 2022 approved a $4.2 billion general obligation environmental bond. Proceeds will be used to guard water quality and climate change adaption and resiliency.

The tools aren’t freed from risks and implementation challenges, Pew said. Political opposition stays an hurdle for major borrowing programs. Legal challenges face many superfund proposals, and states that enact cap-and-invest programs face potential threats from businesses to avoid the price by relocating.

“Despite such impediments, the necessity for proactive resilience funding stays urgent as states work to upgrade infrastructure systems for the challenges they face now and in the longer term,” Pew said.