If the Cut Inflation Act passes, the United States will finally have a federal green bank
If the legislation manages to pass Democrats, the green bank is set to be funded with $27 billion to provide financing so low-income households can acquire efficient heat pumps, rooftop and community solar, and heaters. electric cars. States, tribes and municipalities can apply for grants for clean energy purposes. Of this total, $8 billion would be specifically earmarked for investment in disadvantaged communities.
If the IRA legislation comes out of Congress intact for Biden’s signature, the United States will once again be better late than never for the party. The UK launched a green bank in 2012, privatized it in 2017 and is now considering taking back control. Australia’s Green Bank is the largest in the world.
So what is a green bank? Excerpt from State of the Green Banks 2020:
A green bank can take many forms, but all green banks are driven by a public purpose: to accelerate low-carbon, climate-resilient and sustainable development. A green bank is most often a public, commercially operated and specialized institution or finance facility that serves as a focal point for scaling up national, climate-friendly and sustainable projects. Most, but not all, of the green banks studied in this report are state-owned and largely financed with public capital.
As the focal point of a country’s climate finance, a green bank can tap into new sources of domestic (such as pension funds and sovereign wealth funds) and international (such as multilateral development banks and climate funds) capital. ). Analysis in this report shows that existing green banks have been able to use their relatively low seed capital to leverage many multiples of additional investment.
Contacted by Peter Behr of EnergyWire, Reed Hundt, CEO and co-founder of the nonprofit Coalition for Green Capital, said he was surprised the proposal had managed to be included in the Emission Reduction Act. inflation. It had been one of President Joe Biden’s campaign promises and was included in versions of the Build Back Better Act bill. But Hundt thought he was dead with everything else when Manchin backed out of the act. “It’s amazing,” he said, “I didn’t think we would be in this space,” adding that he hopes “many local nonprofit lending institutions will participate.”
Hundt, a prominent Democrat who chaired the Federal Communications Commission during the Clinton administration, has been involved in climate issues for nearly 30 years. In 1993, he authored the first serious American attempt at a carbon tax. He failed in the Senate. At the Coalition for Green Capital, he has been advocating for a federal green bank since 2010 and building a network of state green banks – the Consortium of American Green Banks. Twenty-three states have already created such banks and several more have one in the pipeline.
Since its launch, consortium members have raised and provided $2.5 billion in clean energy loans. Added to this was $9 billion in private investment. Hundt hopes the government will choose the consortium as a place to invest much of this green bank money.
The usual approach to encouraging clean energy in the United States is to offer production and investment tax credits, such as those currently in place, to encourage companies to invest in renewable energy or to other clean technologies. Tax credits mean less government revenue. This allows projects to be built – wind and solar would not have emerged at the rate they did without them.
Green banks, on the other hand, are banks with a stated mission to lend money for clean energy projects with a view to return on investment. Green banks take advantage of public capital to leverage private investors to build otherwise difficult-to-approve projects. Existing banks are more shy about lending to underserved communities, but this government money is giving them the boost they need. However, the pursuit of profit is not the fundamental raison d’être of any green bank. Vox’s Ella Nilsen reported last year:
Green banks are constituted in various ways. The New York Green Bank is a division of the New York State Energy Research and Development Authority. Green Bank of Michigan is a non-profit organization. Connecticut is quasi-public, created by a bipartisan bill in the state legislature in 2011. Australia’s Green Bank – the largest in the world – is belonging to the government. Still others, like California, are part of state infrastructure banks, which finance local infrastructure projects such as roads, bridges, schools and municipal buildings, as well as energy development. clean.
“[In Connecticut,] we are an intermediary between state policy objectives and private markets,” Connecticut Green Bank President and CEO Bryan Garcia told me in an interview. “We use private sector discipline to achieve public sector goals.”
Since its inception in the mid-2000s, Connecticut Green Bank has inaugurated $1.94 billion investment in the state economy. The vast majority comes from private investment, or $1.65 billion – and for every dollar invested by Connecticut Green Bank, the state is able to attract $6.60 of private investment into projects . It is estimated that this not only reduced energy savings for more than 55,000 families and nearly 400 businesses in the state, but it also resulted in the installation of 434 megawatts of clean energy.
This should have happened decades ago, but it is what it is.
Some further reading:
National Green Bank bill targets $100 billion for key business sectors of Biden’s climate agenda
COULD THE UNITED STATES BENEFIT FROM A NATIONAL GREEN BANK?
CESA house pass