A huge majority of Americans now understand that climate change is real, ominous and imminent. Extreme weather, threats to food supply, climate refugee migration, risks to beachfront cities and overwhelming scientific consensus have all combined to compel Congress to push the economy onto a clean power platform while at the same time protecting consumers and vulnerable communities from taking on an unfair share of the cost of change.
As described in a book I wrote, a decade ago Congress made a major effort to win the battle against climate change. The lessons of 2009-10 teach us that the winning idea is to couple a forcing function that sends a market signal with public financing to accelerate and lower the cost of the shift from carbon to clean.
The focus of the 111th Congress and the incoming Obama Presidency was a cap-and-trade bill. Based on a successful program to reduce acid rain from sulfur dioxide emissions, this proposal licensed emissions and created a market for buying and selling the licenses.
As a complementary measure to lower the cost of renewable power and increase economic growth, then-Rep. Chris Van Hollen (D-Md.) introduced the Green Bank Act of 2009. Renamed the Clean Energy Deployment Administration (CEDA), Reps. John Dingell (D-Mich.) and Jay Inslee (D-Wash.) introduced the measure as an amendment and the Energy and Commerce Committee adopted it by a huge 51 to 6 bipartisan vote. It was also incorporated in the Senate Energy and Natural Resources Committee companion bill by a bipartisan vote.
With a heroic effort by Speaker Nancy Pelosi (D-Calif.), Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), and President Obama, the cap-and-trade bill passed the House by only 7 votes. But in the Senate the bill ran into partisan gridlock, and never reached the Senate floor. CEDA died with it. The Democrats lost the House in November 2010, and no energy bill could be passed for the rest of the Obama Administration.
Meanwhile, the idea of CEDA had a rebirth at the state and local level. As manifested in the American Green Bank Consortium, many state and local jurisdictions have capitalized green banks. In Connecticut, Colorado, Hawaii, Maryland, Michigan, New York, Rhode Island, Nevada, Washington, D.C. and Florida, state and local green banks have already caused more than $3.6 billion in public-private investment in clean power solutions with a ratio of private to public investments of 3.4 to 1. The idea has spread around the world, catalyzing new clean power investment in South Africa, Rwanda, Australia and elsewhere.
Fast-forwarding to the present: Several Congressional Committees are considering legislative proposals to address what has now become a crisis. Congress may choose to adopt a tax or cap-plus-dividend mechanism or it may encourage revivified Environmental Protection Agency action. But regardless of the push that is chosen, it is well understood that the burden of paying for the move from carbon to clean must not fall unfairly on workers and consumers in states or regions that have been historically more dependent on coal and gas than others. Ten states account for about half of U.S. emissions. These areas need a guarantee that the few do not pay for the benefits enjoyed by the many.
To this end, Markey and Van Hollen, now in the Senate, updated and expanded their 2009 green bank idea by introducing on July 8 the National Climate Bank Act. It was co-sponsored by Sens. Richard Blumenthal (D-Conn.) and Brian Schatz (D-Hawaii), who are from states with successful green banks. Connecticut’s Sen. Chris Murphy and Rep. Jim Himes have also introduced a similar bill.
This National Climate Bank would be a more powerful and faster-acting version of CEDA.
- Like CEDA it would join public money with private capital, using $35 billion of public money deposited over five years to mobilize $1 trillion in private investor funds all dedicated to the new clean power platform. Over its 30-year life, the bank would aim to return all its public money to the Treasury.
- To move faster than government typically does, the bank would be a nonpartisan nonprofit operating with complete public transparency.
- The bank must maximize rapid emissions reduction per public dollar invested. This focus leaves other important tasks, like stimulating innovation or addressing nuclear power, to other agencies, such as the Department of Energy.
- The bank can only invest in projects that provide clean power at prices the same as or lower than the prices paid for carbon-based power. Consumers should benefit from advances in renewable power technology over the last decade.
- Vulnerable communities must be prioritized: where the carbon-to-clean shift costs jobs, the bank would fund new job creation.
- The bank can buy coal at auction to keep it in the ground, or pay owners of coal-fired boilers to close their facilities, if these moves will maximize emissions reductions in a hurry. Atmospheric carbon dioxide concentrations are skyrocketing above historical norms, with a 12 percent increase in the past decade alone. There’s not a moment to lose in the fight to keep greenhouse gases out of the atmosphere.
- The bank would bring private investment into electricity generation, transmission, distribution and storage, as well as into decarbonizing industrial processes, transportation, agriculture and forestry. It would help fund improved insulation, windows and other energy use reduction measures in buildings as well as paying for protecting cities and towns from devastating weather.
This broad range of activities reflects the scope of the battle against climate change, and the range of markets the private sector is clamoring for some help to open the door to investing in the new economy.
The National Climate Bank is the new and improved version of CEDA. The commitment to public-private investment is an essential weapon for the present crisis.
Reed Hundt is the CEO and co-founder of the Coalition for Green Capital, a nonprofit that has worked to support and establish green banks.
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