A bill recently introduced in the Senate closes a missing link inherent in many of the ambitious climate goals and plans being advanced today. Sen. Ed Markey (D-Mass.) has put forward a plan to create a National Climate Bank, an independent nonprofit institution structured to drive investment into clean energy and infrastructure projects.
This idea is a critical part of the toolkit for implementing the Green New Deal. Many plans have called for increased investment in clean energy; this bill provides a realistic framework to connect dollars with projects and to do it fairly so that economic benefits accrue to those who need them most.
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The National Climate Bank elegantly fulfills a range of needs. It is empowered to prioritize investments that will deliver jobs and savings to rural areas, low-income communities and communities of color. Renters and low-income households have historically had difficulty affording home solar or efficiency upgrades that would save them money on bills; the National Climate Bank could change that.
The National Climate Bank provides financing rather than grants and deploys its funds in ways that draw in additional private investment. This is not a half-measure or a compromise but a way to get the greatest possible greenhouse gas reduction impact out of every dollar.
Many clean energy projects and technologies are hovering on the edge of mainstream profitability. The National Climate Bank can use the funds and techniques at its disposal to tip them over that edge and let the world of private investment, with its even greater resources, do the rest. The result is more projects under construction than if funds were given as conventional grants.
For example, many clean energy projects are unattractive to commercial banks and investors due to perceived credit risks. With an expenditure that may be small relative to the total cost of the project, the National Climate Bank can provide credit enhancements such as loan guarantees, tipping the scales so that the project gets the green light from private investors.
Other projects are too small on their own to be worth the trouble for commercial banks to work with. The National Climate Bank can do the legwork to identify and aggregate these projects, creating new opportunities for private investors and drawing in their capital.
In all of these cases, the National Climate Bank is relying on a proven model. There are already state and local “green banks” across the country that are putting these ideas into practice and have built up a track record of success. They have reduced greenhouse gas emissions, created jobs, increased low-income uptake of solar energy, and mobilized more than three dollars of private capital for every dollar they have directly invested.
The Coalition for Green Capital has been a longtime partner and supporter of these state and local green banks as they increase their scale and scope. Based on this experience with the green bank model, we suggest that with the $35 billion in startup capital provided by the new bill, the National Climate Bank could eventually mobilize many multiples of that amount by borrowing against its capital and then drawing in private investment.
Global estimates suggest that we’ll need to be talking about investments in the trillions of dollars to effectively address the climate crisis. Many presidential candidates have suggested devoting billions to clean energy research and deployment, and Washington Gov. Jay Inslee and Colorado Sen. Michael Bennet have even proposed green banks. Few others have laid out a clear plan for how to get the greatest impact out of each dollar or how to ensure that economic benefits are shared equitably and energy costs do not increase.
With the National Climate Bank act, they need not look further for a practical and effective framework. Congress should immediately move forward to take up this bill in the House, and any serious presidential candidate should consider a green bank as part of their climate plan.
Reed Hundt is the CEO of the Coalition for Green Capital, a nonprofit that has worked to establish and support green banks, and he is also the former chairman of the Federal Communications Commission from 1993-97 and is currently principal of REH Advisors.
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