Buried on page 667 of the Inflation Reduction Act is a climate policy that has been in the making for more than a decade.
The Greenhouse Gas Reduction Fund provides $27 billion in funding for projects aimed at reducing global warming emissions in the United States. Some of those funds, about $7 billion, will go towards deploying clean energy in low-income communities — but the vast majority of the funds will be used to create America’s first national green bank, an initiative long championed by climate activists. These activists hope that the National Green Bank, which will provide ongoing financial assistance to expand clean energy use across the country, will hasten America’s transition away from fossil fuels.
With the help of the green bank, communities looking to bolster their nascent renewable energy industries will have increased access to finance that could bring them closer to achieving their climate goals.
“This is, I think, one of the most exciting and transformative investments and programs in this new law,” said Sam Ricketts, co-founder of climate group Evergreen Action. “The importance of a National Clean Energy Accelerator is that it is a national entity, with a national mandate to fund these projects in each state.”
The creation of the National Green Bank reflects years of work by climate experts and their allies on Capitol Hill. A green bank proposal was included in the Waxman-Markey climate bill of 2009, which never passed the Senate. The idea has since been floated but never realized — until last month, when Joe Biden signed the Cut Inflation Act, the Democrats’ huge spending package, into law.
“The climate test is simple: jobs, justice and climate. The National Climate Bank does all three,” Edward Markey, a Democratic senator from Massachusetts, said of the new initiative. “Through this bank, local climate and clean energy entrepreneurs will mobilize funds to advance green initiatives and infrastructure in their communities while creating good local jobs.”
The national bank will support the work of existing national and local green banks, which have already flourished in more than a dozen states.
Green Bank of New York has lent more than $1 billion since its founding in 2014 as it worked with the private sector to expand the use of clean energy technologies. One of Green Bank of New York’s initiatives, the Community Solar Program, allowed residents who might not be able to install solar panels on their roofs to sign up for an off-grid solar project instead. site, thereby reducing participants’ energy costs.
Richard Kauffman, chairman of the New York State Energy Research and Development Authority that launched the green bank, cited the community solar project as an example of how these financial institutions can best be used. Before Green Bank of New York got involved, traditional lenders were hesitant to approve funding for community solar projects because of the potential financial risks associated with such initiatives.
Green Bank of New York helped mitigate these risks by going through the documentation and contracts involved in the project while beginning to lend funds at a low interest rate. These green bank loans established a repayment history that then made traditional lenders more comfortable investing their own money in community solar initiatives, thus expanding the implementation of such programs.
“The intent of New York Green Bank was to provide financing for those projects where the issue was not the cost of financing, but the availability of financing,” Kauffman said. “There are many community solar projects right now across the state. They really took advantage of the pioneering role that the green bank played in establishing the market.
State and local banks have indeed helped to identify the vast need for such lending institutions in the United States. Reed Hundt, former chairman of the Federal Communications Commission under Bill Clinton and co-founder of the Coalition for Green Capital, said his group had identified $21 billion worth of clean energy projects behind schedule in national green banks and local.
The National Green Bank will help address this backlog while providing a more streamlined process to set up and run clean energy projects at the local level.
“As the saying goes, you need money to make money,” Hundt said. He added that domestic funding could help provide the financial support needed to transform clean energy supply chains, which in turn could reduce the cost of this technology for American consumers.
Existing state and local green banks in the United States have shown that such loans can be a sound investment. According to the Coalition for Green Capital, 99.62% of loans from state and local green banks in the United States have been repaid to their lender. These payments have empowered green banks, allowing them to invest more funds in projects to reduce global warming emissions.
“It’s the kind of money that will continue to work. It’s not just going to disappear as a grant and not be seen again,” Ricketts said. “It will be a self-executing, self-sustaining financial institution that will continue to…recycle through that initial capitalization to continue doing its job. It’s a feature, not a bug, and it’s one of the most exciting parts of it.
Climate experts have pointed out that the accelerated schedule for the deployment of clean energy in the United States is crucial, because the world has little time to avoid a climate catastrophe. The Intergovernmental Panel on Climate Change warned earlier this year: “Any further delay in concerted global action will miss a brief and rapidly closing window to secure a livable future.”
Combined with other climate provisions of the Cut Inflation Act, the National Green Bank could play a vital role in achieving Biden’s goal of halving U.S. emissions by the end of the year. decade.
“We need to accelerate adoption to reduce emissions before it’s too late. It’s that simple. We need to make the market go faster than it would otherwise,” Hundt said. “We just don’t really have the ability to delay.”