Buried on page 667 of the Reducing Inflation Act is a climate policy that has been in place for over a decade.
The Greenhouse Gas Reduction Fund provides $27 billion in funding for projects aimed at reducing U.S. Earth-heating emissions. Some of that funding, about $7 billion, will be earmarked for clean energy deployment in low-income communities — but the vast majority will go toward creating the nation’s first national green bank, a long-running campaign backed by climate activists. initiative. These campaigners hope that the National Green Bank, which will provide continued financial assistance to expand the use of clean energy across the country, will accelerate America’s transition away from fossil fuels.
With the help of the Green Bank, communities looking to support their nascent renewable energy industries will receive more funding, bringing them closer to meeting their climate goals.
“I think this is one of the most exciting and transformative investments and initiatives in this new law,” said Sam Ricketts, co-founder of climate group Evergreen Action. “The importance of the 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 Act of 2009, but it never made it through the Senate. The idea has been tossed around since then, but never came to fruition — until last month, when Joe Biden slapped the Democrats’ massive spending plan, the Inflation Reduction Act Sign into law.
“The climate test is simple: jobs, justice, and climate. The National Climate Bank does all three,” Sen. Edward Markey, a Democrat from Massachusetts, said of the new initiative. “Through this bank, local climate and clean energy entrepreneurs will use the funds to advance green initiatives and infrastructure in their communities, while creating good local jobs.”
National Bank will help the work of existing state and local green banks, which are already thriving in more than a dozen states.
Since its founding in 2014, the New York Green Bank has provided more than $1 billion in loans as it partners with the private sector to expand the use of clean energy technologies. An initiative of the New York Green Bank, the Community Solar Program, allows residents who may not be able to install solar panels on their roofs to instead subscribe to off-site solar projects, reducing energy costs for participants.
Richard Kaufman, chairman of the New York State Energy Research and Development Authority, which initiated the green bank, used community solar projects as an example of how to make the most of such financial institutions. Until the New York Green Bank stepped in, traditional lenders were reluctant to approve funding for community solar projects due to the potential financial risks of such plans.
The New York Green Bank helped mitigate those risks by dabbling in the documents and contracts involved in the project, while also starting to lend money at low interest rates. These green bank loans build repayment records that make traditional lenders more willing to put their own money toward community solar programs, expanding the reach of such programs.
“The purpose of the New York Green Bank is to finance these projects, and the issue is not the cost of financing, but the availability of financing,” Kaufman said. “There are a lot of community solar projects across the state right now. They really benefit from the spearheading role green banks are playing in building the market.”
State and local banks have really helped determine the huge demand for such lenders 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 team has State and local green banks identify a $21 billion backlog of clean energy projects.
The National Green Bank will help address this backlog while providing a more streamlined process to get clean energy projects up and running at the local level.
“As the saying goes, you need money to make money,” Hunter said. He added that state funding could help provide the financial support needed to transform clean energy supply chains, thereby reducing the cost of using such technologies for U.S. consumers.
Existing state and local green banks in the US have shown that such loans are a sound investment. According to the Green Capital Coalition, 99.62% of state and local green bank loans in the U.S. have been repaid to lenders. These payments allow green banks to be self-sustaining, allowing them to put more money into projects aimed at reducing emissions from Earth heating.
“It’s a type of funding that will continue to operate. It’s not going to just disappear as a grant and not be seen anymore,” Ricketts said. “It’s going to be a self-executing, self-sustaining financial institution that’s going to continue to… cycle through initial capital to keep doing work. It’s a feature, not a bug, and that’s one of the more exciting parts of it.”
Climate experts stress that accelerating the U.S. timeline for clean energy deployment is critical because the world is running out of time to avoid a climate catastrophe. The Intergovernmental Panel on Climate Change warned earlier this year that “any further delay in coordinated global action will miss a short and rapidly closing window to ensure a livable future.”
Combined with other climate provisions in the Inflation Reduction Act, a national green bank could play a vital role in achieving Biden’s goal of halving U.S. emissions by the end of the century.
“We have to accelerate adoption to reduce emissions before it’s too late. It’s that simple. We have to let the market go faster than it would otherwise,” Hunter said. “We really don’t have an option to delay.”