The green bankFinancing the Transition to a Low-Carbon Economy Requires Targeted Financing to Encourage Private-Sector Participation(By John Podesta, Karen Kornbluh via Center for American Progress)The debate over energy legislation begins in earnest in Congress this week and the stakes couldn’t be higher. The United States is falling behind in the space race of our generation—building long-term economic prosperity powered by low-carbon energy. China’s stimulus package invests $12.6 million every hour in greening its economy, for a total of $220 billion, twice as much as similar U.S. investments. Meanwhile, during the most recent economic expansion the average American family paid more than $1,100 a year in rising energy bills for U.S. policies that favor fossil fuels.The choice is clear: continue with more of the same energy policies or transition to a clean-energy economy that creates millions of good jobs here in the United States and moves us off our dependence on foreign oil.The creation of a new Green Bank could lead to the steady and reliable creation of clean-energy jobs and would be a crucial element of the transition to a clean-energy economy. Working in partnership with the private sector, a well constructed, public Green Bank would open credit markets and motivate businesses to invest again. It would enable clean-energy technologies—in such areas as wind, solar, geothermal, advanced biomass, and energy efficiency—to be deployed on a large scale and become commercially viable at current electricity costs.Designed along the lines of the proposals in this memo, a Green Bank is a critical part of an integrated strategy that would begin to build a strong foundation for broad-based economic growth and prosperity while allowing our nation to lead the world in the transformation to a global economy powered by low-carbon energy. An integrated clean prosperity strategy requires several elements that other nations are successfully pursuing, among them: putting a price on carbon, requiring utilities to replace some of their carbon-based energy resources with renewable energy, and jumpstarting investments in clean energy and efficiency.Currently, both Congress and the American public are focused on proposed caps on carbon emissions and requirements that utilities increase their use of renewable energy and invest in energy efficiency. But far less public attention has been paid to the specific policies that will drive new capital investment into clean-energy technology. A Green Bank would facilitate the flow of private capital into renewable energy and efficiency projects on the drawing boards today. The hurdles a Green Bank would overcome are:The still debilitating credit crunch.The need for large-scale, predictable financing.The lack of a financing track record for new clean energy.The lack of scalable and standardized finance models for existing energy-efficiency technologies.The lack of a fully built-out and tested transmission infrastructure.The risk resulting from fluctuating fossil fuel prices.Existing federal loan guarantees and tax incentives are critically important, but they are not enough given the scale of the clean-energy transition ahead of us and the financing obstacles in our path. Because loan guarantees and tax incentives are subject to extensions and appropriations by Congress, and have been allowed to lapse in the past, they lack the certainty that medium- to long-term debt financing requires.Moreover, these guarantees and tax incentives require agency rulemakings that, once established, are difficult to change to meet changes in market conditions. Amid the current economic downturn this lack of flexibility is especially troubling. Companies losing money can no longer fully use the available tax incentives, and developers are struggling to find investors who can capitalize on the tax benefits from their projects. Neither loan guarantees nor tax incentives have |