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The green bank

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