Solving the climate crisis will require significant investments in both large and small-scale infrastructure. However, investors are not always incentivized to fund the smaller projects. One solution to this problem is a public-private financing partnership known as a Green Bank.
A lesser-known provision of the Build Back Better legislation, which passed in the House on November 19 and is now before the U.S. Senate, is the “Greenhouse Gas Reduction Fund,” more commonly known as a federal Green Bank. Should this provision become law, every state, including Idaho, will be granted millions of dollars to set up a Green Bank. So what exactly is a Green Bank, and why is it such an important tool in our fight against climate change?
What is a Green Bank?
A Green Bank is an investment vehicle for climate-related infrastructure projects. The Bank starts with government funds, attracts private investment, and then uses the money to invest in projects that would otherwise not receive funding. A Green Bank is not a government agency controlled by government actors. In addition, they are profitable and self-sufficient because they make back all of the money that they loan out and do not require further funding from the government. Green Banks can fund a wide range of projects such as energy efficiency improvements, rooftop solar, city bike-share projects, electric vehicles, or interstate electric transmission lines.
Green Banks provide a powerful solution to tricky problems. For example, although rooftop solar is a profitable investment once electricity savings cover the initial cost, only the wealthiest can typically afford the upfront costs and high-interest loans associated with solar installation. Big investors are unlikely to fund projects that provide rooftop solar to customers who cannot afford it on their own because identifying individual projects is too time-consuming. Investors will, however, invest their money in Green Banks and let the Green Bank complete the work of locating projects, developing standards for the lending process, and funding the final project. Green Banks can also set up long-term financing for solar customers which is particularly beneficial for low-income individuals with poor credit scores and who need more time to pay back the loan. In this way, Green Banks facilitate investment in all kinds of small-scale climate projects.
Although there is not yet a federal or an Idaho Green Bank, there are around 20 state Green Banks in other parts of the U.S. These Banks attracted $1.9 billion in public investment and $5.1 billion in private investment between 2011 and 2020, meaning that every dollar of public funding generated $3.70 in private investment.
What Could a Green Bank Do For Idaho?
An Idaho Green Bank could develop creative solutions that meet the unique needs of Idahoans. In addition to funding rooftop solar, an Idaho Green Bank could help farmers purchase manure digesters that will reduce methane emissions from their operations or provide financing to farmers who want to utilize climate-smart agricultural practices. The Bank could provide funds for small business owners to purchase electric vehicles that will save the owner long-term gasoline and maintenance costs. The Bank could even invest in tree planting projects that will protect the health of Idaho’s forests.
Take action by telling your Senators to vote yes on the Build Back Better legislation and the Green Bank provision.
For more information about Green Banks, check out the 2021 Report from the Coalition for Green Capital.