It was a welcome blast from the past recently when Rep. Chris Van Hollen (D-MD) introduced legislation to create a federal green bank.
After all, green banking enjoyed bipartisan support in the House and Senate in 2009, and eventually a federal bank surfaced as the Clean Energy Deployment Administration in the House-passed Waxman-Markey cap-and-trade bill later that year. To be sure, the proposal died in the Senate with the rest of Waxman-Markey. But it was one of the best parts of that bill.
Now, the concept has resurfaced, with Van Hollen proposing the creation of an independent, self-sustaining, not-for-profit federal corporation to serve as a catalyst for leveraging private and other non-federal sources of capital in order to scale up clean energy transformation. Through the Green Bank Act of 2014 Van Hollen would capitalize the new entity with an initial $10 billion of green bonds issued by the U.S. Treasury to provide a comprehensive array of financing supports for clean energy and energy efficiency scale-up projects, including loans, loan guarantees, debt securitization, insurance, and other forms of risk management. As such, the legislation answers very well to recent calls (like ours here) to apply the power of cutting-edge finance to clean energy.
And yet, what’s most interesting about the new bill is how carefully it’s being positioned to comport with the new “bottom up” ethos that has swept through energy discussions.
Times have changed, as we wrote last month, and the clear trend in clean energy problem-solving is toward decentralized “self-help” in states and regions. In the clean energy finance area green banks are now running in Connecticut and New York while bank-like loan funds are operating in Vermont and Hawaii. Representatives from 10 other states attended a Green Bank Academy jointly hosted by Brookings, the Coalition for Green Capital, and Connecticut’s Clean Energy Finance and Investment Authority (CEFIA), reflecting an increasing interest among states to create green banking institutions that would provide long-term, low-cost financing to clean energy projects.
Against this backdrop, it’s at once appropriate, shrewd, and a sign of the times that Van Hollen has configured his bill to assist rather than preempt what’s going on in the states. Most notably, the new legislation authorizes the federal green bank to partner with, and offer low-interest seed loans of up to $500 million, to state green banks that operate under similar principles and have their own matching funds. These infusions would give a significant boost to state-side banks, which can use help in amassing their up-front capital.
In short, the new bill gets it right, in a way that so much federal legislation does not. It acknowledges that the era of top-down is over, recognizes the shift of action to the states, and seeks to assist it. It’s too bad that even such appropriately modest bill won’t likely be going anywhere.