By Alison Bennett, S&P Global
Some industry leaders are advocating for billions of dollars in new federal funding for green banks to go toward a national nonprofit institution that could jump-start the clean energy market and help state and local banks.
A green bank is a public, quasi-public or nonprofit institution that uses public funds to attract private investment in clean energy funds. More than 20 such banks now exist at the state and local level in the U.S. The Inflation Reduction Act, signed by President Joe Biden on Aug. 16, provides a total of $27 billion for green banks through the Greenhouse Gas Reduction Fund.
Debate remains about whether that funding should be directed toward individual green banks or should be used to create a national bank that could leverage capital and create financial products to generate more money for green banks nationwide. The Coalition for Green Capital and the American Green Bank Consortium, as well as some lawmakers, are pushing for the latter option, saying that direct grants would not be enough to help the industry provide funding across the board.
Of the total $27 billion, $7 billion will go to states, municipalities, tribal governments and eligible recipients to enable low-income and disadvantaged communities to deploy or benefit from zero-emission technologies or other types of emission reduction activities. The other $20 billion is earmarked for eligible nonprofits to provide funding assistance to green projects through direct and indirect investments — money that will be administered by the Environmental Protection Agency.
The DC Green Bank, part of the District of Columbia’s government, said any money is welcome.
“This really is a game-changer for us in terms of scale,” DC Green Bank CEO Eli Hopson said in an interview. “On a citywide scale, we are going to transform residents’ lives. With this volume, we can standardize products and work with private capital markets. It really is a transformation.”