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Climate Politics Almanac: An update on green banks

How the $27 billion Greenhouse Gas Reduction Fund is being spent

Last year, we wrote about “green banks,” the network of non-profit and state-run organizations that have sprouted up to boost financing for clean energy deployment over the last decade. These green banks were supercharged by the Inflation Reduction Act’s (IRA) $27 billion Greenhouse Gas Reduction Fund (GGRF).

The Fund has the potential to create transformative tools for integrating climate and industrial policy, particularly when states go after this federal money by designing ambitious green banks with strong labor and environmental justice standards:

“Amid mounting costs from climate disasters, fossil-fuel industry cleanup obligations in the billions, and insurance market meltdowns, state governments need much more support and much more development of capacity-building tools to prepare for the road ahead. To actually fulfill its commitment to climate and industrial policy, the Biden administration must work with state and local governments, including through robust public investments from the Greenhouse Gas Reduction Fund. States can seize this opportunity through innovative policy interventions like Minnesota’s new green bank.”

Jahi Wise

Jahi Wise, Senior Advisor to the EPA Administrator and Acting Director for the Greenhouse Gas Reduction Fund program

Shortly after the first tier of the Fund’s recipients was announced, the EPA’s GGRF Director, Jahi Wise, went on the Volts podcast to describe this major landmark in the program’s implementation. Affirming the need for a “national financing infrastructure” to address the scope of the climate crisis, Wise outlined the Fund’s various competitive programs, and the different areas of focus for the announced grant recipients:

  • The $14 billion National Clean Investment Fund is dedicated to affordable financing for clean technology projects. The $14 billion obligation will be split between three coalitions of non-profits and community development financial institutions (CDFIs): the Climate United Fund, which is focused on consumer-facing products and projects that support small businesses; the Coalition for Green Capital, which has the most experience working with state and local green banks; and Power Forward Communities, which is focused on housing decarbonization projects intended to “save homeowners and renters money.”

  • The $6 billion Clean Communities Investment Accelerator will be distributed among five different networks of CDFIs.

  • The $7 billion Solar for All program will be dedicated mostly to state and local governments to support greater deployment of solar energy.

Biden on Earth Day

President Joe Biden in Prince William Forest Park on Earth Day Monday, April 22, 2024, in Triangle, Va. With Biden are Rep. Alexandria Ocasio-Cortez (D-N.Y.); Sen. Bernie Sanders (I-Vt.); Za’Nyia Kelly of the Michigan Healthy Climate Corps; and Sen. Ed Markey (D-Mass). Credit: AP

On Earth Day 2024, President Joe Biden announced the awards from the Solar for All program, flanked by the Green New Deal champions Sen. Bernie Sanders (I-Vt.), Sen. Ed Markey (D-Mass.), and Rep. Alexandria Ocasio-Cortez (D-N.Y.). Sixty total awards were announced, with 49 grants given directly to state agencies, and additional grants to territories, tribes, and non-profits. In some cases, the awards will go to green bank state instrumentalities, such as the Maryland Clean Energy Center or the Illinois Finance Authority. In other cases, non-profits have been chosen to support solar rooftop in Republican-led states, as with the Solar and Energy Loan Fund of St. Lucie County in Florida, or the grants announced for the Coalition for Green Capital to support solar rooftop in North and South Dakota.

Solar rooftop is the clearest example of how green banks are meant to fill so-called financing gaps. As Wise notes, the Fund is focused not on funding climate solutions in the distant future, but on scaling up the use and availability of existing commercialized technologies.

Green banks do have long-term potential to foster more public investment in long-term climate solutions, however. The Center for Public Enterprise (CPE) has described several novel ways that green banks can maximize the degree of support that they receive from federal infrastructure packages: by qualifying for the IRA’s ‘elective pay’ program and by taking advantage of provisions in the Infrastructure Investment and Jobs Act (IIJA) that enable them to access Department of Energy Loan Program Office funds.

The Center’s proposals would unlock sources for federal green bank funding beyond the Fund, and can ensure that these publicly accountable state institutions are improving the financial picture for small public agencies like school districts that make climate smart investments. They also contemplate green banks funding and taking equity stakes in the development of clean technologies, thereby ensuring that the public shares in the financial benefits of climate solutions that prove commercially viable.

rooftop solar project for Maine courthouse

Rooftop solar newly installed on the York Judicial Center in Biddeford, Maine

Minnesota’s green bank, established last year, is one of the most ambitious green banks yet created by a state. Massachusetts and New Mexico also established green banks last year. Vermont’s green bank legislation, H.586, is stuck in committee.

In 2024, the new Democratic majorities in Virginia’s General Assembly consulted with lawmakers in Minnesota to draft and pass legislation establishing a new green bank in Virginia. The Virginia green bank bill was approved by the legislature with bipartisan support in consultation with Republican governor Glenn Youngkin.

Then Youngkin issued a de facto veto, slashing funding for the green bank and inserting a “re-enactment clause” requiring the legislature to pass the bill again in 2024. Now, the fate of Virginia’s green bank will be among several major climate policy questions determined during the General Assembly’s legislative session scheduled for the week of May 15. The May 15 session is meant to hash out substantial disagreement related to the state budget and the record number of vetoes issued by Youngkin.1

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1  In addition to the green bank bill, Youngkin also struck out language requiring Virginia to rejoin the Regional Greenhouse Gas Initiative, and legislation limiting how much Virginia’s utilities can charge ratepayers for costs related to a Youngkin pet project: a small modular nuclear reactor.

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