For 13 years, Reed Hundt has chased the idea of a national green bank, but to no avail.
As CEO of the Coalition for Green Capital, a global incubator for green banks, Hundt has long believed in the green bank financial model of leveraging limited public resources to attract private investors for clean energy projects that governments have been reluctant or can’t afford to support by themselves.
He worked with lawmakers in Colorado, Maryland and Massachusetts to introduce bills to Congress and drum up support in financial circles. In fact, the U.S. House of Representatives passed legislation to fund a green bank three separate times, in large part because of Hundt’s efforts, and President Biden included some $27 billion in his initial spending package last year for such a measure. But victory had eluded him, including when West Virginia Sen. Joe Manchin twice torpedoed Biden’s Build Back Better Act.
The green bank, you might say, was Hundt’s white whale.
So, this week, when Manchin surprised the nation by signing onto a landmark $370 billion climate and energy spending package just weeks after saying for at least the third time that he wouldn’t support such provisions, Hundt was floored to find the final deal included $27 billion for a national green bank.
“You could’ve knocked me over with a feather,” Hundt told me in an interview. “The language is the same, the numbers are the same, the concept is the same. And now we just have to wait and see if the Senate actually votes for it.”
Hundt’s efforts have helped to inspire green banks around the world, including 23 spread across 17 U.S. states. And another 25 states, including New Mexico and New Jersey, are in the process of forming their own. But a growing number of financial analysts and clean energy advocates, including Hundt, believe the implementation of a national green bank would be one of the quickest and most cost-effective ways to accelerate climate investments in the U.S., making it a critical tool in keeping the country in line with the Paris Agreement.
Green banks could play an even bigger role in reducing the nation’s emissions, Hundt said, after the recent Supreme Court decision limiting the federal government’s ability to regulate carbon emissions in power plants and national climate regulations like a carbon tax have been taken off the table.
Green banks are similar to regular banks, except that they have more access to public funding since they’re seen by the governments that support them as providing a public service. They lend money for clean energy or energy-efficiency projects with an expected return on investment, leveraging a relatively small amount of public funds to make projects, like community solar arrays, more attractive to private investors looking to make a buck.
They can help develop local markets and supply chains, provide financial guidance to developers and help fill gaps in the market. Many green banks also prioritize vulnerable and low-income communities. Of the $27 billion included in the latest spending bill proposal, $8 billion will be used to target projects in low- to medium-income communities.
The model has proven successful in many countries, including the U.S. Before the United Kingdom government sold it in 2017, it used its green bank to fund much of its offshore wind boom. And Australia’s green bank, which is the largest in the world, has helped to scale up investment in energy efficiency installations, as well as wind, solar and hydrogen energy development.
In the U.S., green banks have on average generated $3.70 in private investments for every $1 the bank invested, according to a 2021 report from the American Green Bank Consortium and the Coalition for Green Capital. And since 2011, American green banks have generated $7 billion in clean energy investment, with nearly $1.7 billion in 2020 alone, the report said.
Hundt estimates that a federal green bank would be even more effective, spurring $10-100 in private capital for every dollar of public investment. “So we’re not talking about grants,” he said. “We’re talking about profitable investment, creating investment value for the consumer, value for the investors. That’s a really important point.”
One area where a national green bank could make a huge difference, Hundt said, is by rapidly scaling up the installation of heat pumps in the U.S., where commercial and residential buildings make up 13 percent of the nation’s total greenhouse gas emissions.
Globally, using heat pumps instead of traditional boilers and furnaces could cut global CO2 emissions by 3 gigatons per year, according to a report released this month by the consultancy firm McKinsey and Company.
There’s even evidence that green banks are helping to bridge America’s cultural divide when it comes to talking about climate solutions. A recent poll by Hundt’s Coalition for Green Capital found that the majority of likely voters in two fossil fuel-producing states support the idea of a national green bank.
In Manchin’s homestate of West Virginia, 54 percent of likely voters supported the idea of a national green bank, the survey found, with 31 percent opposing. In Alaska, 68 percent supported the bank and 20 percent opposed. Among oil, gas, and coal workers and their families, support was even higher: 62 percent and 77 percent of them supported a green bank in West Virginia and Alaska, respectively.
As Democrats continue to negotiate the spending agreement, Hundt is holding his breath that the deal goes through and he finally sees his decade-long quest come to fruition. “It’s the biggest amount of money dedicated to public-private investing in energy infrastructure of any capitalist country in the world,” he said. “We need to go from words to reality, and all across the country. But we needed money to do it, so, this is pretty dramatic.”
That’s it this week for Today’s Climate. Thanks for reading, and I’ll be back in your inbox on Tuesday.
That’s the total amount of global GDP—or gross domestic product—that many experts believe the world would need to spend each year on clean technologies and infrastructure in order to avoid catastrophic climate change by the end of the century.