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'Green banks': The answer to clean energy's subsidy woes?

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The idea is being put forward by the Brookings Institute, which issued an in-depth report on Green Banks last week as part of the Brookings-Rockefeller Project on State and Metropolitan Innovation.    

But the idea is not entirely new. In fact, the Export-Import Bank of the United States (Ex-Im Bank) and the Overseas Private Investment Corporation are similar endeavors that have successfully raised capital for energy and infrastructure in the past. The difference this time around is that Green Banks would be the purview of state governments rather than the federal government. 

State budgets are challenged financially, so Green State Banks would be a sound solution that would allow states to leverage public money with private sector funds and, importantly, private sector experience.  The overall effect will be to cut clean energy’s dependence on federal subsidies and tax credits, which in turn will make them more competitive and hopefully push development into full maturity, all the while allowing states to make their own decisions. It is also much easier for states to forge public-private relations than it is for the federal government. 

There is no single model that could work across states, however, so it is up to each state to design their own form of green banking. There are at least three models of banks that states could choose from depending on their specific circumstances and needs. The Connecticut model is a semi-public corporation that merges funds the state already has for clean energy with private investment in the bank. They could also take an existing infrastructure bank and add on a Green Bank to its services, or transform a grant authority into a lending authority in partnership with the private sector. (RELATED: What Does the Future Hold for Natural Gas Prices?)

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