The idea of a national “green bank,” which would borrow public money to help cash-strapped businesses and individuals invest in things like solar panels and energy efficiency upgrades, has been kicked around since the first Obama administration. But it wasn’t until President Joe Biden signed the 2022 Inflation Reduction Act that the federal government set aside money through the bill’s $27 billion. Greenhouse Gas Reduction Fundfor this express purpose.
On Thursday, Vice President Kamala Harris and EPA Administrator Michael Regan announced that the administration was ready to start signing checks. But rather than centralizing the funding in a single bank, the administration is sending the money — $20 billion of the total so far — to eight selected applicants, representing more than a dozen local nonprofits. The idea is that these trusted intermediaries, who already have a track record of investing in local projects, can better inject the loans directly into communities, with the vast majority of funding going to low-income and disadvantaged recipients. The hope is to give communities access to the capital they need to invest in a clean local economy – according to a vision that recipients define for themselves.
“We have the capacity with this approach to empower communities to decide what projects they want that will have the greatest impact from their perspective in the place they call home,” Vice President Harris said at the announcement event in Charlotte, North Carolina. “We can invest in those projects in a way that will have real value for the people who live there — instead of us from Washington, DC, telling us what you need.”
In Charlotte, Vice President Harris visited Grier Heights, a historically Black neighborhood where a community bank called Self-Help facilitated investments to insulate, weatherize and electrify nearly 50 homes. The Vice President emphasized that these efforts not only created jobs for the contractors who did the work and reduced the carbon footprint of each of the houses, but they also improved the lives of families who inhabit them. When she visited the Grier Heights home of one father and small business owner, the resident told Harris that his combined gas and electric bill had been reduced from $600 a month to about $100 a month after attending one of Self-Help drew in its energy. efficient homes. These savings enable him and his spouse to spend more on childcare and save money for their children.
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Self-Help and another community-based lender have partnered with the nonprofit Climate United Fund to invest the nearly $7 billion they’ve been awarded through the green bank program in projects that hope to help families, schools, small businesses, community organizations and other local institutions. They aim to invest at least 60 percent of those funds in low-income and disadvantaged communities, 20 percent in rural communities, and 5 percent in tribal communities.
The other community-based financial institutions that will receive the remaining $14 billion announced Thursday — which will be facilitated by the National Clean Investment Fund and the Clean Communities Investment Accelerator — have similar goals for the types of projects and communities they support. One awardee, the Native CDFI Network, intends to focus its efforts in reserves and indigenous communities.
These grants, along with a $7 billion “Solar power for everyone” grant expected to be announced later this spring represents “the single largest climate investment in the Inflation Reduction Act,” according to a press release quote from Massachusetts Senator Edward Markey, a Democrat who supported the law.
The funds are designed to do much more than simply inject public funds into communities that need them – they are also intended to catalyze further investment. The EPA expects that every dollar of federal investment will spur seven dollars in private spending. If this projection is correct, this multiplier would exceed the similar effect observed in separate provisions of the Inflation Reduction Act. (A recent analysis found that the law’s tax credits have ballooned $5.50 from private investments for every $1 in credits.) This means that the Greenhouse Gas Reduction Fund could lead to nearly $200 billion in green investment.
Although the idea is that these kinds of effects will make the program a win-win-win for the climate, local communities and the government, the green bank project is not without its critics. One member of Congress, a Republican representing Alabama, called the effort a “Green ‘slush fund’” when he tried to repeal the green bank program earlier this year, saying the program lacked accountability and oversight to ensure money was not wasted. In a vote cast almost entirely along party lines, the bill passed the House of Representatives and was sent to the Senate. Although it has yet to receive a vote in the Democratic Senate, President Joe Biden issued a statement making it clear that he would veto the repeal effort.
“When we expand access to capital and give every person in our country — no matter who they are or where they live — the opportunity to pursue their dreams,” the vice president said Thursday, “we’re building a cleaner, healthier and fairer and more prosperous futures for all.”
