California has long been a leader in developing and deploying clean, low-carbon technologies, in large part due to its supportive public policies. Revenues from the auction of carbon emissions allowances create new opportunities for California to continue its leadership in clean energy. Using a portion of these revenues to create a California Green Bank could leverage private capital to allow more Californians to access clean energy, reduce energy costs, and more rapidly transition to a lower-carbon economy.
What is a Green Bank?Many low-carbon technologies cost more at first but save money over time. However, many of California’s people, businesses, and public entities cannot obtain affordable financing to take advantage of low-carbon technologies. California’s innovators and entrepreneurs face a similar problem accessing financing to scale-up and commercialize new low-carbon technologies. A Green Bank is a quasi-public institution or a governmental financing authority that can help bridge this gap by encouraging investors and private lenders to start expanding financing opportunities for low-carbon technologies. By using financial tools such as long-term and low interest rate loans, revolving loan funds, insurance products (such as loan guarantees or loan-loss reserves), and low-cost public investments, a Green Bank could catalyze private financing for low-carbon technologies. Key opportunities include distributed and large-scale clean energy generation, clean transportation vehicles and infrastructure, as well as water and energy efficiency measures in small businesses and homes. Many of these opportunities are new to investors; a Green Bank’s pioneering investments and support could provide the experience and data they need to enter this market. A California Green Bank could build upon the experience of green banks recently established in Connecticut, New York, and Hawaii, and act in coordination with existing state and federal programs to promote a cleaner, low-carbon future. Through careful future analysis and stakeholder input, the green bank should be designed to:
- Accelerate the transition to low-carbon technologies by addressing market barriers to developing and deploying clean technologies.
- Seek cost-effective solutions that reduce costs to society and allocate risks appropriately.
- Enable significant progress towards the state’s policy goals including energy, air quality, and emissions goals.
- Consider opportunities across all sectors that can significantly reduce carbon emissions – such as renewable energy, energy efficiency, transportation, the water-energy nexus, and innovation.
- Avoid providing public support where private financing already does the job.
- Use public finance mechanisms where they are appropriate and efficient, rather than to address problems that may be better addressed through policy or regulatory changes.
- Improve access to low-carbon technologies, particularly in disadvantaged communities.