The launch of what would be the first U.S. green bank to help communities largely left behind by the clean energy revolution is back on track under a Senate climate deal that contains $60 billion in new environmental justice funding.
The new Greenhouse Gas Reduction Fund would be funded at $27 billion over the next decade to better leverage private sector investment and community lenders to build wind, solar, electric vehicle, and energy efficiency projects at the community level, under the deal negotiated between Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-N.Y.).
Green banks are typically public or quasi-public institutions using innovative financing techniques and market development tools in partnership with the private sector to accelerate the deployment of clean energy technologies.
While many states including New York and Connecticut have backed their own green banks for years, what would be the first launch of a U.S. fund capitalized with billions of dollars over the next decade would vault the U.S. to the top tier of global leaders in such clean energy investment, said Reed Hundt, former chairman of the Federal Communications Commission who has advised venture capital and private equity firms since the late 1990s.
Environmental equity is a major focus of the $27 billion pot, Hundt said.
Of that total, $7 billion would go to state green banks “which are all woefully short of capital,” he said. Those banks are wrestling with an estimated $21 billion project backlog because of underfunding.
The $20 billion remainder would be set aside for federal investments. Forty percent of that—$8 billion—is to be focused on benefiting disadvantaged communities.
The $60 billion in total environmental justice funding included in the Schumer-Manchin agreement would ensure tangible clean energy projects to which communities could point, said Hundt, now CEO and chairman of the nonprofit Coalition for Green Capital. They range from more efficient household heat pumps or community solar projects in communities, particularly disadvantaged ones.
“It is the single, largest, discrete and focused environmental justice investment in building the clean power platform on an environmental equity basis that we have ever seen,” he said.
Getting the Greenhouse Gas Reduction Fund and its billions of dollars into the deal is a big win for Democratic Sens. Chris Van Hollen (Md.) and Ed Markey (Mass.).
They led Senate efforts for a U.S. green bank, then called a Clean Energy and Sustainability Accelerator, to invest in everything from rooftop solar projects to more energy-efficient housing. President Joe Biden made the accelerator a key part of his Build Back Better framework in 2021.
The green bank “will serve as a force multiplier for the development and deployment of green technologies, with an emphasis on environmental justice communities,” Van Hollen said in a statement.
Clean energy advocates including E2—which represents business leaders, investors, and others in clean energy—made capitalization of the green bank a top priority to ensure marginalized and underserved communities benefit from the climate provisions Schumer and Manchin negotiated.
“The clean energy transition can and must result in a more equitable, more resilient economy,” said Sandra Purohit, E2’s director of federal advocacy. “The tens of billions in federal funding for environmental justice in this package are a critical down payment to ensuring that happens.”
A total of $369 billion is allocated for climate and clean energy provisions in the package, to be spent over 10 years, in what would mark the most significant US policy effort yet to address climate change.
Other environmental equity funding proposed in the Manchin-Schumer deal includes:
- Environmental and Climate Justice Block Grants ($3 billion) to respond to the disproportionate pollution levels impacting disadvantaged communities;
- Neighborhood Access and Equity Grants ($3 billion) to reconnect poorer communities divided by highways and other infrastructure;
- A grant program to support zero-emission equipment at ports ($3 billion); and
- An effort to transition diesel and other polluting vehicles, such as school and transit buses and garbage trucks, to cleaner alternatives ($1 billion).
While environmental justice groups are welcoming the prospect of billions of dollars in new funding, they expressed concern about the compromises needed to get wins on climate-friendly and environmental equity.
Disadvantaged communities “experience an unconscionable exposure to all of things that this bill works to address, so we are pleased to see that members of Congress went back to the negotiating table and really worked on putting together a package that could address environmental justice and climate,” said Dana Johnson, senior director of strategy and federal policy for WE ACT for Environmental Justice.
But more offshore drilling, along with incentives for carbon capture and storage, nuclear energy, and biofuels “are all sensitive issues for frontline communities,” she said.