In a recent CleanTechnica article, I wrote about Elizabeth Warren’s plan for defeating the climate crisis and transitioning the US economy to run on 100% clean energy. She stated explicitly that her plan to pay for a Green New Deal would require big, structural changes and would arise from $10.7 trillion in federal and non-federal funding. What are the financing tools Warren intends to tap to unlock state, local, and private investment? How would she direct it towards meaningful investments to mitigate climate change, produce jobs, and reduce inequality?
And what about other plans out there for a national switch to clean energy? What does Bernie Sanders, for example, outline for funding ideas? Let’s survey these prominent and provocative voices today in the clean energy movement and see their fiscal visions for carbon-free power and 100% renewable energy.
How Warren Would Pay for a US Switch to Clean Energy
The transition to clean energy is “an opportunity to transform our economy, creating new industries, like in zero-emissions building construction, and greatly expanding others, like electric vehicle manufacturing,” Warren says. She argues that the transition creates “huge opportunities” for state, local and non-federal investment in the process.
A Warren administration would create new financing tools to unlock state, local, and private investment. She is firm that these investments to tackle climate change, produce jobs, and reduce inequality will flow to the “right places” — not just the wealthy and well-connected.
Okay, Senator Warren, how would you pay for it?
A Green Bank: A Green Bank, aka the National Climate Bank Act, could mobilize $1 trillion in climate and green infrastructure investments across the country over 30 years. She says it would:
- open up new markets for greater investment by working alongside existing federal authorities through direct spending, grants, and loans
- provide security for investors looking for climate-friendly investments in mid- to large-scale infrastructure projects
- increase the overall scale of clean energy investment and the pace of substitution of clean energy technologies for fossil-fuel based technologies
- protect consumers by keeping energy prices low and ensuring compliance with the Consumer Financial Protection Bureau’s regulations
- expand opportunities for communities and the private sector by directing funds toward communities on the front lines of the climate crisis that have traditionally been left out of investment opportunities
A September report from the New York-based Coalition for Green Capital found that such a bank could mobilize up to $1 trillion of investment over 30 years. The bank would recycle its capital, lending the same dollars repeatedly as loans are paid back and the funds re-used.
Fourteen states, including Michigan, New York, and Hawaii already have such banks, and other cities and counties have explored their own. Washington, DC, for example, approved one in 2018 and Baltimore’s Climate Access Fund seeks to help low-income and minority residents access more expensive solar energy. Small focus target investment on a local basis, and the national version would help mobilize investment on a required and faster scale.
Green Victory Bonds: Much like current state programs for land use projects, river and habitat preservation, and energy and water infrastructure, green bonds have also surged in popularity worldwide, with sales growing 46% last year to a total of about $460 billion. A lot like the World War II-era “Victory Bond” program, Green Victory Bonds would be sold at levels that allow Americans across the socioeconomic spectrum the opportunity to “own a piece of the climate solution and to benefit from the new green economy that we build together.”
Sanders on How to Pay for a Green New Deal
Embedded in many of Senator Bernie Sanders’ proposals for attacking the climate crisis are financing plans. Here are some of his fiscal visions that would usher in a Green New Deal.
Green Climate Fund: Sanders’ plan to halt the climate crisis centers on US investment of $200 billion in the Green Climate Fund (GCF) for the equitable transfer of renewable technologies, climate adaptation, and assistance in adopting sustainable energies. Since approving its first project in November, 2015, the GCF has grown to become the world’s largest climate finance fund through its readiness in 129 countries, including allocation of over $5.6 billion of its funding to build a project portfolio of over $20.6 billion. It is playing a key role in supporting the implementation of intended nationally determined contributions (NDCs), driving a shift to lower greenhouse gas emissions, and supporting action to adapt to the impacts of climate change in developing countries.
Significant US Military Reductions: While Warren’s plan alludes to decreasing military funding in order to pay for a Green New Deal — “We’ll pay for this with savings from my plan to transition the military away from its dependence on fossil fuels and other internal Department of Defense funding shifts, she says” — Sanders is much more explicit about redirecting military funds to mitigating the climate crisis. He says that the major industrialized nations spend trillions of dollars “on misguided wars and weapons of mass destruction,” He proposes to combat the climate crisis by recognizing that the Pentagon is the largest institutional emitter of greenhouse gases in the world and that the US spends $81 billion annually to protect oil supplies and transport routes. “We are uniquely positioned,” Sanders explains, “to lead the planet in a wholesale shift away from militarism.”
End Overseas Fossil Fuel Financing: The US federal government currently supports investments in fossil fuels through the World Bank, the International Monetary Fund, OPIC, the Export-Import Bank, and other multilateral institutions. These international investments are inconsistent with a goal to curb the global climate crisis, and Sanders says these “must end.” His administration would lead these international financial institutions, instead, toward advancing the equitable adoption of sustainable energy across the planet.
By redirecting money from these and other sources like income taxes from 20 million new jobs, taxes on fossil fuels, and selling power via federal power marketing authorities, Sanders will establish a Climate Justice Resiliency Fund. Funded at $40 billion, the EPA, together with a number of other agencies, would conduct a nationwide survey to identify areas with high climate impact vulnerabilities and other socioeconomic factors, public health challenges, and environmental hazards. Each community will then be eligible for Climate Justice Resiliency funding in order of most vulnerable to least vulnerable.
The US is not alone in its quest to use financing to make the switch to clean energy a reality. A recent article in the Washington Post pointed out that the EU’s biggest climate weapon lies in the financial fine print. The EU is embedding environmental goals in standards for banks, money managers, and insurers, it seems, in the hope of directing trillions of euros to fund a radical revision of the region’s economy. Like most of the US Democratic field of candidates, the EU is committed to meeting the targets of the Paris Agreement. Some of the EU’s money management strategies are pointing toward:
- Disclosing how they incorporate sustainability factors into investment decisions
- Setting up low-carbon benchmarks, like indexes created to track companies with a low carbon footprint, to steer funds to environmentally friendly investments
- Lowering capital requirements to encourage green lending
- Scrutinizing the environmental risks that remain on balance sheets and possibly imposing extra capital demands to offset possible losses
- Assessing environmental risks facing borrowers before they lend
So there’s a lot about which to think when considering the funding necessary for climate action. In the next part of this series, we’ll look at the other Democratic presidential contenders — as well as a few insightful researchers and economists — and review their plans to fund climate action. Stay tuned.