By Stephany Griffith-Jones, Ilmi Granoff and Douglass Sims
Our history shows that when we have faced overwhelming economic challenges, we have created public institutions up to the task of meeting them. To meet today’s challenges of COVID-19 recovery, inequality and climate change, a federal green bank that would channel public and private investment for the public interest is essential.
The Clean Energy and Sustainability Accelerator is the green bank for our times. Rep. Debbie Dingell (D-Mich.) recently introduced legislation with bipartisan support, that, if enacted, would establish the accelerator, a nonprofit financial institution with $100 billion in equity and the mission of directing investment into transformative projects that create good jobs, and mitigate both global warming and inequality. It would invest in every state through and alongside local financial institutions. A full 40 percent of investment would support the most vulnerable communities.
President Biden included a version in his American Job’s Plan, and nearly 250 groups have urged Congress to pass the legislation for a green bank as part of the upcoming infrastructure bill.
But questions remain about how to build a successful Accelerator. How large should its initial capitalization be? What can it help achieve? What instruments should it use to achieve its objectives?
The proposed $100 billion is a reasonable capitalization that allows finance on the scale required. The European Investment Bank, which lends to European Union countries with a collective GDP slightly lower than ours, has a capital base of $300 billion USD, half of which will be dedicated to support lending to low-carbon activities by 2025.
The accelerator’s capital base would drive around $460 billion of total investment in 4 years and $880 billion in 10 years, according to recent studies by Vivid Economics. Vivid also estimated that this investment would create nearly 4 million jobs in 4 years and 12 million jobs in the next decade.
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