In the just the last few weeks, two more governors announced plans to create green banks and dedicated clean energy finance capacity in their states. Governor Gavin Newsom in California and Governor Phil Murphy in New Jersey both kicked off new efforts to use public capital to spark more private investment to reduce greenhouse gas emissions.
On January 9, Governor Newsom proposed the formation of a $1 billion Climate Catalyst Revolving Loan Fund (“the Fund”) as part of his annual budget. The Fund is meant to provide financing to target projects and sectors that can reduce greenhouse gas (GHG) emissions and increase sustainability, and do so in ways that catalyze greater private investment where it is not flowing today. The Fund will be housed within and operated by the California Infrastructure and Economic Development Bank (“IBank”), which has a long track record of financing similar kinds of projects. Not since Governor Cuomo of New York announced his plan to form the $1 billion NY Green Bank in January 2013 has a state taken such significant action on clean energy finance.
And in New Jersey, on January 27, Governor Murphy released the state’s much-anticipated Energy Master Plan. The Plan lays out the vision for energy development and emissions reductions for the next three decades. One of the proposed elements is the formation of a New Jersey Green Bank. Much like California’s Fund and other green banks, the goal is to use public funds to drive multiples of private investment into underserved clean energy markets to achieve deeper market penetration. In New Jersey, the Green Bank is to be organized and launched under the direction of the state’s Economic Development Authority.
The Green Bank’s prominent placement in the state’s Energy Master Plan comes on the heels of its inclusion in the state’s RGGI Scoping Document, which proposes how New Jersey will allocate the new proceeds of RGGI allowance auctions. A New Jersey Green Bank was also featured in the Governor’s economic development plan released in 2018, and his official transition plan. This surge of interest and commitment to a Green Bank in the Garden State followed the release of an analysis of the clean energy finance opportunity in NJ produced by Environmental Defense Fund and CGC.
The commitment and scale of these governors’ proposals deserves applause, especially because of the relatively high amount of emissions coming from both states (particularly due to transportation). But these states are hardly alone. Last year green bank legislation was introduced in Maine and Wisconsin. And CGC has projects underway in Ohio, Minnesota, Alaska and several other states.
The urgency is real and timing could not be better. With the introduction of the National Climate Bank Act and the growing momentum behind it, states can be early movers, start investing now in their clean economies, and ready themselves to receive billions of dollars from the new national financing entity. The Climate Bank will directly finance some projects, but it will also provide capital directly to state and local green banks to finance activity better suited to local expertise.
States like California and New Jersey are getting an early jump by deploying capital today so they can get billions more in the near future.