The Biden administration recently announced the recipients of nearly $1 billion in Environmental Protection Agency (EPA) funding for “clean school buses” aimed at accelerating the transition to low-emission vehicles and reducing air pollution around schools and neighborhoods. Demand from local school districts was so high that the EPA nearly doubled the amount awarded, which will help pay for more than 2,400 new buses that students and parents depend on across 389 school districts. Roughly 1,600 other applicants will have to wait for next year’s round of funding after requesting $4 billion for 12,000 school buses.
The funding for new school buses is included in the Bipartisan Infrastructure Law championed by President Joe Biden as a breakthrough deal for improving transportation and fighting climate change. However, the $1 trillion package approved by Congress in 2021 includes only $550 billion in new spending and was much less ambitious than the White House’s initial $2.3 trillion proposal for creating jobs, fixing roads and ensuring clean drinking water, among other priorities. As the midterms approach, this early compromise struck by Biden has largely faded in the rearview mirror.
While the Biden administration directs billions of dollars in transportation and infrastructure funding into communities — often with little fanfare from a media obsessed with contentious elections — the EPA is rolling out the government’s most ambitious climate program to date. The EPA’s national “green bank” will leverage public money in hopes of raising private capital for reducing greenhouse gas emissions and building out renewable energy infrastructure. Officially known as the Greenhouse Gas Reduction Fund, the green bank was created by the Inflation Reduction Act, a tenuous legislative victory for Democrats facing backlash over the flailing economy from midterm voters.
Unlike the new electric school buses, which are paid for by rebates and grants delivered directly to school districts from the EPA, the $27 billion earmarked for the national green bank will flow through a complex web of nonprofits, new businesses, private financial investors and an existing network of state and local green banks. A coalition of mainstream environmental groups, including the Sierra Club and the Union of Concerned Scientists, and a host of solar pioneers and green tech entrepreneurs have pushed for a national green bank for years, building off what they say are successful “green banking” efforts to attract private investment in cleaner energy at the local level.
While the EPA’s green bank is generating plenty of buzz in the world of green capitalism, climate activists say relying on the financial markets and for-profit companies to reduce greenhouse gas emissions is a mistake.
“Direct federal funding of distributed renewables, such as community solar, is a good thing,” said Mitch Jones, managing director of the climate action group Food and Water Watch, in an email. “Laundering that funding through financial institutions that can decide where to send it is not.”
Sam Ricketts, the co-director of Evergreen Action, which advocates for a transition to a clean energy economy, said the EPA’s green bank will support an “ecosystem of finance” throughout the U.S. and “catalyze” investments in renewable energy infrastructure, particularly in disadvantaged communities often overlooked by investors.
“This is one of the investments in the Inflation Reduction Act that’s most exciting because of its ability to catalyze — as existing financial institutions are already doing — in disadvantaged communities and in environmental justice communities, new clean energy projects,” Ricketts said in a newsletter distributed by the Coalition for Green Capital on Thursday.
The “disadvantaged” and “environmental justice” communities Ricketts refers to are cities and neighborhoods that disproportionately suffer from climate threats, industrial pollution and failing infrastructure, often as a result of economic collapse or the machinations of systemic racism. The EPA’s Greenhouse Gas Reduction Fund includes $7 billion in “competitive grants” to help “low-income and disadvantaged communities” deploy or benefit from zero-emission energy projects, including community microgrids and rooftop solar panels that can reduce carbon emissions and provide electricity during hurricanes and other disasters.
“At the end of the day, we’re all trying to accomplish the same goals, which is to stimulate and accelerate the adoption of climate technology on the ground, in our community so that it can create real impact,” said Damon Burns, CEO of Finance New Orleans, a company that provides “green mortgages” and financing for “sustainable developers” in southern Louisiana. “That’s what’s unique about the green bank network; everybody is interested in building up the industry. This is not a competitive thing.”
However, there will certainly be competition for the $20 billion in green bank funding vaguely earmarked by the EPA for “eligible entities” that provide “financial and technical assistance” to projects that reduce or avoid greenhouse gas emissions.
Although $8 billion is set aside for reducing emissions in low-income communities, this money would not flow directly into community-based projects. Instead, a community solar nonprofit or a private business working to reduce its carbon footprint would receive cheap loans or other “creative” financing solutions from the green bank or its network of beneficiaries. For example, a green bank could provide tailored financing to help a private delivery company purchase electric vehicles.
Jones said green banking encourages investments in “false solutions” that will not prevent global warming, such as the purchasing of carbon offsets, which allow private companies to claim a reduction in their carbon emissions by buying parcels of land or planting trees, for example.
“We know how to reduce greenhouse gas emissions: Build renewables and shutdown fossil fuels,” Jones said. “Profiting off of false solutions such as biogas or offsets will not reduce emissions.”
The idea behind a green bank is to give emission-reducing projects and industries a financial leg up so they can attract private investors who would otherwise not be interested in a risky solar start-up or a windmill project in a low-income area. Proponents point to examples set by existing state and local green banks, which help finance local solar projects that are too small or risky to attract traditional investors. Once those solar projects pay back their low-interest loans, building credit in the process, the green bank can then recycle the money into financing for a different project.
By 2020, existing green banks across 22 states leveraged $2 billion in bank funding to generate $7 billion in investment capital for clean energy and efficiency projects, according to the Coalition for Green Capital.
Critics see short-term benefits and long-term pitfalls in green banking. Under this model, public dollars are leveraged to reduce risk for private capitalists, who are then rewarded with profits for “doing the right thing” about climate change, according to Adrienne Buller, author of The Value of a Whale: On the Illusions of Green Capitalism. In a Q&A published in the Los Angeles Review of Books, Buller succinctly articulated her critique of green banking, saying:
Without question, this strategy can direct urgently needed new investment flows toward certain low-carbon alternatives. But it has clear limitations. Ultimately, it’s a program based on the idea that to be worth pursuing, any low-carbon infrastructure should and will be more profitable than fossil fuel-driven alternatives. Moreover, this is supposedly not only necessary but also desirable. In truth, there are lots of areas in which, with respect to both necessity and desirability, the optimal systems and solutions that can deliver a decarbonized future are not based around maximum profit — like, for instance, replacing a culture of mass private vehicle ownership with affordable and accessible public modes of transport.
The question that hangs over the Inflation Reduction Act is to what extent we’re willing to accept the compromise of handing control over investment in our collective decarbonized future to a handful of investment giants because we are desperate enough to get something — anything — that can cut through the quagmire of US climate politics.
The green bank is a market-driven solution to the climate crisis, or at least it is designed to drive energy and tech markets in a certain direction. While mainstream climate activists may applaud the focus on “low-income” and “disadvantaged” communities, much of the excitement around green banking is coming from large environmental groups allied with labor unions and green tech entrepreneurs. A large chunk of this federal investment will not flow into the coffers of local governments, environmental watchdogs and nonprofits — at least not directly. Instead, billions of federal dollars will cycle through nonprofit financial institutions and their partners, in hopes of drawing private investments in clean tech.
The EPA is currently seeking public comments and holding listening sessions with activists, community members and financial stakeholders on the Greenhouse Gas Reduction Fund. What the national green banking system will ultimately look like remains to be seen, and plenty of questions remain about whether investments in clean energy and critical local infrastructure will reach the communities that need them most.