Smart cities and their citizens around the world are now raising the beacon of war against climate change. But in order to win, the greenhouse gas emissions they have to be a near-zero figure, towards mid-century. While there are multiple hurdles coming in the way, finance is one of the major challenges.
UN’s Intergovernmental Panel on Climate Change (IPCC), revealed recently, that to tackle the climate crisis, the world will have to spend $2.4 trillion each year until 2035. And in doing so, it is predicted that economies across the globe will have to undergo a massive economic transformation. As no economy is still fully on course, governments cannot afford a laissez-faire approach to keep up the transformation.
There is an urgent need for public investment that pushes commercial deployment of clean, green, and efficient energy. However, considering the political reality, public budgets will always be under pressure. Therefore, it is required that effective public investment is directed towards targeted markets to meet the challenge. There is a proven track record, that public financial institutions (commercially-minded) with a low-carbon mandate can bring the private sector into action. They can implement a risk-tolerant public capital that is able to attract investment to low-carbon infrastructure in a manner that drives private capital into innovative markets.
And this is how the concept of ‘green bank’ is spreading in different smart cities across the globe. Green banks, basically being public or semi-public, leverage innovative financing strategies and market development tools in collaboration with the private lending companies to catalyse the deployment of renewable energy technologies. For the first time, the concept came to fruition, in 2009 in the US. Today, the country owns 14 green banks at the city, state, and county level.
Keep reading to know how green banks have been able to fund clean energy in different parts of the globe.
Green Bank In The US
The US got its first state-level green bank in Connecticut in 2011, which was able to mobilise over $1.6 billion of investment into clean energy economy in the region at about a 7:1 ratio of private to public funds.
Be it at the city, county or state level, or at the national level, the core value provided by green banks is the same, as per Jeffrey Schub, executive director at the Coalition for Green Capital (CGC). He continues saying that public funds available for investment in green energy projects are limited, and so policy-makers want to enhance the impact of each dollar of investment. Green banks are able to achieve this in a unique manner by mixing public, private and philanthropic investment together in a clean energy project that would otherwise strive to attract capital.
CGC has worked to help establish several green banks around the world including Connecticut and Washington, DC.
Washington, DC Mayor, Muriel Bowser, passed the District’s Green Finance Authority Establishment Act, officially which made the city to have the first government-funded green bank in the US. So far, the bank is being capitalised with $105 million of public funds, when the city would need over $2 billion to accomplish the green goals.
Mayor Bowser has committed to zero greenhouse gas emissions by 2050 and green bank is one of the best tools to shape reality.
DC Green Bank Goals
While comparatively being in the early stage, DC Green Bank has laid out its goals. It aims at attracting private capital at a minimum ratio of five private dollars to one public dollar. It will use bonding authority to improve capacity, recapitalise finds and speed up lending. Further, it also intends to make the institution a go-to resource for the residents, small business owners and commercial developers interested in clean energy deployment.
Almost three-quarters of Washington, DC’s emissions come from buildings. Hence, the green bank’s major focus is to push existing buildings and new constructions towards net-zero. In the effort, the bank will measure the performance of every building and initiate an array of projects that require funding and additional resources.
The Strides In Australia
Australia too has its green bank called ‘The Clean Energy Finance Corporation (CEFC) which has set new records in the number and value of investment commitment between the years 2017 and 2018. The institution has been successful in delivering increased focus on some of the country’s toughest carbon emission challenges via investment partnerships, innovative projects, and technologies.
The country has made 39 new direct investments worth AUD 2.3 billion in the clean energy sector including renewable energy, transport, waste-related projects and energy efficiency. With this, the CEFC investment portfolio grew to AUD 5.3 billion with an estimated carbon abatement of 10.8 Mt CO2 e per year.
The green bank in Australia has proved to be the leading investor in the nation’s renewable energy sector and with this, it has now extended its reach into emission reduction practices in infrastructure, property, agriculture, etc.
One of the biggest clean energy projects in Australia is funded by the green bank. It is a fully integrated wind, solar, and battery project that is anticipated to serve lifetime emissions abatement of over 3 million tonnes. The battery component is providing grid stability for local communities by relieving demand on long transmission lines.
The Green Story Of Japan
The green bank of Japan, better known as the ‘Green Finance Organisation (GFO) is constantly investing in local clean energy projects that include wind, biogas, hydroelectric and other technologies. For over six months, GFO has committed to investing in five projects, equalling the number to 32. Out of the projects that it has invested in 24 of the renewable energy power stations are already operational. Until now, the organisation has committed to over USD 100 million and these have mobilised about 10 times the amount in total project value.
Furthermore, the Ministry of the Environment in Japan has been working to encourage the issuance of green bonds in Japan and in the effort, it has published its Green Bond Guidelines in March 2017. Reflecting its role, the green bank has revealed that it will use a budget of about USD 6 million to subsidise the issuance costs of green bonds.
The UK In The Same Line
UK’s Green Investment Group (the national green bank), has been capable of investing GBP 1.6 billion into green infrastructure projects over the past year. Apart from this, it is also supported 10 new green transactions, expanded the GIG brand from the UK to Europe, North America and Asia.
It also arranged one of the largest and longest green power purchase agreements in the world. This wind farm project in Northern Sweden was initiated in mid-2016 and is the biggest of its kind in Europe. Besides, it has also extended its capacity into development stage investing and established new Energy Solutions and advisory services activity.
Apart from these green banks, there are similar movements taking place in India, South Africa, Mexico, Chile, Colombia, Indonesia, China and Rwanda. Although at present, the global investments are short of what cities need to beat climate change, green banks situated in different smart cities have been recognised to have a powerful potential to provide the funds required in the run.