The Green New Deal is a plan to tackle the connected crises of climate change and inequality. One major goal of the Green New Deal is to achieve 100% decarbonized energy. But, far beyond reducing carbon, a Green New Deal would invest in projects to green the economy that create unionized, family-sustaining wages in sectors old and new, break up corporate monopoly power, and provide all communities equitable access to things like clean air and water. In sum, it is a major mobilization towards a different type of economy.
To do so within the timeframe we have to work with, the Green New Deal must be ambitious enough to construct entirely new institutions, reorganize sectors of our economy, and rigorously rewrite the rules of the game to end the extractive economy. To achieve the dual mission of this massive federal investment plan, the Green New Deal needs to invest in projects that build energy democracy across the United States.
The policy interventions featured in this series:
- Expanded community choice aggregation
- Community Ownership of Power Administration
- Debt cancellation for rural cooperatives
- Green investment bank
- Redesigned renewable incentives
What is energy democracy?
Our current energy system is run by and for fossil fuel interests. Oil and gas companies like Chevron or ExxonMobil, and large utilities like the Southern Company and Duke, have used their political and economic power to continue to run our energy system off fossil fuels because that’s how they make their money. Generally, where there have been investments in renewable energy, our current markets and financing favor large, corporate entities and centralized clean energy projects that fail to enable independence from fossil fuel power plants or monopoly control and that rarely spread the benefit to the larger community. This model for clean energy can centralize clean energy wealth and raise costs for everyday households, rather than distributing wealth, lowering costs, and improving quality of life for communities as the Green New Deal seeks to achieve.Rooted in climate justice, energy democracy aims to distribute ownership and control to all—particularly those most subjugated by our current economic system.
Energy democracy seeks to shift this balance of power in more ways than one. It seeks to build an energy future based on democratically governed, community-controlled renewable energy. Rooted in climate justice, it aims to distribute ownership and control to all—particularly those most subjugated by our current economic system—so that the next energy system provides affordable, clean energy for all that builds up the power of communities instead of polluting or profiting off of them.
There are examples across the country of energy democracy in action—from building community-owned renewable energy in neighborhoods like Sunset Park in New York City to the work PUSH Buffalo has done to build vibrant, efficient affordable housing.
Why do we need the Green New Deal to fuel energy democracy?
While there are thriving examples of energy democracy across the country and around the world, financing and pro-monopoly regulatory barriers have been a major problem across the board. Financial flows historically haven’t favored renewable energy projects, let alone projects that are collectively owned or that operate differently from a “usual” business, while regulations have explicitly or accidentally limited the ability of community-based alternatives to take hold.
Through the Green New Deal, we have a major opportunity to expand federal financing in a way that builds an equitable green economy and open up options for communities to take the lead. In fact, by putting public funds, technical expertise, and the legal rights to create local clean energy into the hands of cooperatives, public institutions, and social enterprises, we can ensure that the benefits of the clean energy transition actually accrue to our communities, instead of Wall Street firms or large corporations.
In this series, we put forward important policies that, as part of the Green New Deal, could be transformational in fueling energy democracy—providing access, ownership, and control to those largely left out of the market. This is an evolving compilation and is by no means a comprehensive list of the policy or financial interventions needed to embed energy democracy into a Green New Deal. The policies highlighted here serve instead as some of the key policy building blocks that will enable a more equitable and resilient energy system.
This growing compilation of policy proposals for energy democracy in a Green New Deal have been put together in conjunction with Cooperative Energy Futures and The Democracy Collaborative.
A federal green investment bank could support energy democracy by directly funding community-based enterprises and low-income access to renewable energy and energy efficiency. ENVIRONMENT & ENERGY, MONEY & BANKING January 29, 2020
Wall Street is financing climate destruction. Private banks’ business model values short-term, high-profit projects, even if that comes at the cost of the climate. When they do invest in the green transition, they generally focus their lending on large-scale projects designed by big companies, not community-based initiatives. The Green New Deal could shift financing flows to communities by creating a national green investment bank (GIB). In particular, a green investment bank could be instrumental in funding energy democracy projects by building an important federal program that directly funded community-based enterprises and low-income access to renewable energy and energy efficiency. This federal green investment bank could work alongside, and help to capitalize, a thriving cohort of regional and local banks to spur the transition across the United States and react to their local communities.
The problem. The Green New Deal calls for a transition towards a cleaner and more equitable energy system. This will take a massive system overhaul, which means we need access to major financing and investment. However, private banks, which make up much of the US financial system, have not shown they are up to the task of investing in the future we need.
33 private banks have provided a combined $1.9 trillion to fossil fuel projects since the adoption of the Paris Climate Accord in 2016.1 In direct contrast, those same banks only contributed around $230 billion to climate finance in 2016.2
The costs of the climate crisis—fueled and funded by private banks—have been disproportionately imposed upon workers, women, communities of color, and those most marginalized in society. In a Green New Deal, these are the communities that deserve to be able to build and own that new future. But even when Wall Street does invest in the energy transition, those funds usually go to large, high-credit corporations that often do little to distribute the benefits within the local community. This could further expand the gulf between the haves and the have-nots, and continue the historical pattern of redlining by private banks—from housing to student to business loans—in the emerging sector of climate finance. In instances when community-based or public projects have been able to secure loans from these banks, the steep interest (sometimes in the double digits) makes it a highly extractive experience.3
Right now, Wall Street is failing the climate with its focus on short-term profits and high returns, which favors dramatically higher investment levels in fossil fuels than our planet can support. Meanwhile, their climate solution investments are most likely to benefit the already-wealthy, rather than those most hit by the effects of climate change.
Answer: A green investment bank: Nonextractive financing at the scale & speed needed for a GND
The Green New Deal could create a federal green investment bank (GIB) chartered on inherently different motives from private lending: ensuring that financing is just, democratic, and decarbonized. As a publicly owned bank, the GIB would be more interested in keeping its capital consistent than maximizing profit, allowing it to refocus financial flows to public infrastructure investment and community-based needs. A green investment bank would likely hit every sector of our economy—transit, water, housing, and so much more—so that we redesign our systems for living in a sustainable future.
There is more than enough evidence that public banks can be successful with low rates of return. For example, German investment banks earn less than a third of a percent return on assets (ROA) and the Nordic Investment Bank earns just over a half a percent ROA, while still operating effectively. Across the world, public banking has proven a key investor in the energy transition, already investing dramatically more than their private counterparts.4
This new GIB could deploy funds for the massive amount of work we need for a Green New Deal in a number of ways, including low- to no-interest loans, targeted grants, or direct ownership stakes in projects (building public-public or public-community collaborations). It could also operate as a connector between federal financing and local investments, liaising via a network of local public or community banks, or facilitate directed funds from third parties (official donors or green investors). As a national hub, the GIB could help capitalize new local public banks, as well as deploy federal financing at affordable rates to the local public banks, creating a system that builds across different scales while being able to place decision-making at local levels.5
The GIB would likely hit every sector of our economy—transit, water, housing, and so much more—so that we redesign our systems for living in a sustainable future. It could also be integral in opening up massive investment in energy democracy projects, for an energy transition that doesn’t redline low-income neighborhoods or communities of color. Such an Energy Democracy Financing Program could specifically focus on serving historically disinvested community members and supporting community or public ownership models through renewable or efficiency-based projects. The GIB and its local partner banks could target financing for renewable energy or efficiency projects that were either owned and/or benefited:
- Disinvested residents: People living in low-income census tracts, those enrolled in federal poverty assistance programs, renters who have largely been left out of energy ownership, or other indicators of disinvestment or displacement;
- Community enterprise: local enterprises that have historically been at a disadvantage including: women-owned or minority-owned businesses, cooperatives, social enterprises, or nonprofits such as churches or community centers;
- Public institutions: local government agencies, publicly- or cooperatively-owned utilities, and tribal governments.
The GIB would be fundamental in ensuring that we deploy nonextractive financing at the scale and speed we need for a Green New Deal. A core component of that bank’s vision should be to deploy resources to communities cut out of the renewable energy transition to date but have so much to gain.
Public banking in the US: Nonextractive financing at the scale & speed needed for a Green New Deal
For the US, public banking isn’t a foreign concept. The Reconstruction Finance Corporation (RFC), the first nationwide, federally owned investment bank, was formed in 1932 during the Great Depression and financed many of the New Deal initiatives. This federal bank stands as a clear historical example of the power of American public banks. Its original goal was to inject fresh liquidity into the banking sector, but it became a vital vehicle for the direct financing of many New Deal programs. It provided loans to a number of different sectors such as credit unions, railroads, farmers, and commercial businesses. The low returns on investments were used to offer more credit; by 1957, when the bank formally ended its operations, the bank had disbursed more than $40 billion in credit against its $500 million initial capitalization.
There is also a well-functioning state-level public bank that has operated effectively for the past 100 years: the Bank of North Dakota (BND). The state bank supports commerce and industry, while also partnering with local financial institutions to make business and education loans at better rates than its private counterparts. This has strengthened the ability of North Dakota’s community banks to compete against big, out-of-state banks, resulting in a strengthened North Dakota economy, particularly with regard to small business growth and job creation.6 Over the years, BND has sent about a third of a billion dollars into the state’s general fund, helping build schools, roads, and other important necessities for the state’s residents.7
This is part of a compilation of policy proposals for energy democracy in a Green New Deal assembled in conjunction with Cooperative Energy Futures and The Democracy Collaborative. It is largely based on a report by Thomas Marois and Ali Liza Gungen, A US green investment bank for all, which details the different components of a federal green investment bank.
1. Alison Kirsch, et al., “Banking on climate change: Fossil fuel finance report card 2019,” Rainforest Action Network, March 19, 2019, https://www.ran.org/bankingonclimatechange2019/
2.Padraig Oliver, Alex Clark, & Chavi Meattle, “Global climate finance: an updated view 2018,” Climate Policy Initiative, November 2018, https://climatepolicyinitiative.org/wp-content/uploads/2018/11/Global-Climate-Finance-_-An-Updated-View-2018.pdf
3.Eillie Anzilotti, “The one strategy that could finance the whole Green New Deal,” FastCompany, June 26, 2019, https://www.fastcompany.com/90364616/public-banking-can-finance-the-green-new-deal
4.Thomas Marois & Ali Riza Gungen, “A US green investment bank for all: democratized finance for a just transition,” The Next System Project, September 20, 2019, https://thenextsystem.org/green-investment-bank
5.Laura Basu, “The Washington Consensus is dead. But what should replace it?” Open Democracy, April 13, 2019, https://www.opendemocracy.net/en/oureconomy/washington-consensus-dead-what-should-replace-it/
6.Stacy Mitchell, “The Bank of North Dakota,” Institute for Local Self Reliance, accessed January 27, 2020, https://ilsr.org/rule/bank-of-north-dakota-2/
7.Josh Harkinson, “How the nation’s only state-owned bank became the envy of Wall Street, March 28, 2009, https://www.motherjones.com/politics/2009/03/how-nations-only-state-owned-bank-became-envy-wall-street/
As a major component of the Green New Deal’s energy strategy, this new federal agency would provide a catalytic tool for a new energy system based on local, community benefit.
There is an alternative to private monopoly utilities trapping communities in fossil fuel energy use or individual customer choice programs that may not shift the system fast enough or do so with equity.
ENVIRONMENT & ENERGY, January 29, 2020
Rural communities should not be left behind in the energy transition due to the entrenched interests of capital, particularly when the federal government holds a significant amount of the debt holding rural utilities back.
ENVIRONMENT & ENERGY, January 29, 2020
Instead of a tax credit that largely locks out those with the most to gain from the clean energy transition, a direct incentive would specifically incentivize local distributed renewable energy. ENVIRONMENT & ENERGY