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*Congress Should Charter the Green Bank*

[image: user-pic]By Reed
Hundt<http://tpmcafe.talkingpointsmemo.com/profile/rehundt>- June 3,
2009, 3:15PM

At least since Adam Smith's era, every nation in the world has used low
cost, government supported loans to help pay for critical projects necessary
for economic development. This is how in the United States we built the Erie
Canal, fought wars, and constructed schools. And now we need a Green Bank to
support low cost loans that steadily over twenty years, starting right away,
will finance the conversion of America's energy industry from carbon to
clean.

That is why more than fifty businesses have come together to form the
Coalition for the Green Bank, of which I am the co-chairman. We have
received expressions of support from many business lobbies as well as the
Center for American Progress and environmental groups. Congressman Chris Van
Hollen proposes to charter our Green Bank through legislation he has
introduced in the House Ways and Means Committee. Our immediate goal is to
have that Committee pass the Van Hollen Green Bank Act either as a
standalone measure or as an amendment to the monumental Waxman-Markey bill
passed by the House Energy and Commerce Committee and now referred to Ways
and Means.

Our Coalition also supports the Energy and Commerce Committee for including
Congressman Jay Inslee's version of the Green Bank in its legislation, and
we honor Senator Jeff Bingaman for including a green bank in his tremendous
energy legislation.

Nothing is more critical for our children than bringing an end to the
continuing destruction of our environment by carbon dioxide, and Green Bank
financing would take American emissions levels below the targets we hope to
see the world adopt in the Copenhagen discussions at the end of the year.
But even in the immediate present no single action can give us more of the
new jobs that fight the dire recession than massive and steady investment in
alternative energy generation and distribution. Green Bank financing will
produce one to two million additional jobs for the next two decades-- this
is the amount by which the work force will have permanently increased.

Nor can we take any wiser steps toward a sound foreign policy than moving
our energy industry from dependence on foreign oil and gas to an independent
foundation in sun, wind, tides and other renewable sources. We estimate
national security savings of $500 billion a year when an electric
transportation system is achieved. Jobs, national security, and - of course
- saving the environment from catastrophe are three targets pierced by the
sharp-pointed arrow of the Green Bank.

The goal of any nation's energy policy is abundant, cheap and safe power,
heating, cooling and lighting. The means to that goal must be (1) use of
clean, not carbon-based, energy generation coupled with (2) low cost
generation and (3) efficient energy use. It is not necessary to raise the
price of electricity generated by clean energy in order to achieve these
goals.

Similarly, in the early nineties, our national goal was widespread, cheap
communications service. Thanks to the new technologies of the capital
Internet and cellular, investors put more than $850 billion into new
networks between 1997 and 2007. But in these markets, the economy enjoyed
rapidly growing demand for new services. By contrast, the first obstacle we
face in the Great Conversion from carbon to clean is the lack of new demand
for electricity. Because of the bad news of economic downturn and the good
news of government-stimulated efficiency measures, business and residential
customers are not demanding electricity in volumes that require new
capacity. Current projections show that the carbon-based electricity
generation industry of today does not need much in the way of new supply
sources until perhaps 2015 to2016. By contrast, the growing economies of
China, India and Southeast Asia require new energy sources, and we need them
to agree by treaty and trade deals to use clean energy.

But meanwhile back in the USA the government needs to oblige utilities and
other users to buy clean energy. This is the purpose of the Congressional
proposals of Renewable Electricity Standards (RES) - a requirement to buy
clean energy. And to encourage firms to convert from carbon to clean
Congress should also pass the Carbon Caps contained in Waxman-Markey. Under
RES and Caps, businesses will have to buy clean energy and phase out
polluting energy sources - and the Green Bank will assure that the
shareholders of these firms and the consumers who buy from them will not pay
a higher price for energy as a result of these measures. It is reasonable to
aim at creating new clean generation capacity amounting to 20 to 30
Gigawatts a year-- which is about 2-3% of existing national capacity. As new
clean capacity increases beyond what the current demand requires, existing
polluting capacity would be phased out-- while the Bank holds shareholders
harmless. There is no need to punish the companies that should lead from
best conversion from Carbon to Clean.

Moreover, the Green Bank will attract private sector investment in clean
energy. The Bank should provide $500 billion in equity investment. This
trillion dollars-- over twenty years-- will suffice to save our economy and
environment.

Government does not need to buy or bail out existing energy companies. It
does not need to become a principal equity investor in alternative energy.
It needs only to assure that loans are made to willing private investors and
that these loans are made at very low interest rates, so that consumers
don't have to pay higher prices in order to persuade understandably anxious
investors to put their money into wind, solar, geothermal, and the other
clean energy facilities that will put us on the path to new jobs, secure
energy, and a safe environment.

Nor will the Green Bank cost taxpayers money over time. If the Treasury
funds the Green Bank with only one to two percent of the amount of bonds it
will sell over the next twelve months, that fifty billion dollars in cash on
the clean balance sheet of Bank will underwrite debt financing that will
have a very low default rate. The reason is that the Bank will finance only
projects where the demand is guaranteed and the revenue sure to come in -
because RES and Caps will require the utilities to switch from carbon to
clean.

And the Bank will not replace private financing. Instead it will be a
nonprofit wholesale bank that facilitates sensible, safe, reliable lending
by retail banks making a healthy, reasonable profit on this activity. We
expect that the Green Bank will generate hundreds of millions of dollars of
profitable, predictable revenue for retail banks- which is exactly the sort
of stimulus to lending that the economy needs. In order to improve our
economy now, obtain energy security later, and save our environment forever,
the Green Bank should be chartered by an act of Congress - this summer.


Eric D. Schwerin

Rosemont Seneca Partners, LLC

1010 Wisconsin Ave., NW

Suite 705

Washington, DC 20007

(202) 333-1880

[email protected] <[email protected]>

*P** **Consider the environment before printing this email.**