Couldn’t agree more that there is not enough thinking being done on how the various policies being discussed (in On/Cda/NA) would impact private investment/capital flows. The operating assumption seems to be that if the right policies are in place (inasmuch as those reflect the prevailing economic theories), then markets will follow. But that isn’t always the case.

But a couple of points to consider: first, the problem may be as much non-economic as it is actual access to capital. In most cases, the stumbling block for potential investors will not be the actual financials of a given project or project developer, but the continued existence of political and regulatory risk attached to any project in this sector. An incentive, as attractive as it is, doesn’t really guarantee grid access. And although I recognize that the Green Energy Act is meant to address this, there is obviously a great deal of inertia in the system. How would a Green Bank address those issues?

The second point is in relation to a cap-and-trade system and the role that carbon finance can eventually play in generating the kind of investment flows we want to see. This is an area where we really don’t know what the potential is, in terms of dollars invested. But a potential downside to a Green Bank, with a deepening and broadening of public support tools for renewables, has the potential to crowd out potential carbon finance streams (through the principle of rendering ineligible for offsets those projects that have used public support). And if it were a straight substitution, in terms of potential investment dollars, then there would not be an issue. But an attractive feature of carbon markets/carbon finance (which public support does not share) is the secondary and tertiary markets that would get created (yes…derivatives), and the substantial multiplier those promise in terms of financing.

Finally, a word of support of a Green Bank from a different perspective: the absolute necessity to think about some of the government/institutional needs for climate policy…another area where we have not done enough thinking.

With that, a pitch: At Sustainable Prosperity, these are all issues we plan on examining much more closely in the months/years ahead. I’d like to sit down with you at some point to share thoughts on policy/research gaps, and how SP might collaborate with you on getting some of this work out.

Alex Wood