The IRA's green bank
Everyone's aflutter about the Inflation Reduction Act. Seemingly out of nowhere, yacht-owner and coal baron President Joe Manchin announced that he was, in fact, supportive of a version of dark brandon President Joe Biden's climate agenda. Word on the street is that Chris Coons got in Manchin's ear and told him everyone thought he was evil, but also Manchin was maybe playing Mitch McConnell by working with him to pass the CHIPS act (China bad!), taking away the minority leader's legislative negotiating leverage so Manchin could push through some watered (oiled?)-down climate legislation.
However it happened, it seems to be actually happening with famous not-Republican Krysten Sinema recently giving a thumbs up and the persnickety senate parliamentarian waving it through. There's been a flurry of analysis of the bill on the left (consensus seems to be that this is good but could be much better) and I've been watching the feeds to see if anything might be available in the legislation to help school districts interested in greening their facilities and infrastructure.
The question I'm writing about here is based on a possible lead along those lines: the bill creates something called the Greenhouse Gas Reduction Fund (GGRF), otherwise known as the first national green bank in United States history. I'm wondering whether/how districts could take advantage of it.
Coddling private capital?
On the one hand, a green bank is what happens when you can't get capitalists to care about the ecological havoc they're wreaking. Buying and selling everything doesn't tend to reduce carbon emissions. That's because carbon emissions are both extremely profitable and the material basis upon which profit-making relies. The key concept here is risk. People in power haven't wanted to take the risk of making green stuff that doesn't emit carbon--technologies, tools, supplies, materials, machines, etc--because what if they lose money doing it? Their whole thing is making money, so they don't want to do something that wouldn't make money. Reducing carbon emissions hasn't been a big money-maker, meaning it's too risky to ensure the climate remains habitable! Lol.
But certain members of the ruling class (like former FCC chair Reed Hundt) realized climate change is a big problem have tried to find workarounds. One idea was to use government funds to make capitalists feel more comfortable producing green stuff. Public finance becomes a de-risking tool because, if capitalists know that there's public money to cushion them if they lose their private money doing green business, then they'll feel more comfortable helping to not ruin the world. The green bank is a managed pool of public capital that coddles private capital so it feels more comfortable not ruining the planet. When reading about green banks, I see a lot of language about "accelerating" the "deployment" of green technologies.
Gramsci said we need to have a pessimism of the intellect and an optimism of the will. My take above is a pessimism-of-the-intellect view on green banks. On the other hand, keeping an optimism of the will, we have to figure out how to create institutions that get things going in the right direction from within the existing economy. If we understand non-reformist reforms as the kind of policies we can make right now that we wouldn't want to get rid of in the transition to socialism, then green banks might actually be non-reformist reforms. We'll want green banks in the future. Maybe not these exact green banks, but we'll want some form of them.
Dialectically speaking, maybe the green bank is like a parent encouraging their baby to come into the pool for the first time. The baby is afraid. It's risky! They stand at the edge, wondering if they should jump. The parent opens their arms and says "Don't worry, I've got you!" The green bank is the parent and the capitalists are the babies who are only used to ruining the planet.
The idea has been around for awhile, bubbling up through the byzantine layers of the United States repressive apparatuses. My home state of Connecticut had the first state-level green bank in the country, which coaxed about $500 million of green production that might not have otherwise existed. Then Montgomery County, Maryland had a green bank at the local level. New York has the biggest Green Bank in the country, while Hawaii's green infrastructure authority, Rhode Island's infrastructure bank, and California's infrastructure and development bank all do this too.
After a few failed attempts to start a national green bank--starting in 2009 after the financial crisis, when it couldn't get through the senate, and then other attempts throughout the Obama years--the recent Manchinian moment provided an opportunity: the GGRF.
The Griffle: details
On a trip visiting my in-laws with the toddler, we found a shelf of old British children's books featuring a character called the Griffle. He's an upright lion-like creature with rabbit ears, like a mini-griffin. Importantly, he's green. Looking at the Greenhouse Gas Reduction Fund's acronym (GGRF), it seems pretty obvious that the Griffle should be it's mascot.
Anyway, the GGRF is a national pool of public capital meant to coddle private capital so it doesn't ruin the planet. It's the brainchild of a little cabal of ecologically-minded ruling class people. Chief among them is Hundt, CEO of the Coalition for Green Capital, a nonprofit organization that incubates green banks. I think the Green Bank Network was involved too. Green New Deal champion Ed Markey and Maryland Senator Chris VanHollen were in on it too. The section of the IRA that creates the GGRF--section 134 from what I can see--was based on their legislative contributions to the original Build Back Better legislation. It's nice to see something that made it in, unlike the thing I helped with, the Green New Deal for Schools.
I don't mean to be entirely sour grapes about it. I bring up the GND for Schools to see whether the GGRF could be a financing mechanism for school districts to green their facilities. Let's look at the law itself. There's about $27 billion for the fund. Again, that money is supposed to encourage capitalists to go green. The big question is whether a school district could be an eligible borrower or, what's more likely, whether firms that are eligible borrowers might be incentivized to work with school districts.
Here's the first big passage:
$7,000,000,000, to remain available until September 30, 2024, to make grants, on a competitive basis and beginning not later than 180 calendar days after the date of enactment of this section, to States, municipalities, Tribal governments, and eligible recipients for the purposes of providing grants, loans, or other forms of financial assistance, as well as technical assistance, to enable low-income and disadvantaged communities to deploy or benefit from zero-emission technologies, including distributed technologies on residential rooftops, and to carry out other greenhouse gas emission reduction activities, as determined appropriate by the Administrator in accordance with this section;
Notice that word deploy in there; that's green bank lingo. This opening $7 billion is for existing green banks. According to Bloomberg, that $7 billion is needed because, as Reed Hundt says, some of them “are all woefully short of capital.” Apparently, "those banks are wrestling with an estimated $21 billion project backlog because of underfunding." So juice for the existing green banks like in CT, HI, CA, NY, and RI! This money can't go to school districts directly since districts aren't banks. But I should note that if there are state laws in place that help school districts do green infrastructure capital expenditure (like Pennsylvania), and that state has a green bank (not like Pennsylvania), then this money could help.
But there's $20 billion left. "The $20 billion remainder would be set aside for federal investments. Forty percent of that—$8 billion—is to be focused on benefiting disadvantaged communities," while the other $11.9 billion goes to "general assistance." In this case the federal government becomes the green bank rather than helping out existing state banks. Could school districts be eligible recipients of loans from this national green bank? Here's that section:
‘‘(1) ELIGIBLE RECIPIENT.—The term ‘eligible recipient’ means a nonprofit organization that— ‘‘(A) is designed to provide capital, including by leveraging private capital, and other forms of financial assistance for the rapid deployment of low- and zero-emission products, technologies, and services; ‘(B) does not take deposits other than deposits from repayments and other revenue received from financial assistance provided using grant funds under this section; ‘‘(C) is funded by public or charitable contributions; and ‘‘(D) invests in or finances projects alone or in conjunction with other investors.
From the bolded phrases, it looks like the kind of places that might be eligible for the federal green bank are bank-like entities, not governments themselves. These entities provide capital, take deposits, are funded through contributions, and invest/finance projects. They're not governments. What kind of entity is this exactly? Who are they imagining as the audience here? I'm thinking of economic and development authorities, or public financial bodies like infrastructure banks that haven't developed their own green banks. Given that it's Reed Hundt's project, I wouldn't be surprised is the GGRF is just a nationalized green bank incubator.
So even though it's a bank, and school districts borrow from banks, the GGRF is not the kind of thing that school districts borrow from directly. Districts don't provide capital, they spend capital. They don't take deposits or contributions, they bring in tax revenues. They don't invest or finance projects, they are invested in and financed by others.
So what to make of this? Yakov Feygin, an economist whose work I really like and who helped with the green bank, told me that the green bank is incorporated like the public broadcasting corporation and that there's an initiative underway to let existing state-level green banks lend outside state boundaries via something called "inclusive prosperity capital." If that's the case, then school districts could go directly to this coalition of state green banks for their loans. One would hope the terms and conditions are generous, but knowing Feygin (and the PBC reference) I'd bet that the odds are good on that front.
If that doesn't work out, or it turns out to be more complicated, I can think of a few ways school districts might take advantage of this money, particularly poor school districts.
Doing the green deal
Let's say you're the School District of Philadelphia serving the biggest poor city in the country and you have a horrific $5 billion deferred maintenance backlog on your buildings, but you have a pretty great record of using existing laws to finance green facilities projects that reduce the carbon your school buildings emit. Because of the GGRF funds, you could do a big green bond deal. I see two possibilities here.
First, you could partner with the Pennsylvania Authority for Industrial Development (PAID) or the Commonwealth Financial Authority (CFA), who take out loans and invest in public projects and are funded by the public. These entities could go directly to the GGRF program administrator, who has a pool of $8 billion specifically for disadvantaged communities to benefit from green infrastructure. The administrator has $30 million budget to facilitate the use of GGRF funds. If there's an organizational architecture for lending directly out of the GGRF, then maybe that could work? I think that's what that $30 million budget would be for? If so, then the loan could happen through the federal government, hopefully with reduced fees and interest rate. I wonder whether PAID or CFA take deposits though? I'll have to check on that.
Second, the school district could go to the municipal bond market for a green bond and work with a public banking entity of some kind that meets the criteria set out above (provides capital, funded by public, doesn't take deposits other than from GGRF). Banks are the key player in bond deals. This could be an entity under the newly-created Philadelphia Public Financial Authority, for instance. I wonder if the newly-funded Maintenance Project Grant Program would qualify? Or even the unfunded PlanCon? Do public spending programs qualify as things that 'invest' and get 'deposits' if those investments are tax revenues and the investments are tax grants?
But Philadelphia is a very particular case because it has to operate within the confines of Pennsylvania institutions. Other states might not have these same barriers. For instance, Virginia's Public School Authority could potentially go to the GGRF. Other states have school infrastructure authorities as well, like Massachusetts and Wyoming. They would have to set up programs specifically for the GGRF to take advantage of them to meet that criterion about not taking other deposits, and that might take state legislation, which takes time.
Anyway, maybe this is possible? I don't know. School districts tend to get left behind in these initiatives precisely around issues like eligibility, like that time I thought a Department of Energy loan program could be helpful. I'm going to have some conversations with experts and see. It's feeling like maybe something could happen!