'Green' Bonds Now
We know that carbon emissions are an emergency. They need to go down a lot and fast. We all know the Green New Deal and the Green Stimulus and other infrastructure projects are necessary, but somehow also out of reach. One of the things that makes them distant is the question of finance. Where’s the money gonna come from?
You might think the Federal Reserve and Treasury could hit some buttons on the money machine and take care of it. They’re busy trying to fight a zombie infestation in the large corporate sector right now.
But here’s a demand that I think would be fun: congress should get the Fed to buy $1 trillion of ‘green’ bonds for the new infrastructure bill. What would this mean?
‘Green’ bonds are one of the main ways ‘green’ stuff gets financed. Here’s a definition. And here’s an overview to start. They’re sort of legit (but not without issues).
More Basics
Remember that finance is how you pay for budgets: where do we get the money to pay for labor, space, machines, materials, etc.
One of the main ways people finance things is by selling bonds, or asking for loans and promising lenders that they’ll pay back the amount plus interest later. It’s good business: bonds are a $100 trillion market globally.
Green bonds are loans made to people who do ‘green’ stuff. There are also ‘social’, ‘sustainability’, and even ‘blue’ bonds that finance related projects.
What counts as ‘green’? There are standards, but enforcement isn’t great. China, who issues (gets) a lot of green bonds, counts coal plants as green. Poland does the same. But those could be outliers and apparently China is working to ‘harmonize’ their standards with the EU, one of the biggest issuers.
According to the Environmental Finance Bond Database, the total market for all those goodhearted bonds is $812.91Bn. ‘Green’ bonds are only $257.7 bn. Pretty small when you think about the total bond market being $100 trillion.
Still, the green bond market is growing at a pretty fast clip. 51% growth between 2017-2019. Here’s a summary of the numbers from 2019.
You can also track who issues these bonds through the EFBD: . All our favorites are there! JP Morgan, Goldman Sachs, Barclays, Citi…But also governments, like France, Lithuania, US, etc. I applied for a membership so I can get more info, but was told they’re getting too many applications so I have to wait!
But yeah, if the US government decided to go balls out for ‘green’ bonds, we could make a political statement that this is the market to be in, get more people buying and selling them, and funding green infrastructure to reduce emissions. The interest rate could go down, more green projects get finance, emissions decrease.
Fiddling while the planet burns?
The always irascible Yves Smith wrote recently that green bonds are “fiddling while the planet burns.” The argument is that, first, the infrastructure projects funded by the bonds still rely on heavy emitters like electric grids and transportation systems.
Second, trusting capitalists with not burning the planet is like trusting a con man with your life savings. There’s rampant greenwashing, as I mentioned, but more generally Smith says you can’t use private investment for the public good. “Cute basis points” aren’t enough to protect our only habitat.
I think the response to Smith is that this is a terrain of struggle, and the goal is move the ruling class. Moving the ruling requires contradictory pushes, simultaneous actions, and a big push for ‘green’ bonds could sway them in a positive direction. If they only listen to financespeak, why not push on it and see how far it goes?
And a BIG push in this direction could have an outsized effect. Of course smith is right, but not right enough to not try…