Episode 89: Jeffrey Schub, Coalition for Green Capital
Today's guest is Jeffrey Schub, Executive Director at the Coalition for Green Capital (CGC).
CGC is an international 501(c)(3) nonprofit that finances clean energy investments in the U.S. and in developing nations through the incubation of “green banks.” These banks, in turn, invest in mission-driven projects that may not otherwise be able to access capital on the commercial market. In its decade-long history, CGC has deployed over $2 billion in clean energy investments throughout the world.
Jeff manages the organization and leads all business development, fundraising, and project management activities. His work in over a dozen states in the U.S. has led to green banks securing and investing hundreds of millions of dollars into clean energy. This episode cleared up some misconceptions that I had about what green banks are, their significance in addressing climate change, and how to go about establishing them. I hope you find this discussion as fascinating as I did!
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
In today's episode, we cover:
What is CGC and its mission as a nonprofit?
Why “green bank” is somewhat of a misnomer
The history of green banks in the U.S. both on the federal and state level
Where the CGC adds value in the clean tech financing ecosystem
Customers served by green banks
The role green banks have played in jump starting new markets for clean tech
Comparing green banks with for-profit investment firms (e.g. Ultra Capital, Generate Capital)
Sources of funding for CGC
Opportunities in the U.S. for green banks
How the U.S. Department of Energy loan program aids companies in getting through the commercialization gap
Jeffrey’s perspective on putting a price on carbon
Views on the impact of the 2020 presidential elections and the various positions of candidates
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Jason Jacobs: Hello everyone. This is Jason Jacobs, and welcome to my climate journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.
Today's guest is Jeffrey Schub the Executive Director of the Coalition for Green Capital or CGC. CGC is a nonprofit that incubates and supports local clean energy finance institutions or green banks to drive greater clean energy investment into existing and new markets in the U.S. and in developing countries. Jeff manages the organization and leads all business development, fundraising, and project management activities.
His work in over a dozen States in the U.S. has led to Greenbank securing and investing hundreds of millions of dollars in clean energy. This episode cleared up some misconceptions that I had about what green banks are or aren't, why they matter where we are, and getting them deployed, how to go about getting more of them deployed.
The role of federal versus state versus local government in making that happen and how you and I can help. I thought it was a great one and I'm excited for you to hear it. So Jeff Schub, welcome to the show.
Jeffrey Schub: Thanks so much. Great to be here.
Jason Jacobs: Great to be here with you as well. Remotely, I should say, which is a bummer because these are always a little nicer when you can do them in person, but if you want to keep doing them at the volume that I've been.
Cranking them out and you want to keep your carbon footprint low and and stay married. You need to do at least some of them are remote.
Jeffrey Schub: No kidding. That marriage one I definitely agree with.
Jason Jacobs: And see your kids grow up and sane stuff like that. So everything, everything's a balance, but I'm very happy to be here with you today.
Green banks are something that I've heard repeatedly over the course of this climate journey are very important, and I know a little bit, but I don't know much and I'm dying to know more, so this is a really timely episode for me.
Jeffrey Schub: Great. Yeah. If you ever want to learn about green banks, you're talking to the right person and the right organization.
This is what we live and breathe every day.
Jason Jacobs: So maybe let's just take it from the top. What is Coalition for Green Capital?
Jeffrey Schub: Coalition for Green Capital or a CGC is a 501c3 nonprofit. We've got people in DC, in New York and Colorado in Rwanda. We actually have a person in Vermont as well, so we're a team of 12 people scattered around the world, working exclusively on the issue of green banks for the purpose of accelerating investment to address climate change.
CGC was founded by Reed Hunt, the former chairman of the federal communications commission during the Clinton administration. Basically on the premise of how do we do in the energy sector? What he helped usher in, in the communication sector of driving trillions of dollars investment to completely transform a analog platform into a digital platform.
And so CGC was built around the idea of how do we use public dollars in ways that can drive market activity and specifically private investment into the deployment of technologies that already exist and can reduce greenhouse gas emissions, but are not deployed at the scale that are necessary due to lack of investment.
The idea came about while Reed was part of the Obama transition team in late 2008 early 2009 it was proposed as part of the stimulus package that would come right out of the gate and the beginning of the Obama administration and was not included in that package because they were really looking for things that were investment in shovel ready activity as we were told. And so Reed and Ken Berlin, the other cofounder of CGC decided to form an organization coming out of the transition that would specifically focus on trying to pass legislation in Congress to create such a federal green bank. And it had much, much more success than one can really contemplate.
And imagine today that an entity that was known as the clean energy deployment administration passed with a 51 to six vote in the house, energy and commerce committee as an amendment to the Waxman Markey cap and trade bill, and then pass the entire house. It has a bipartisan vote out of the Senate energy and natural resources committee, but it was not part of a cap and trade bill.
And so it did not pass. It did not become law. We did not get a federal green bank. CGC then turns its attention to state and local activity in the U.S. and now increasingly a nation level activity outside the U.S. in developing countries to create green banks until there was an opportunity to try this again at the federal level, which was really where we are today.
Jason Jacobs: What was the timeline on that when it didn't pass?
Jeffrey Schub: So that was 2009 really when the bill sort of came up and went in 2010. When it became clear that the window of opportunity for federal climate activity had really closed from the legislative perspective, and that's when we started looking more at state level activity where that's where the pathways were for getting something like a clean bank done.
Jason Jacobs: What's a green bank?
Jeffrey Schub: The purpose of a green bank is to use its capital in ways that can drive and crowd in quote unquote private investment into solutions and technologies that can lower greenhouse gas emissions. Historically, this has meant renewable energy projects, but it really can be, it should be much broader than that as we sort of stare down the reality of where we are with climate change.
And so what does that actually mean? It's a dedicated, mission-driven finance institution that has public and mission-driven capital. That can be used in ways through innovative structures in flexible capital deployment that attracts and draws in private investment into projects and activities that they otherwise would not invest in without that kind of capital alongside.
And so what does that look like in reality, those sort of four core tactics that a lot of green mix use. One is risk mitigation. A commercial bank might look at a solar plus storage project and say, you know what? This technology is proven. We know that this stuff works. There's a really good project off-taker but we've just never done something like this.
We're not comfortable with the risk. We don't want to be the first mover. A green bank might say, well, how about if we provided a partial loan guarantee so that you commercial banker are comfortable doing this so that you have a safety net below you? That's a very common technique where then that commercial bank can start participating in transactions like that.
Really understand what the risk profile is, what the cash flows are, so that they can then do it at much, much larger scale without a loan guarantee behind them because they understand what the risk is. So that's one of the. Core tactics. A second one is, and this is a really often cited challenge for driving investment at scale, is that really large institutional capital providers and really large commercial banks are only writing checks for projects where the check is $100 million or $200 million.
They're just not going to directly finance a $10,000 residential energy efficiency upgrade. That's just not the business they're in. And so there's all of this financial infrastructure that has to be created effectively that connects those really small projects to the really large pools of institutional capital or public capital markets where capital is abundant and cheap.
And so room banks play a key role there as aggregators and warehousers of those small projects where they would go out, originate them and finance them themselves. And then once they've been built up into a pool that is actually attractive and at scale to attract private investment. Then they can sell it off and do it all over again.
This turns out to be one of the key roles and in particularly is going to be important to address climate at scale across the U.S. as the kinds of technological solutions that are needed to address climate change are many of them are small in distributed. They're not cookie cutter or standardized from place to place.
The last two, what I call sort of first of kind transactions or novel transactions are really important piece where it's not actually necessarily that the green bank is providing capital, but it's that it's a mission driven institution where the people there are willing to spend time. And money. You trying to figure out something that's never been financed before.
As one green bank president in the U.S. often says that the purpose of a green bank is to incur the brain damage that it takes to actually figure out how to finance him. Something that's never been done before. Maybe it's a new kind of run of the river hydro technology that's been done in Europe, but it's never been installed in the U.S..
Some banks are just like, we're not going to take on the upfront cost to figuring out how to evaluate that to project because we don't really know what the longterm profitability opportunities are. Green banks will just do that. They'll do that work, internal legal there that costs, and because they're mission driven, I. E. nonprofit, they can bear more of those costs. The last one that's worth probably spending a little bit more time in is core project economic challenges. The simplest example you can think of is what could a solar project in, let's say, Missouri. Power is relatively cheap in Missouri. The sun shines a little bit.
It's not the sunniest place in the world. It's not the greatest place in the world. And if you wanted to finance the solar project on commercial terms where the bankers and the investors and tax equity investors are getting their returns, they require that project might produce power that needs to be sold at something that's 15 cents a kilowatt hour.
Maybe 20 cents kilowatt hour. Who knows? Meaning it's more than the price of electricity in that state, and you don't have a market for that. No one's buying more expensive renewable electricity in anything that looks like a market, and that's what you need to balance out. You need to find a solution where private capital providers are getting the returns that they need on their money because they're never going to invest at scale if they're not getting the returns they need. But you also need to deliver something that's actually cheaper and better for the customers in the energy end users. And so green banks can inject their capital into those projects to make sure that a, they get built, and B, they get built on terms that satisfy both sides of that equation.
And so that can mean long tenor debt, low cost capital that can involve risk mitigation, something to bring down the total cost of that financing, which actually turns out to be a really powerful lever for lowering the price of clean electricity in the first place.
Jason Jacobs: Who are the primary customers of green banks?
Jeffrey Schub: It depends a little bit on where the green bank sits in the financial markets. Some state green banks around the U.S. are retail. He has so to speak, where they sit pretty close to the customers, and other ones are more institutional capital providers. So for example, the New York Green Bank, which is the largest state green bank in the U.S. is on its way to being a $1 billion specialty finance company is really a wholesale capital provider, meaning they're working with other institutional investors and banks and developers to provide capital to sort of intermediaries who then actually go out and develop, build and finance individual projects using that capital. But in some cases, there are green banks that are effectively directly working with an individual contractor who are going to build an energy efficiency upgrade for a home, for example, and providing a loan or enabling a loan directly to that project.
Jason Jacobs: How long have green banks been around, and also what does the current landscape look like in terms of how many there are, where are they? Is it us specific? Are they popular in other countries as well? What does that landscape look like?
Jeffrey Schub: The first green banks in the world recruited right around the same time in about 2011 so the first one in the U.S. is the Connecticut State Green Bank was passed into law through legislation in July of 2011. The first national green bank was built right around the same time in the United Kingdom, the UK green investment bank, which was a multibillion dollar national green bank, that actually for a time was the largest investor in offshore wind in the world and is seemed to be basically responsible for the creation of a UK offshore wind market because of its initial investment to get that market going.
There was a national green bank in Australia, the clean energy finance corporation, which again is a multibillion dollar finance institution. In the U.S. there's about 12 or maybe 14 now, state or local green banks around the country that collectively have driven about $4 billion of investment into mostly clean energy projects that wouldn't have been built otherwise and globally.
Especially because the scale of the UK and Australia, green banks have catalyzed about $50 billion of total investment on average, where there was about three or $4 of private investment for each green bank, dollar deployed, sort of representing the catalytic effect of these institutions.
Jason Jacobs: So I'm going to test out how well I understand what you just told me.
So basically a green bank is similar to a bank in that it can lend for different projects or finance projects similar to in those could be residential projects, or those could be commercial projects or larger infrastructure projects. The distinction though is that if there are areas that are important from an
Impact standpoint, and that might have higher risk than would make good sense as strictly a for profit enterprise. Then the green bank can step in and essentially be a bank with more of an impact focus and tolerance for risk.
Jeffrey Schub: Yeah, I think that's perfect. That's really, really well said, the purpose of green banks is not to invest where private capital was already going. Do green banks need to be financing utility scale solar projects in Nevada? No, probably not. There's a lot of private capital going there. There's no shortage of capital, but there are many, many other sectors, especially when you look beyond renewable of generation, that the opportunity is enormous.
And by opportunity, I mean economically viable opportunity to use enormous, and it's necessarily from a climate standpoint, but for a host of reasons there are a number of barriers that are slowing the flow of capital. And really the purpose of a green bank is to look and act like a market actor just the way you described, but be sort of at the leading edge of risk tolerance and being able to use its capital and more flexible and innovative ways to start penetrating those markets.
Jason Jacobs: And what does it look like in terms of who can start a bank and who can start at a green bank and compare and contrast those? Is it the same process and the same regulatory landscape, or does it look very different?
Jeffrey Schub: If anybody wants to have one simple takeaway from this conversation, it is this, that green banks are not banks.
I'll say it one more time. Green banks are not banks. It is a very frustrating misnomer that's a result of the original naming of this concept being green banks and it's stuck, but they are not banks. And what does that mean? Literally green banks are not depository institutions. They do not take deposits.
You and I can't walk up there and say, I want to open a checking account. They are really specialty finance companies. They tend to take on two different forms in the U.S. or maybe since they three different forms. Some of them are directly part of government, so the New York green bank is directly part of my sorta, which is the state energy office.
So it is in effect a government agency that. In a host of ways, operates and looks very different from government, but it is directly part of the government. Some of them are what you might call wholly owned corporations of government that they behave and look structurally like a private business, but they're owned by the government.
So the Australia national green bank is an example of that. And some of them are. Nonprofit corporations that are created sort of in collaboration and in coordination with government specifically because it's easier to create a nonprofit than it is to create a government owned corporation. There's a lot more ways to do it.
So we often get asked, well, could anybody who wants to go create a finance company and call it a green bank and answer is well we're not in charge of deciding the name of these things, but if it's a mission driven finance entity that's using its capital in ways to catalyze more investment in order to reduce greenhouse gas emissions, then yeah, you can call yourself a green bank.
It gets trickier when it's sort of private institutions that are starting to do more green lending and want to call themselves a green bank, or we can get even more complicated when people ask about what about the greening the banking sector conversation, which is different from this, but there is no one single definition of how a green bank has to be structured and looked like.
Jason Jacobs: So I'm going to try a different analogy to test my understanding as well. So there are some project finance type companies that do some of these smaller thornier projects like you're describing, so that might be an ultra capital, that might be a generate capital, that might be spring lane capital, or others of these entities that are starting to exist.
How does that compare? Is this green bank concept essentially that, but without the profit motive?
Jeffrey Schub: Yes. I think that's exactly right. I'm like ultra and generate are ones that actually come up quite often and we've spoken to on a number of occasions, very similar motivation, very similar model of what they're trying to achieve in terms of addressing market gaps, going where the private sector isn't today, but it's without the profit motive, which in some cases makes only a small difference in some cases, makes all the difference in the world.
Jason Jacobs: So do green banks and compete with the generates and the ultras and the spring lanes?
Jeffrey Schub: No, I don't think so at all. I think in many ways, I think green banks are a really natural partnership for those institutions that are trying to find ways to put their capital to work into projects that are sometimes hard to source.
In fact, we've had conversations with at least one of those companies about specifically putting capital into some projects that green banks are helping to arrange or structure because we saw that there was an investment opportunity. One thing I'll say that also sort of speaks to the opportunity for partnership here is that CGC has probably had conversations about creating green banks in 35 - 40 States in the U.S. literally nowhere has any state government, local actor market participants said this is a bad idea, which is not to say that.
Virginia says for talking about this is just intrinsically sort of a good idea to address climate change in this way. Using public funds in ways that are sort of long lasting have this catalytic effect. The reason there are not 35 to 40 green banks around the country is that state and local governments are in a really, really bad fiscal condition across the U.S. right now.
What New York was able to do in 2013 and say, here's $1 billion of public money to go do this. It's pretty unique. There are not a lot of States that have the financial capacity to do this, even if they like the idea. And so that's created a situation now where there's a lot of green banks that are really low on capital that are looking for all the ways they can find capital that resembles the public funds that are flexible and really necessary for this.
So what are examples of funds that are similar to public money that might be able to play the role that public capital usually plays in the green bank space? So it can be philanthropic grant money. That's really nice. It's hard to get that meaningful scale and there can be philanthropic program related investment where a foundation provides a low cost loan to a green bank or a project that's actually very similar to what green bank capital could do that.
It turns out it's also really hard to find. Impact investment is a, is a space that it's really hard to define what that is and it contains sort of everything you can imagine, but there are impact investors in there that can play a similar role. And then you have the folks like generate an ultra that because of the alignment of what they're trying to achieve, their respective of the return requirements, it turns out to be a really good match in terms of understanding the philosophy of what green banks are trying to achieve.
And so in a universe in which public capital is limited or unavailable. All of these sort of partnership opportunities with different capital providers open up. But frankly, that's why our organization is so focused in the near term future on creating a national green bank or national climate bank, because there is no bigger pot of cheap public money in the world really doesn't the U.S. Federal government.
Jason Jacobs: So let's say there was $1 billion and that could be allocating it. You can't do this exactly because if it goes towards green banks, it sounds like it's philanthropic or government capital. And if it goes towards generate, let's say, or some other type of kind of private finance vehicle, it would be an investment through a limited partner investment or the like.
But let's say you have that billion and your, or even a dollar and you're trying to figure out. If I want more of these kind of thorny, risky projects that are important and good for the world to help facilitate this clean energy transition to exist, how do I determine whether that dollar should go towards investment or green banks?
What are the trade offs?
Jeffrey Schub: You're sitting in a government seat or just from a climate strategist seat?
Jason Jacobs: Put the source aside. Yeah, you just have a dollar and you want to help facilitate the clean energy transition. How should I, if I'm holding that dollar, and again, that you can't exactly do this because in one side it's philanthropic and another side it's investment.
But how should I think about how to determine where to allocate that?
Jeffrey Schub: I think about how to get bang for the buck in terms of investment, in terms of greenhouse gas emissions reduction. And so from that perspective. Giving the dollar to a green bank allows it to have a catalytic effect where $1 in the green bank might result in, in some cases, $10 of private investment.
Because it's designed to operate that way using the financing techniques it has. And so investment is a stand in for the ultimate metric of greenhouse gas emissions reductions. And so in the absence of knowing exactly what project we're talking about, we're really looking at trying to maximize investments.
And in that case, giving the dollar to a green bank, not because I think obsessively about green banks and they should be the only thing that exists, but specifically because they play this role of enabling the private capital to go where it otherwise wouldn't be able to.
Jason Jacobs: I'm going to try another analogy.
So is this like prime coalition, but for projects instead of companies?
Jeffrey Schub: Very, very similar. And we've spoken with them and we have talked about how like, Holy cow, this is really similar. So if you imagine creating a prime coalition. Where their capital is coming from impact investors, foundations, government, blended all together and say, we're going to put this all into projects instead of companies, and we're going to do it in ways that bring in as much private co-investment for those products.
That is literally what prom coalition does, and when we talked with them, we're just like, Holy cow. We're sort of talking about the same thing, but applied to different parts of the clean energy ecosystem.
And what kind of expectations are there with this capital in terms of how risky is too risky and how impactful is impactful enough, and what kind of accountability or metrics are there that these green banks are driving towards?
That's a really good question. And again, this might be a frustrating reframe, but there's no specific answer to this. Um. Some green banks are built with no specific return requirement, meaning the Connecticut green bank receives 20 to $30 million of additional public money every year with no explicit or even implicit requirement that that money gets returned to the state.
And the Connecticut green bank operates in a way where it does not impose on itself any sort of a cost of capital. So it operates with sort of the most flexibility. The New York green bank, on the other hand, it's money too is quote three from the state. There is no. Explicit expectations that that money ever gets returned.
But the New York green bank likes to operate in ways that make it look as much like a market actor as possible. And so it has a requirement to be self sustaining. It should be paying for its operations, which it does. So its financing activity generates enough revenue through interest and fees to cover its operating expenses, which I think is a really important threshold for green banks, if they can do it, and then it deploys its capital in ways where it's getting these, what I would say is it's like a small amount of return on equity, but less than market rate. It really depends on what you're trying to achieve. So for example, you can imagine a national green bank or national climate bank that has authorized to put their capital into renewable power storage, transmission, agriculture, forestry, carbon capture. What I'm describing is effectively what's in the national climate bank act, but you could also imagine that it decides that the most effective thing it can do with its capital in terms of greenhouse gas emissions reductions, is to buy out all the coal plants in America.
Let's say the climate bank had $100 billion and it put $50 billion towards buying out coal plants and $50 billion towards return generating activity. Buying out a coal plant does not have return generating activity. That money is gone. It has a massive greenhouse gas emissions impact, but that money is gone.
But the other half of that money might actually be used in ways that return the money back to the bank and can continue to operate indefinitely into the future. It really all depends on the source of the capital and with the policy makers behind that capital think is allowable.
Jason Jacobs: Now with prime coalition as an example, if I invest, I might be investing out of my dollars that are already earmarked for philanthropy.
So it's not really my money. I'm just a steward of that capital through a donor advised fund or a foundation. But the return can come back so that I can grow my philanthropic dollars that I can then put to work again. Does the same hold true as it relates to green bank funding?
Jeffrey Schub: Very much so. So they were effectively.
Giant revolving loan funds, who could think of it that way so that the money that comes back can be used again, which again, sort of speaks to the long term catalytic effect, where it's not just that private capital is being leveraged at the project level where one green bank dollar and three private dollars right.
Project, but that one green bank dollar can come back to the green bank, can do it again and finance another project. And so there are a cycling effect actually multiplies the leverage over a period of time. So it operates very much in the same way. Public or philanthropic capital is a very, very scarce resource.
And so the decisions about how to deploy that money and how much return to generate and how to preserve that capital should not be taken lightly.
Jason Jacobs: Is corporate philanthropy a thing? Does that happen? Can big companies kind of Microsoft or a Google or someone like that fund an organization like a green bank through their philanthropic arm?
Jeffrey Schub: They absolutely can. It's funny. This is something we've thought about a little bit more recently as especially some of the larger tech companies have started declaring climate goals. Obviously, corporate procurement of renewables is something that's grown dramatically as well. I don't think there's a track record of that, to be honest.
The space of philanthropy. Philanthropy's interaction with the green bank space has been strong. Sort of CGC is majority funded by our activities funded by philanthropy. We would not be here...
Jason Jacobs: By foundations, individuals. What does that, what does that make it look like?
Jeffrey Schub: It's mostly foundations. It's Hewlett foundation, the climate works foundation in the energy foundation and have for a long time been our largest funders.
We have many more than that, but they're all really foundations who understand and agree with the mission of green banks and support sort of our work to go out and be field catalysts, so to speak, for the space. So that's sort of one category of philanthropy that we would not be here without. This category of philanthropy of direct investment into green banks is much more nascent.
There are green banks that have absolutely received grants from foundations to support the development of certain programs, help them figure out how to build certain products, for instance. But this space of program related investment of getting foundations to put capital into a green bank, specifically on terms that are meant to be around financing as opposed to just paying for an operating expense is, I would say that the activity is far, far, far behind the volume of conversation in the philanthropic space. It turns out it's just very hard to get foundations to build the institutional capacity and the internal buy in to actually be able to do that at scale.
Jason Jacobs: I mean, listening to the lack of accountability and the freedom at the individual green bank level to kind of set their own.
Return expectations and types of projects they invest in and things like that. I mean, one the thing that popped through my head, and I don't know if this is relevant or not, is that, let's say there was corporate philanthropy or oil and gas tycoon wanted to give you $1 billion of philanthropic capital, but really to try to water down the things that.
The green bank was putting money towards so that they get the green halo, but can still protect their nest egg, if you will. Has, I mean, if things like that ever come up in the green bank world that you're aware of?
Jeffrey Schub: That's an interesting question. I don't think anything like that's come up. You know, I think the green banks have all developed pretty specific boxes of what their investment criteria is and what their return requirements are, and this is how we operate. These are our operating principles. And I think if somebody came along to say, here's some capital and you need to do something that's outside of your box with it, I think they would reject it.
Not necessarily even out of some principle that they don't want money from an oil tycoon and don't want their influence, but more out of practicality that it's hard for these institutions, like any financial institution to change the way they do business. And so if they were given money to do something that was really different from what they have been designed to do, I think it just wouldn't be a really good fit.
I don't think that has happened yet.
Jason Jacobs: We've talked a lot about what green banks are and kind of the state of green banks, and it's clear from talking to you that you believe there should be a lot more green banks and a lot more dollars put towards green banks. And it sounds like you're currently working at the state level because the state levels where the action is, but ultimately, if there were action at the federal level, you'd be working at the federal level as well.
Or maybe even instead of, so it'd be great to talk about two things, and that's if that's okay. One is just. Taking CGC aside for a minute. What needs to happen with green banks in order for green banks to flourish and grow? And then a second question is just kind of bringing that back around to, given that, what does he GCs role in that process and how do you spend your days?
Jeffrey Schub: It's not complicated. There needs to be option one A and option one B. Option one a is there needs to be national green bank in the United States. There is economists and everybody has made the same argument for about a decade now. Like there is no better time for the U.S. government to say that they're going through plow lots and lots of money into infrastructure and we're really talking about is infrastructure.
Public capital is cheap and can be. Raised it really low rates. So now is the time to create a national green bank or national climate bank that national climate bank could directly finance projects like offshore wind projects or transmission lines that are intrinsically sort of national or regional in scale.
And they could also be the source of capital to all the state and local green banks that are popping up around the country that are suffering for lack of capital. That is precisely what is proposed in new federal legislation in the U.S. Senate. The national climate bank act was introduced last summer by lead sponsors, Senators Markey, and Van Hollen, and in the house in December.
Representative Debbie Dingell and representative Tonko introduced companion bill in the house side. And then just a couple of weeks ago that bill was pulled into chairman Palone's broader clean future act, the comprehensive climate package that the energy and commerce committee has been working on for many, many months.
And so this is starting to get into the DNA of the legislative blueprint, so to speak, of what climate action. Most likely in 2021 looks like if that bill were to pass, we think that the $35 billion of capital that's allocated to the national climate bank could over 30 years catalyze up to a trillion dollars of private co-investment.
I can walk through how that happens, but that's our estimate. And importantly, this is not just on Capitol Hill, but many of the presidential campaigns of their climate policies include the creation of a national green bank or a national climate bank. So on a national scale. This is picking up momentum and attention in ways that it hasn't really since 2009 which you can attribute to a lot of things.
It's the changing politics of climate, certainly, but also it's cause there's a decade of track record. Now, this idea of green banks is known and they work and it's proven, and there's a national greenbacks around the U.S. and so the time and opportunity is here in a really, really exciting way.
Jason Jacobs: A side question and then I want to get into CGCS role and all that, but the aside is just, I've heard from a number of people that there is a capital gap when it comes to things like getting your first plant built where they stole out of risk, but it requires some real capital, but you don't have enough proof and it's too high risk to get the project finance capital, but you need more money than you can get from software style venture capitalists, especially without being able to show software style returns in software style timelines. Is that the type of project that a green bank could potentially help address?
Jeffrey Schub: Potentially. So where you're sort of alluding to reserves a technology cycle and development cycle for energy solutions where we have to get out of the lab.
If the R and D you have to have proof of concept, then there's sort of a commercialization gap. That often exists where something to the first of kind project can't get financing, and then there's a deployment gap where something's been proven, but for a host of reasons and not being deployed at scale, that sort of commercialization gap has historically been addressed, at least by the U.S. federal government, mostly by the U.S. department of energy loan program office.
So some of the first onshore wind and large utility scale solar projects are actually financed for successfully by the loan program office to specifically cover and get through that commercialization gap? It's sort of imagined that the national climate bank would probably focus a little bit more on the deployment gap, where the loan program offers going to be.
We could still, we're continuing to focus on the commercialization gap
and then back to CGC. So if the most important thing it sounds like is to make the national green bank or national climate bank happen, what does that mean in terms of CGCS role and what are the, what are the big initiatives that you guys are taking on?
Jason Jacobs: How are you spending your time?
Jeffrey Schub: We've launched a full on campaign to support this, which includes a couple of elements. It's being resources as valuable and useful to leaders on Capitol Hill and policy makers. We can inform them about how green banks work and how the legislation could be shaped. We're a resource that's what we exist as a federal one C three nonprofit to provide educational information. So that's one part of it. A second part of it is building out coalitions of stakeholders and supporters. And so we're starting to do a lot of work talking to key groups like environmental organizations, wall street in the finance sector.
Business writ large to make sure they understand and are familiar with this concept. Environmental justice organizations are really, really key, important group that we're building out relationships with to make sure they understand what this concept is and are supportive. So there's that sort of element of coalition building and sort of the associated communications around that.
But the last piece, which is in some ways our organization's bread and butter is developing and writing the technical material and content to explain how a national green bank could work. And the interesting thing that we've found over all these years of doing this work is that when you introduced the idea of a green bank to somebody, you're going to get one question and then another question, and basically a deluge of questions across the map about everything you can imagine about how a green bank works or what sort of projects are going to be financed, but the return requirements are going to be how many staff is going to have all the good questions you're asking basically. There's something about this idea that once you open it up a crack, there's just a million questions that come at you. And we see it as our job to answer those questions. And so we're spending a lot of time producing technical material describing here's a use case of how a national climate bank could finance.
An agricultural project that has a big greenhouse gas emissions impact, specifically down to the schematic of cashflows. Or here's how a climate bank could help finance a transmission line. And then more broadly, here's what we think the impact of a climate bank could be in terms of, you know, Scott's emissions reductions and jobs and economic impact.
So we see it as our job to provide the best information we possibly can to decision makers and stakeholders so they can understand what the strength and value of this proposal is.
Jason Jacobs: When I hear you describe this, I can't help but think of another episode I did with Mark Reynolds from the citizens' climate lobby and with citizens' climate lobby they've got this kind of one overarching initiative, which is to get a price on carbon implemented, and they have their own kind of flavor of that and one that they're pushing forward and helping write and things like that. But in their case, it sounded like they do a lot of the same things that you guys do, and in terms of being a resource and educating policy makers and things like that.
But another thing they do is they have an army of grassroots volunteers that are on the ground all over the place that are kind of out there building this grassroots army of others to join the fight and vote and be aware of the issue and prioritize it and be loud about it and things like that. I'm not hearing that from you, and I'm curious why that is and how you think about that.
Jeffrey Schub: Yeah, so it's a good observation. Yeah, and the distinction, CGC does not have an army of grassroots supporters. For most of our history, it hasn't been a necessary component of the work, to be honest. Part of it is because there's been good support from policymakers in ways that sort of enabled this action without that. Governor Cuomo stood up at his state of the state address in January, 2013 and just said, we're creating a $1 billion green bank in New York and didn't necessarily require grassroots action to make it happen. Another thing which doesn't take you very long to learn is pretty wonky and technical idea.
There's ways of communicating about it that make it a little bit less wonky and technical, but it is intrinsically. And we're talking about finance, public, private partnerships, and right there you've lost most people, and so it's not something that necessarily lends itself to that sort of grassroots engagement.
That said, we recognize that passing federal legislation. Requires a lot more voices than CGC, which is why we're trying to build out alliances and partnerships, not just with really smart environmental organizations whose voices are more known than ours, but also our organizations that do have reach out to voters into individuals.
We are not a lobbying organization, so that's something we constantly have to be very aware of, but we are for the first time seeing that building out, that sort of support has value for what we're trying to achieve. And so we're looking for the sort of structures and partnerships we can get that can leverage that kind of reach.
Jason Jacobs: One clarifying question. Maybe it's just a yes or no. Do we need a price on carbon?
Jeffrey Schub: It seems like a pretty good idea to me as the honest truth.
Jason Jacobs: You could go on, but really I just wanted to kind of say it. Okay. I just wanted to kind of poke on that just so I understood where you stand, because now I want to ask you my real question, which is a lot of people have told me that if they could choose one thing that would have the biggest impact in the climate fight, the number one thing they would choose is to put a price on carbon. We've been spending this whole episode so far talking about this national green bank or national climate bank and how important it is.
If you could only pick one thing to get into place to maximize its impact on decarbonization and the clean energy transition out of those two, which would it be and why?
Jeffrey Schub: I guess I will sidestep the question because I just don't think that one answer is the right answer. There was definitely not a silver bullet to this.
I don't think it's the climate bank and I don't think it's price on carbon. I don't think either one is going to solve this crisis. It absolutely requires multiple approaches. It requires a portfolio of solutions, which is frankly why I think it's really smart with what Chairman Palone did of putting together a package of solutions.
You can, are you around the edges of what should be in that package? But it absolutely requires multiple components. And I guess the thing I'd say is that the nice thing about climate bank or green bank is that. It's a complimentary tool to all of them. If you have a price on carbon, if you have a cap and trade program, if you have a clean energy standard, green banks meet the markets where they are and they play in the markets, depending on what the economics are.
If you have a price on carbon and all of a sudden the price of the dirty energy that you're competing with has gotten more expensive. That obviously makes it easier than for the clean energy solution to compete, which might mean that the amount of climate bank capital necessarily in the capital stack is less than it would have been before.
That the interest rate doesn't have to be as low, meaning it just sort of meets the project economics where it is. Green banks work very well with cap and trade programs and specifically the resources, the proceeds raised from the permit auctions in Connecticut and New York have been used to capitalize the state green bank.
So there's a really natural synergy there. And something similar has been proposed for recently in New Jersey as well. I think this is true, but all of the States where there are state green banks also have clean energy standards. So there nothing about this solution. That means if you do it this way, you're not doing it another way.
Jason Jacobs: Well, I know that Republicans in general are allergic to the word tax, and so there's a lot of resistance to a carbon tax, even if we need it. And sure, there's other ways to do it could be cap and trade or some other form, but it's like government light, like every, you know, the government light is what it seems like people want on the right side of the aisle.
I guess a question for you is how do those same people think about green banks?
Jeffrey Schub: I do think that one of the really. Good aspects of a green bank, putting aside the name is that this can and should be intrinsically a bipartisan solution. And thankfully, yes, a lot in the world has changed since 2009 but it does matter to people in Congress who are still there 10 years later that this idea had bipartisan support back in 2009 that really matters a lot, and it's not just lip service to say that this is about investment. This is using public dollars in ways that catalyze multiples of private investments. It's about generating returns and profit making opportunities for the private capital, because we think pretty strongly that that's what's going to get the private money move in the right direction, but it's also about consumer protection and ensuring that the transition to clean energy happens in ways that produce energy that's lower cost and has minimal economic impact, especially in the States where there is a fear of the greatest potential impact. I mean, that investment means jobs and new businesses. This isn't lip service. This is real. We've seen it. There's data to back this up, but that's what green banks do.
Obviously there's going to be questions about how much money should go into a green bank, what the sectors should be. Is there certain sectors that are going to be prioritized by Republicans, but we do think that this really can and should be bipartisan.
Jason Jacobs: You had mentioned that you're spending time at the state level because it doesn't seem, at least at this moment, to be the fruit isn't ripe at the federal level to try again.
What are the most important things that would need to happen or change in order to set the table to get this done at the federal level.
Jeffrey Schub: The fruit is getting ripe. We're turning back to the federal level now, and we have, so the window was here, so what has to change is we have to spend more time over the next year, probably building more awareness of the idea.
The biggest challenge, honestly, is not that people just like this, it's just not enough people know about the idea. Getting included in Palone's package there's really been a big boost for that, but we have to spend more time in our allies, have to spend more time just increasing the profile of this idea in Congress.
The more we can work with our partners at the state level in the next year or so to increase their collective investment and demonstrate more of their impact the better. It turns out that my going to an office on Capitol Hill and describing a green bank only has so much impact, but getting the CEO of a green bank in Michigan to go talk to representative Debbie Dingell from Michigan about the green bank and Michigan is a million times more valuable. They are by far the best communicators of the value of this idea, and so we're absolutely continuing to invest in and support the expansion of state level green banks, because that really, really matters both in terms of addressing the climate crisis in real time and driving investment, but also has a political impact and value at the federal level.
The truth is we have to see how the election shakes out. I'm not going to pretend as if the election isn't an important determinant of the future of climate bank policy in the future of climate policy writ large at the federal level. We have our views on how the election might play out and we have strategies about how to sort of persist no matter the outcome, but obviously that's the big variable.
Jason Jacobs: I dunno if I can ask this, but for the people out there that want the national green bank to happen, how should they be thinking about the election?
Jeffrey Schub: Certainly it would be helpful to have a change in the white house. Obviously, having a climate denier in the white house is not helpful to this effort. I will say that obviously this president hasn't demonstrated a lot of ability to follow through on a complicated policy execution. He does like to talk about infrastructure investment, and we're talking about a version of infrastructure investment, whether there's a space to have a coherent conversation about that in January, 2021 where this administration is really anybody's guess.
So I'm not going to pretend as if that's a really easy solution, but I do think that having the president would be reelected is not necessarily the death knell for this idea. And on the democratic side, as I said, a lot of the candidates have included something like this or explicitly supportive climate banker, green bank solution.
There are lots of people who are thinking of putting a lot of good attention and focus debating whether or not certain candidates are aggressive enough in their climate proposals and their target of net zero by 2030 or 2050 is the right or wrong one. CDC tries to avoid getting into those debates because for us, we think that focused on investment in climate solutions is where we can best add value, and most of them have put forward really strong plans on this. Pete Buttigiege has a specific proposal for a $250 billion climate bank. Elizabeth Warren has endorsed the national climate bank legislation. Before that, Kamala Harris had endorsed the bill. Jay Inslee was the first candidate to put a green bank in his climate plan. And so we feel really happy broadly with the candidates on the democratic side and where they stand on this issue.
Jason Jacobs: So if someone offered you $100 billion and you could allocate it towards anything to maximize its impact on the clean energy transition or deep decarbonizing, our global economy, you fill in the blank, but you get the idea like to help with climate change, where would you put it and how would you allocate that money?
Jeffrey Schub: As you might guess. My answer would be that it would be used to capitalize as a national climate bank that was fairly easy. How the money would actually be used is harder. I think that putting money towards efficiently buying out and shutting down coal plants sort of has to be on the table. Taking emissions out of the system is just as essential as putting clean energy solutions into the system.
So I think that really should be on the table. That is in the Senate version of the national climate bank act mechanism to use reverse auctions to buy out coal plants. So that would be a really big piece of it. I do think that investment really needs to be targeted in certain geographies that have both low energy costs and really large reliance economically on fossil fuels, because those are the places where people stand to lose the most from a climate transition.
And I think. Both from sort of an equity standpoint and political standpoint investing in clean energy activity in those communities is essential. And then last but not least, focusing on low income communities, environmental justice communities in those frontline communities that are already suffering from the effects of climate change.
Absolutely. We should be prioritized. The nice thing is emissions reductions in downtown Newark are just as valuable as emissions reductions in Massachusetts. And so from a climate standpoint, investing in emissions reductions in low income communities is a double win because you can deliver benefits to the people who live there, as well as creating a greenhouse gas emissions reductions.
Jason Jacobs: So if we can stop right there. That brings up an important point you had mentioned a lot earlier in the episode that I wanted to come back to you and you just reminded me, and that's around environmental justice. You said that the environmental justice groups are very important to the efforts of the green banks.
One tension that I've noticed is that the people that are focused on technological solutions, let's say a new biofuels, technology or an electric jet or things like that, right? It's like the environmental justice community says, what about us? What about us? Make sure you talk to people from the environmental justice community and understand their perspective.
From my perspective, you know, I come more from the technology side and if we can work on things that will bring down our overall emissions, it's good for everybody. The stuff we were talking about with the green bank, it sounded more like infrastructure, like for plants and things like that. So let's talk about that environmental justice. Why is it so important, and then how do the efforts of the green bank impact the environmental justice community and vice versa, and what should I know? Help me understand where that fits into all this. I know it does, and it's not that I'm not a believer that it's super important. I just don't have as much exposure to it yet. And it's a topic I plan to cover more in the future, but since I've got you, it'd be great to get your thoughts.
Jeffrey Schub: Let me preface by saying I am not environmental justice expert. There are people who have spent their entire lives working in these communities, on these issues who understand them much more deeply than I do.
So what I can offer is much more surface level. What we have learned from this works though, is that we're really talking about a range of different issues. So it includes, for example, ensuring that low income and minority communities have access to the new clean energy solutions that are brought to market.
So for example, if you are a renter, you cannot put solar panels on your roof cause you can only get a solar lease or buy solar panels if you own the house. It's a really, really simple example of how those communities are shut out. And most of those solutions are determined by FICO scores. But it turns out your proclivity to pay your electricity bill is not all that correlated to your FICO score.
And so there's sort of credit limitations that are imposed unnecessarily. Developers and contractors in the industries that are out there and trying to find customers for clean energy solutions tend to overlook serving those communities because of a perception that it's might be harder to deliver their services there.
And so that's just one piece of this is delivering clean energy solutions in a way that lowers energy costs to customers that are traditionally overlooked. Completely separate from that is the question of how do you address communities that the poor communities that have literally a coal plant next to them or a gas plant next to them that's spewing pollution and causing people to be sick.
That requires a different kinds of investment, different kinds of solutions that involve, yes, it's shutting down that coal plant and yes, it's investing in. New clean energy solutions to replace it, but there's also an economic development story that has to be pulled in investment that has to come with that.
Another is the jobs component. It's one thing to say, we're going to build a community solar project in this location to ensure that people in this community have access to low cost solar, even though they're renters. It's a totally other thing to make sure that the people who are building that solar.
Project are from that community and being trained and developing up skills and jobs. Then there's the question of frontline communities that are literally being affected already by climate change and, for a host of reasons, the communities that are affected already by the effects of climate change tend to be ones that are poorer and have a higher minority population.
And so, there's a resilience and adaptation story to be told there as well. So that's my surface level or attempt to describe even the range of issues that we're talking about. And I think both communities have every right to be extremely angry about how fossil fuel industry has damaged their communities, but also to be really skeptical about the development of new climate solutions that are meant to support their own transitions in their own economic development in their communities.
I think they should have a healthy skepticism to really ask hard questions. Make sure that these are solutions that are going to deliver economic benefits, but also really make sure that the transition to clean energy doesn't result in higher energy costs for the communities.
Jason Jacobs: Well, thank you for that, and that's a great overview.
And as I said, it's an area I'll be digging into much more deeply, but it was valuable to hear your thoughts. So last question that I have is just the listeners of the pod tend to be people that are looking at the problem of climate change at the systems level. That are interested in reallocating their career in some meaningful way and oftentimes fully into working on this problem.
And they come from a wide range of backgrounds. Some of them come from the policy side, some come from science, some come from universities or research. Others come from the government, both government agencies and elected officials. Some come from being entrepreneurs, others come from different layers of the up, the capital stack, venture capital, project finance, et cetera.
For all those people or any of those people listening to the show, trying to figure out how they can help and maximize their impact on the problem. What advice do you have for them?
Jeffrey Schub: This is an intrinsically interdisciplinary challenge addressing climate change, so there is no background that's the wrong background.
For example, I don't have a background in science or an engineering or environment or even in finance, but I'm coming at this from an economics and policy angle. I think the most important thing for people will look at when they're looking at ways to participate in this is how do you do something that is scalable?
How do you do something and apply your work towards a solution that actually can have an impact? Yes, it's good for people to drive an electric vehicle. Yes, it's good to have LED light bulbs by carbon offsets. Those individual actions, I don't think, will add up to the collective dramatic transformation that we need.
We need scalable solutions. And so that really comes down in my mind to two things. Developing the ideas that can actually lead to scale, whether it's a technology or a policy idea. We're building an organization that intrinsically is designed to do this at scale. And voting, voting, voting, voting. There is no more powerful lever in this country for voting.
And if you think that climate change is the number one priority and the disaster, that it clearly is coming down, coming down the road, it's already here. You have to vote and you have to talk to your legislators and talk to your elected officials about this and demonstrate that this is something that is of top priority to you.
And so if you can spend your time working on solutions that are scalable and. You don't have to go out and be an organizer, just vote. I think those are the things that people really can do to address this issue.
Jason Jacobs: Awesome. Well, Jeff, this was a terrific discussion. I really enjoyed it. Thanks so much for coming on the show.
Jeffrey Schub: Yeah, thank you for having me. Really enjoyed it. Really appreciate the opportunity to be on here.
Hey, everyone. Jason here. Thanks again for joining me on my climate journey. If you'd like to learn more about the journey, you can visit us at my climate journey dot C O. Note that is dot C O not that com.
Someday we'll get the.com, but right now dot C O. You can also find me on Twitter at @jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes.
The lawyers made me say that, thank you.
