The Inflation Reduction Act — which was signed into law by President Joe Biden — invests $300 billion in deficit reduction and nearly $370 billion in energy security and climate change programs over the next 10 years.
One of the environmental provisions inside the bill establishes a National Green Bank, a program that's supposed to help launch and leverage private funding for clean energy projects across the US.
Green banks are banking institutions that use public and private funding to incentivize the transition to clean energy. The banks are initially funded with public dollars and then use the proceeds from their investments or other private dollars to fund more environmental-related projects. For example, a green bank might loan money to a company that's installing solar rooftops or to a homeowner that wants to buy a heat pump. Green banks are either government-owned or semi-public.
The Inflation Reduction Act allocates $27 billion to fund a National Green Bank. This bank will provide financing so lower-income households can acquire clean energy technology such as efficient heat pumps, rooftop and community solar, and electric cars, according to the bill.
States, tribes, and municipalities can apply for grants for clean energy purposes as well. The act stipulates that a third of funding for the National Green Bank go toward disadvantaged communities.
The Connecticut Green Bank is the nation’s first green bank, established in 2011. Since its creation, the Connecticut Green Bank and its private partners have invested over $2.14 billion in capital for clean energy projects across the state, according to the fund. According to the bank’s 2021 fiscal year report, for every $1 of public funds committed by the Green Bank, private groups invested an additional $7.40 toward green energy in the state.
As of 2016, the oldest green banks in the country, in Connecticut and New York, have collectively invested nearly $575 billion in total clean energy projects, according to the National Renewable Energy Laboratory.
The NY Green Bank, established in 2013, is the largest green bank in operation. According to its impact report, the NY Green Bank loaned $438 million across 17 transactions, resulting in a total of $1.7 billion in overall investments in fiscal year 2021-2022.
The Inflation Reduction Act also sets a minimum corporate tax, adds credits for renewable energy and electric vehicles, and allows Medicaid to negotiate the price of some prescription medications, among other changes.