The Tools to Build a Green Economy
By Melissa Gallant and Hayley Martinez
What role does public policy play in encouraging and facilitating the green economy? What are the policy tools and incentives that steer green investment effectively? On March 24, the Earth Institute and the M.S. in Sustainability Management program held a panel to explore these questions titled Building a Public-Private Partnership to Finance the Green Economy.
The panel featured Jessica Bailey, co-founder and chief executive officer at Greenworks Lending; Satyajit Bose, lecturer in economics at the School of Professional Studies at Columbia University and associate director of the M.S. in Sustainability Management program; and Curtis Probst, managing director of sustainable finance at Rocky Mountain Institute. It was moderated by Steven Cohen, executive director of the Earth Institute and a professor of practice at the School of International and Public Affairs at Columbia University. The panel and reception were enjoyed by over 150 students, faculty and interested professionals, as well as an audience on the live webcast. You can watch the full panel here, or read on for some highlights from the discussion.
Cohen started off with a seemingly simple question: How would you define the green economy?
“I don’t like to describe the green economy as any different than the regular economy,” Bailey began. “The ‘green’ aspect has penetrated the mainstream economy, mainstream business, and certainly the government.” Bose pointed out that for the past three decades, “energy productivity,” the ratio of growth in wealth (measured by gross domestic product) to energy emissions, has been steadily decreasing. “When you realize that GDP is increasing while emissions are going down, that should tell you the green economy is expanding.”
Probst turned to global investment in the renewable sector, which was $329 billion last year compared to $88 billion 10 years earlier. From socially responsible investing to sales of organic food, there are many indicators that show the green economy is growing.
Panelists went on to discuss the roles of the public and private sectors in promoting green growth. The speakers agreed that the government’s role should be to create a regulatory system or broader framework that enables entrepreneurs and utilities to find innovative ways to incentivize things like efficient energy use.
“A lot of what government can do is provide a structure that animates markets and gets private sector investors and lenders involved to create new business models,” Probst said. Government can spark the clean energy economy by setting the rules and letting the private sector scale up.
Throughout the discussion, panelists drew on their experience in the field, describing specific examples of public and private sectors working together to create innovative models for sustainable growth. They discussed Property Assessed Clean Energy, a financing mechanism where state and local governments loan building owners the up-front costs for renewable or energy efficiency upgrades, allowing the owners to use a portion of their cost savings to repay the loan. They mentioned New York State’s Reforming the Energy Vision program, a statewide initiative to change the way utilities are regulated to promote a cleaner, more resilient, more cost-effective grid. Each of these models is successful not only in increasing the use of clean energy, but also in providing a framework that allows the private sector to do what it does best.
Key issues affecting the rate of transition to a green economy include entrenched interests supporting the status quo, lack of data and information, organizational obstacles, reaching competitive levels of risk and return for financing, and the need to scale up. While each speaker agreed that we are already experiencing the transition to a green economy, the challenge remains of how to accelerate the process and make meaningful reductions in carbon emissions that will limit the impacts of climate change.
“The capital is going to go where the ideas are, and there are lots of ideas,” said Bailey. “We just need to pair the good ideas with the good business models in this space, and I think we’re going to see a huge amount of capital flood into it.”
The transition to a green, renewable-based economy is well under way globally. Much of that action is seen at the state and local level through climate action plans, green banks, and more robust markets for clean energy investment. It is seen in people’s awareness and consciousness. Finance is not the only factor in this transition; decisions to become more energy efficient or invest responsibly come from a deeper motivation. As Bose noted, the sustainability sector has the potential to provide finance with a role that is much more responsible to society.
Melissa Gallant is a student of the M.S. in Sustainability Management program, and an intern in the executive director’s office at the Earth Institute.