Why Germany Leads In Renewables: It Has Its Own Green Bank

The Green New Deal endorsed by Alexandria Ocasio-Cortez and more than 40 other US Representatives has been criticized as imposing a too-heavy burden on the rich and upper-middle-class taxpayers who will have to pay for it, but taxing the rich is not what the Green New Deal resolution proposes. It says funding will come primarily from certain public agencies, including the Federal Reserve and “a new public bank or system of regional and specialized public banks.”

Funding through the Federal Reserve may be controversial, but establishing a national public infrastructure and development bank should be a no-brainer. The real question is why we don’t already have one, like China, Germany, and other countries that are running circles around us in infrastructure development. Many European, Asian and Latin American countries have their own national development banks, as well as belonging to bilateral or multinational development institutions that are jointly owned by multiple governments. Unlike the US Federal Reserve, which considers itself “independent” of government, national development banks are wholly owned by their governments and carry out public development policies.

China not only has its own China Infrastructure Bank but has established the Asian Infrastructure Investment Bank, which counts many Asian and Middle Eastern countries in its membership, including Australia, New Zealand, and Saudi Arabia. Both banks are helping to fund China’s trillion-dollar “One Belt One Road” infrastructure initiative. China is so far ahead of the United States in building infrastructure that Dan Slane, a former advisor on President Trump’s transition team, has warned, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”

The leader in renewable energy, however, is Germany, called “the world’s first major renewable energy economy.” Germany has a public sector development bank called KfW (Kreditanstalt für Wiederaufbau or “Reconstruction Credit Institute”), which is even larger than the World Bank. Along with Germany’s non-profit Sparkassen banks, KfW has largely funded the country’s green energy revolution.

Unlike private commercial banks, KfW does not have to focus on maximizing short-term profits for its shareholders while turning a blind eye to external costs, including those imposed on the environment. The bank has been free to support the energy revolution by funding major investments in renewable energy and energy efficiency. Its fossil fuel investments are close to zero. One of the key features of KFW, as with other development banks, is that much of its lending is driven in a strategic direction determined by the national government. Its key role in the green energy revolution has been played within a public policy framework under Germany’s renewable energy legislation, including policy measures that have made investment in renewables commercially attractive.

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Gary Anderson 1 month ago Contributor's comment

Interesting concepts. US politicians are so afraid of their own shadows, so these ideas are unlikely here.