State Clean Energy Funds Becoming Key for Green Jobs and Investment

A joint report from The Brookings Institution and The Rockefeller Foundation examines how more than 20 states are investing $500 million per year from clean energy funds (CEFs).  The report, Leveraging State Clean Energy Funds for Economic Development, details how CEFs are becoming key mechanisms for states to support their clean energy economies.  CEFs are increasingly important in a time of federal energy policy uncertainty and the possible expiration of federal tax incentives, subsidies, and loan guarantees contained in the 2009 stimulus and other programs.  While CEFs have successfully financed significant clean energy projects, the report notes that CEFs can play a more robust role in the development of nationwide clean energy industries.

According to the report, over the last decade, state CEFs invested $2.7 billion and leveraged an additional $9.7 billion from federal and private sector sources.  The combined $12 billion supported over 72,000 clean energy projects, ranging in size from commercial power projects to residential solar installations.  CEF-supported finance mechanisms for installing clean energy technologies include rebates, grants, loans, and performance-based incentives.  CEFs also enabled increased investment in energy efficiency programs by almost $3 billion over five years, almost half of which funded consumer investment subsidies.  These investments played critical roles in deploying clean technologies, overcoming upfront capital shortages, and creating thousands of green jobs.

CEFs raise revenue through a variety of mechanisms, including ratepayer electricity bill surcharges, renewable portfolio standard (RPS) compliance payments, sales of regional carbon allowances (Regional Greenhouse Gas Initiative states), pollution charges on utilities, bonds, and taxes on fossil fuels. 

The report emphasizes that despite the success of CEFs in promoting clean energy action, states should focus on reorienting CEFs toward long-term economic development goals.  Increasing innovation through greater research and development spending is needed, as well as financial support for early-stage clean energy companies and technologies.  States should also improve communication and pool their resources when working on shared objectives.  In particular, states can increase the efficacy of CEFs if they:

  • “Reorient a significant portion of their funding toward clean energy-related economic development
  • Develop detailed state-specific clean energy market data
  • Link clean energy funds with economic development entities and other stakeholders in the emerging industry
  • Collaborate with other state, regional, and federal efforts to best leverage public and private dollars and learn from each other's experiences.” (Brookings Press Release)

Overall, the hope is that the early success of CEFs can be the basis for more effective public support for the clean energy industry.  


"Several States Using Little-Known Fund to Jump-Start the Clean Economy"

Report Link: Leveraging State Clean Energy Funds for Economic Development