If we had adopted a comprehensive clean energy program, including a cap-and-trade system, back in 2001 or back at the time of the Kyoto Protocol, then things might have looked very different during the credit boom period. In particular, with cheap money available, large-scale investments in green electricity generation would have looked like a high-payoff investment opportunity. True, any particular investment would have been risky since none of the technology has been deployed on a truly large scale. But the potential upside would have been huge.
Instead we got, well, what we got. And now that the country is getting serious about reforming our energy policies, the climate for financing large-scale investments has become terrible. With markets incredibly risk-averse, it’s difficult for any kind of project that doesn’t have a long track-record behind it to get off the ground. And innovative green technology, by definition, lacks such a track-record. One potential solution would be a government-financed “Green Bank,” as described in a new proposal from Karen Kornbluh and John Podesta.