$2.2 Billion Investment by the US in Green Bonds
In an attempt to encourage sustainable investment, approximately 2.2 billion dollars were released by the United States treasury in new bonds. This move is being considered a great kick-start for the renewable energy sector and it will also speed up the roll out of low carbon energy projects in the US. Clean Renewable Energy Bonds (CREBs) is the name of the new financial instrument that will function as a low interest loan to the owners of renewable projects. This bond will be providing them an alternative for traditional monetary sources that had stopped functioning last year due to the global financial crunch.
Clean Renewable Energy Bonds in 2005 were originally authorized as a part of the Energy Policy Act. Approximately 800 million dollars in CREBs was created in 2008 under the Emergency Economic Stabilization Act. Earlier this year, this amount went up to 2.4 billion dollars as a part of the stimulus package by the Obama government.
There is a lot of similarity in these bonds and production tax credits awarded to renewable projects. The instrument applies to the same projects on a large basis. The only difference lies in the fact that these bonds serve as a finance tool rather than providing relief from post-implementation tax. These bonds are being said to serve as an immediate monetary help for the renewable sector and take projects related to solar or wind farms into the construction phase. If a utility or government agency will sell the Clean Renewable Energy Bond to any lender, the lender will then become the bondholder. Normally, the bondholder will get interest from the issuer but in the case of CREB, majority of the tab is picked up by the federal government and the bondholders are paid interest in the form of tax credit.
In the United States, bonds have become one of the latest funding mechanisms, especially designed to speed up the development of the renewable energy capacity in the country. The government is also planning to start a direct grant scheme for providing projects with Federal funding.