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OCR Page 1 of 55Green Bonds
Policy: These bonds would encourage actions that recognize
This proposal recommends
the relationship between land conservation and developmentcreation of a new financing
mechanism -- green bonds -- to raise funds to finance environment-related public projects. Green
infrastructure projects would create environmental amenities in urban, suburban, and rural areas
which would encourage long-term economic investment including those aimed at creating jobs,
restoring environmental quality, and providing an attractive and functional setting for urban
revitalization. This proposal would create a new financing mechanism green bonds -- to raise
funds to finance environment-related public projects. Like qualified zone academy bonds
(QZABs), this program would allow state and local governments to issue zero interest bonds to
NPV
time
lenders who could claim a tax credit for the life of the bond in lieu of interest. The issue makes no
$200,
principal or interest payments on the bond until maturity (13 years). The overall program would
one onsur
be capped at $200 million annually over five years.
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To be eligible for this support, the local community would have to raise the bulk of the financing,
of
at least 55% (unresolved issue).
The availablility of green bonds would encouage actions
revenue Raw
that recognize the relationship between land conservation and development. Green bonds would
be available to finance infrastructure projects that create environmental amenities in urban,
suburban, and rural areas that would encourage long-term economic investment (including that
assoc loss
aimed at creating jobs), enhance the quality of the local environment, reduce carbon emissions
thereby proteting the global environment, and provide an attractive and functional setting for
urban revitalization.
bonds. setof arevery of
To participate in this program, a community would have to raise the bulk of the financing,
at least 55% (unresolved issue). The fifty largest cities, in partnership with appropriate
stakeholder interests, governments, and organizations, would apply directly to EPA (& Interior --
open issue), for their credit subsidy. This will insurewould ensure that these large cities,
proom
particularly those with many environmentally impaired neighborhoods, will receive adequate
attention and appropriate treatment in the process of allocating the subsidies. A portion of the
to
credit subsidies could be allocated and administered by the states among their local communities.
The states would need to -have to develop plans to ensure that funding is allocated by the relevant
ea yr
state authorities according to need and also according to evidenceto ensure that the interest rate
over 13yrs. $
subsidy is being used to support environmental improvement projects. The subsidies willwould be
distributed among participating states and municipalities on a population-based formula.
The green bondingbonds proposal would encompass both public, governmental activities
and private activities that promise public benefits. The virtue of a mechanism that encompasses
both activities is largely one of efficiency and efficacy. For example, the cost to a developer of
adding an environmental amenity with significant public benefits (e.g., extra pollution control
features) may be far less than if a government entity had to implement the same measure
independently. Similarly, incentives to accelerate the timing of private activity (e.g. more
accessible, accelerated compliance with the soot and smog rules) also may create public benefits
(room for new development while attaining air goals) that governmental entities otherwise could
$200m would finance $400 m of bonds over
5 yrs,
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