Traces of a Circle

This is an archived version of the PW Sources newsletter from Saturday, April 13, 2024. Sign up to receive PW Sources directly to your inbox here.


Last week, the EPA announced eight awardees who will receive funding under the Greenhouse Gas Reduction Fund (GGRF), a $27 billion financing program established in the Inflation Reduction Act of 2022. The GGRF aims to bring private investment toward low- to zero-emission projects in communities that have struggled to attract capital for green development.

In a 2014 article, WHITNEY ANGELL LEONARD advocates for the use of the green bank model at the state and, eventually, the federal level:

“The magic of green banks lies in their shift to a finance-based model from a subsidy-based model of support for clean energy technology. Subsidies have traditionally been the other mechanism that governments have used to support clean energy, but they are not nearly as efficient as the green bank model. In addition to the problem of ‘picking winners,’ subsidies also tend to be expensive per unit of technology deployed. While a subsidy is an expenditure that will not be paid back to the government, a loan represents an asset because it will be paid back, and, in the meantime, the lender can charge interest on it. In the case of government loans, both the federal government and state governments have a low discount rate because they have relatively easy access to capital and a high certainty of being able to collect money through taxes. And as long as a state government can loan money at an interest rate that is above its own (low) discount rate, it can actually create value with that loan. Moreover, partnering with the private sector also helps introduce private lenders to the clean energy technology market and helps develop secondary markets in clean energy investment. Both of these developments will help ensure the private sector is positioned to finance clean technology on its own at some point in the future, without the need for government support. The green bank model is meant to work toward this goal.”

“Manchester and other municipalities would save millions if the GGRF capitalized the state’s historic green bank, which could secure lower fees and interest rates.” In PW, David Backer on how the GGRF could be applied towards public school capital projects. Link. And a Climate Policy Initiative report from January examines the main challenges in implementing the GGRF. Link

+  “With the launch of the GGRF, we have an enormous new pool of financial capital in institutions carrying public missions to close the gap between ‘financeable theoretically’ and ‘financing in reality’ for the clean energy economy.” By Ilmi Granoff. Link.

+   “Another instrument in the weak derisking toolkit are green capital requirements that impose additional capital requirements on banks.” Daniela Gabor and Benjamin Braun’s October 2023 paper offers a critical perspective on “derisking.” Link. And see Gabor’s 2022 PW essay on the subject. Link


Political Forests

BOSMAN BATUBARA is an Indonesian postdoctoral researcher at the Human Geography and Spatial Planning Department, University of Utrecht. A recent paper coauthored with Michelle Kooy, Yves Van Leynseele, Margreet Zwarteveen, and Ari Ujianto links uneven urban and rural in Indonesia.

From the paper:

“This process of turning village land into forest exemplifies what Peluso and Vandergeest have termed political forest: the enclosure of forest lands by the state. As Peluso notes, ‘village enclaves in the teak forest are among the poorest of the poor forest villages.’ Political forest then explains the relatively high percentage of landless people in Kedungwringin. Ibu Siji’s village was far from exceptional. According to the company profile, Perhutani currently controls almost 2.5 million hectares of land across 6381 villages in the island of Java and Madura. With the enactment of the Basic Forestry Act 5/1967, the New Order regime claimed the majority of the country’s land as state forest. From 1967 onwards, the New Order state extended its ‘political forest’ to the forested lands on Indonesia’s outer islands that had so far remained untouched, dividing forest lands into several categories, including that of ‘industrial forest.’ By 2018, 63% of Indonesia’s land area was demarcated as kawasan hutan or forest area. The Basic Forestry Act 5/1967 also made it possible for the New Order regime to allocate large-scale logging concessionaries to non-state companies, paving the way for massive capital investments in the logging sector. Between 1967 and 1980, 519 logging concessionaires covering a total area of 53 million hectares were given to non-state corporations.”

+ + +

+  “While overcapacity can be seen as economically wasteful, it engenders a Darwinian struggle for entrepreneurial survival and technological innovation, which nurtures internationally competitive export champions.” New on PW, Paulo Gerbaudo examines China’s leadership in EV manufacturing. Link.

+  Ahead of the upcoming proxy season, join the Center for Active Stewardship on April 17 at 1 pm ET for a discussion on climate-related risks and opportunities in a post-IRA world, featuring Lee Harris, Nolan Lindquist, Marian Macindoe, Michael O’Leary, and Jessica Whitt. More information and registration here

+  Join PW on April 23 at 12 pm ET for a discussion of profits, prices, and the green energy transition, on the occasion of Brett Cristopher’s new book The Price is Wrong, featuring Christopher, Melanie Brusseler, and Kyle Chan, and moderated by Heatmap’s Robinson Meyer. 

+  On April 25, we are happy to support a conference at Columbia University organized by Ella Coon and Ben Kodres-O’Brien, and featuring many friends and collaborators: “New (and Old) Directions in Historical Political Economy.” Register here

+  “Squeezed by the Manchin-Sinema vise, congressional Democrats sacrificed everything besides climate in their reconciliation bill because it offered a goldilocks solution to their true concern: the triple crisis of China–climate–secular stagnation.” By Ted Fertik and Tim Sahay. Link.

+  “If Uttar Pradesh, growing 2 percentage points slower than Tamil Nadu, were to expand 2 percentage points faster than the southern state, per capita incomes would level—in 64 years.” By Andy Mukherjee. Link.

+  By forecast comparison, Leila Bengali analyzes which categories of goods and services have responded to hikes in the federal funds rate between 2020 and 2024. Link.

+  “The Marshall Plan and IBRD lending may have played a smaller role in European reconstruction than what has been commonly believed. Instead, Europe was primarily responsible for rebuilding its own economy.” By Paulina Restrepo-Echavarría and Brian Reinbold. Link.

+  Aditi Sahasrabuddhe argues that interpersonal trust enabled policymakers to engage in ad hoc cooperation during the 2008 Global Financial Crisis, reinforcing global hierarchies. Link. And see Sahasrabuddhe’s 2021 PW article on central bank independence. Link

+  “Scholars have observed that, historically, state engineers’ understanding of their social role has bound them together more than their expertise: their group has identified less as a profession than as a social category. Consequently, some researchers have questioned whether state engineers really were (or are) engineers in the technical sense at all. Terry Shinn has argued that the work of state engineers was ‘almost totally lacking in scientific and engineering content: the attributes that mattered were social and political.’ Eda Kranakis, however, disputes such conclusions on two counts. First, she argues, the public works design and construction projects of nineteenth-century state engineers clearly included large amounts of technical work. Second, she notes, the emergence of large-scale technological systems increasingly required both state and civil engineers to perform a variety of different kinds of tasks, and defining engineering as a narrow set of technical tasks offers too simple a view of what it means to be an engineer of any kind. To put the matter somewhat differently, state engineers did not so much derive legitimacy from their technological achievements as the other way around. That is, their position within the state conferred legitimacy on their technologies.” By Gabrielle Hecht. Link.

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