In Massachusetts, Governor Healey’s administration has announced the creation of the Massachusetts Community Climate Bank. Otherwise known as the Green Bank, it will begin with $50 million in seed funding and will be initially targeted at decarbonizing affordable housing. While other states have established Green Banks, the Massachusetts approach is notable because it will be the first ever in the nation devoted to affordable housing. However, there are plans to expand it eventually. You may have two questions though: 1) what is a Green Bank, and 2) with so many programs already in place for decarbonization, why do we need it?

At the most basic level, Green Banks are “public, quasi-public, or nonprofit financing entities that leverage public and private capital to pursue goals for clean energy projects that reduce emissions.”  They allow clean energy projects which may not be able to meet traditional financing requirements to get the capital necessary to move projects forward. The $50 million initial investment from the Healey Administration will allow it to access some of the $27 billion in funding in the Greenhouse Gas Reduction Fund established by the federal Inflation Reduction Act. Miriam Wasser from Boston radio station WBUR has prepared this explainer about Green Banks operate.

A more interesting question is why Massachusetts needs a Green Bank when the state already has several incentive programs. The answer is straightforward: what is currently available is nowhere near enough to fund our building decarbonization needs. The Commonwealth will need to invest billions to achieve its ambitious greenhouse gas reduction requirements.

In Massachusetts, over 65% of the energy used by buildings comes from fossil fuels. Unfortunately, roughly 85% of the residential buildings expected to exist in 2050 have already been built. This housing stock is also older, as with much of New England and the Northeast. Older homes are significantly more difficult and expensive to retrofit. These aspects of the building stock in Massachusetts signal the need for more large-scale investment in programs to retrofit, weatherize, and replace fossil fuels used in these buildings.

Currently, the vast majority of funding in Massachusetts for weatherization and heat pump installation comes from the utility-administered  Mass Save energy efficiency program. Massachusetts has fielded a top-rated energy efficiency program for over a decade that provides billions of dollars in investment toward energy efficiency, weatherization, and heat pumps. However, the program is primarily funded through ratepayer dollars. As the need to invest in housing stock improvements, additional funds are needed to avoid placing the decarbonization burden on utility ratepayers. Therefore, the need to find alternative funding mechanisms for decarbonization is clearly critical.

A Green Bank alone will not entirely solve our decarbonization financing needs for the Commonwealth. However, it remains a critical piece in the decarbonization jigsaw puzzle and signals that the Healey Administration understands the need to diversify the funding sources to meet the building decarbonization challenge.