Green Bonds For Renewable Energy Technology
I never thought that the push for alternative energy sources would be so hard in Canada. Apparently, many companies in Canada have had trouble getting funding to push for renewable energy like wind, hydro, biomass and geothermal. A government funded organization called Action Canada Fellows has recognized this problem and thinks that Canada should be a renewable energy giant. They are proposing that Green Bonds be issued in order for Canada to accomplish this goal.
How do Green Bonds work?
These Green bonds will be government-backed bonds that can help increase the production of alternative energy. This makes the bonds as safe as any traditional government bond. The government will issues these bonds and allow private companies to bid on them. Any company that borrows money earned through the bonds will have to show how they are reducing carbon offsets in an economical way. Since there is a risk to default with some of the companies, the tax payers will have to cover the difference to ensure they are paid in full. Even with the government shelling out some money for this program, it is still far cheaper than providing subsidies for alternate energy growth.
What companies will get the money?
The green bonds will go towards funding companies that are not necessarily researching any new technologies, but purchasing existing technologies to build an infrastructure for renewable energy. The main problem for many of these companies is that they are finding it difficult to get funding.
So for example if I want to build a coal plant, compared to a bio-gas plant, and I went to the bank and borrowed money for the coal plant, they will lend me money at prime, assuming I am a good company. But funding a bio-gas plant or a tidal generation plant, that’s going to be about 18 per cent, because they’re just not familiar with it.
Banks aren’t familiar with many of these alternative energy sources and are unwilling to take a risk on them.
Who can buy one?
The biggest benefit to this program is the fact that it gets the citizens involved in the fighter for a cleaner source of energy. Buying a green bond will allow people to make a difference. It will also educate many people on just how many different renewable energy sources we currently have available. Another huge advantage to the buying these government bonds. The energy sector is extremely risky to invest in, including alternate energy. This makes these bonds a steal as it allows people to not only make a difference but not feel like they will lose all of their money in doing so. If the bonds are accepted by the Canadian government, it is predicted that tens of billions of dollars could be raised.
Europe has already started to use green bonds and now hopefully Canada will be the next country. If this can be successful in Canada as well, why couldn’t this be a viable option in other countries, like America? We’ll have to wait and see if something like this is picked up by other countries.
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4 Responses to “Green Bonds For Renewable Energy Technology”
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Would be nice to see the US follow suit on this one. We can only cross our fingers!
SteamboatEcobroker
Its definitely a great idea! You’d think the government would be a little more forward with this sort of thing and provide more assistance to businesses and individuals that are actually interested in reducing their carbon footprint.
Green Home Hintss last blog post..Alternative Cat Litter and Litter Boxes
I would love a program like this. Green bonds would be a great investment. If the goverment made them tax free income i bet people would line up to buy the bonds.
Chris@ high yields last blog post..Pimco high yield bond fund nav.
I agree completely with you Chris. Many people would start to buy them if they make them tax free. It just makes financial sense in that it doesn’t require the government to put much money out and they get to please us by providing companies with the funds they need to get renewable energy more available.