(Graphic via English Wikimedia)

TO SAY THAT talk about energy affordability is having a moment feels like an understatement. What was once considered impolite dinner conversation has become a shared reality, with neighbors swapping stories about the financial burden of high energy costs and the strain they’re putting on household budgets.

In Massachusetts, energy prices have been steadily climbing for years, and lawmakers recognize that they must address these economic pressures. One innovative policy idea on the table that should receive more attention is the creation of a state climate bank.

State Sen. Paul Mark first introduced this concept in the Legislature several years ago. His proposal has since evolved, and now he and Rep. Joan Meschino have introduced updated legislation to establish the Massachusetts Climate Bank. The bill would create a quasi-independent public authority that would foster financial innovation to invest in climate mitigation and resilience projects and accelerate the deployment of clean energy. This market-driven tool would lower costs, reduce climate pollution, enhance community resilience, and strengthen the Commonwealth’s economy.

Once established, the climate bank would be overseen by an 11-member governing board made up of climate finance experts and state officials. The governing board would manage a mix of public and private funds and direct financing to eligible projects. It would also establish clear governance and accountability measures to ensure transparency, financial sustainability, and equitable access to resources.

This is not a grant program or a new tax. Nor would the bank hold “accounts” like a traditional bank. Instead, it would provide low-interest loans, credit enhancements, and other financial products to make clean energy and resilience projects workable for homeowners, small businesses, manufacturers, hospitals, universities, and developers.

Initial state appropriations of $100 million over five years — a modest amount — are designed to unlock private investment and ensure long-term financial sustainability. In addition to the publicly appropriated seed money, the bank would access multiple funding streams, such as private capital, philanthropic investments, and cap-and-trade revenues, to ensure a durable source of financing even amid changes in federal funding.

This is not a new idea. In fact, the proposed climate bank follows a well-established model. There are currently about 40 other state and local climate banks operating in the US — demonstrating that climate banks work. Since 2013, projects in states like Connecticut and New York have leveraged private capital to implement climate solutions and deliver savings to residents and businesses.

Using public seed monies to leverage larger sums of private capital, state and local climate banks across the country collectively invested $10.6 billion into clean energy projects in 2023 alone. This strategy reduces dependence on public appropriations and ensures that funds revolve are reinvested over time.

Private capital is one of the last untapped financial resources in Massachusetts for funding the transition to a cleaner, more resilient economy. It could help fill resource gaps that exist because traditional banks are often hesitant to shoulder the administrative burden for small projects or invest in projects that navigate unfamiliar terrain. The new bank would also complement existing programs, such as the Massachusetts Community Climate Bank, which focuses exclusively on affordable housing projects.

Importantly, the new climate bank would enhance Massachusetts’s response to the energy affordability crisis. The most effective way to address rising energy costs is to lower the cost of energy production while reducing demand through energy efficiency measures. Yet in passing a new energy affordability bill 10 days ago, the House proposed a massive cut to the state’s nation-leading energy efficiency program Mass Save. The climate bank could help offset some of this lost funding by providing low-cost financing for the same energy efficiency projects that Mass Save has enabled, supporting both residents and businesses.

Leading businesses increasingly view clean energy investments as critical infrastructure upgrades that reduce long-term operating expenses and improve resilience. A dedicated climate bank would provide a vital mechanism to help businesses access low-cost capital to upgrade facilities and stay competitive in a modern economy. With a stable, long-term source of funding, businesses can confidently invest and grow in Massachusetts, instead of making investments elsewhere.

A climate bank will also help the state meet its climate commitment to reach net zero emissions by 2050. Homeowners and businesses of all sizes could use climate bank financing for projects that will reduce climate pollution and expand clean energy, while helping to strengthen local economies and stimulate job growth.

Massachusetts has long been a leader in climate innovation. Lawmakers have a clear opportunity to again turn that leadership into action, without significantly tapping an already stressed state budget. Creating a climate bank is a smart approach to lower costs, reduce pollution, unlock private investment, and keep Massachusetts competitive. It is a fiscally responsible path to achieve three critical goals: address affordability challenges, strengthen the economy, and remain a leader in addressing the challenges of a changing climate.

When the House recently took up the energy affordability legislation, Rep. Meschino proposed an amendment to include the Massachusetts Climate Bill, but it was not addressed before the House vote. As the bill moves to the Senate, lawmakers should seize the opportunity to include the provision.

With affordability concerns looming large, it is a smart economic strategy that also advances the state’s commitment to smart climate and energy policy.

Rishi Reddi is a senior policy advisor at Ceres, a national, Boston-based nonprofit working to accelerate the clean energy transition, overseeing policy advocacy for the Northeast states.