The $1 trillion bipartisan infrastructure plan before Congress is inching closer to becoming law. And though the investments in climate change have been scaled back, the bill still includes more than $150 billion to boost clean energy.
Milken Institute Public Finance Program Director Dan Carol tells Yahoo Finance Live that the bill is a good start, but more needs to be done in order to address America’s vast energy infrastructure needs.
“I think it’s a very good down payment on climate. The initial bipartisan framework, there’s some good stuff in there on electric grid and carbon capture and batteries and storage, but it’s good that the Biden administration is taking the two-track approach because there are lots of things that are needed there,” he said.
Carol notes that $400 billion in tax credits for wind and solar are not in this latest draft of the bill and there are “deep cuts to measures that are still present.”
“The electrification was cut from about $175 billion to about $7 [billion] or 8 billion. For the auto industry, which is planning to invest heavily, over $100 billion in that area to match that with core infrastructure to support the shift to electrification is important. But look … we have a $17 trillion gap by 2050 — that’s $600 billion a year … but 150 billion for 8 years is not quite going to get there. So it’s good that we have a two track approach. So [a] down payment, but more is needed,” he added.
When asked if the cuts made to climate change measures in the bill would act as a tailwind for investors, Carol said, not quite.
“It’s not tailwinds for investors. I would call it a light breeze at this point. I mean, you have an exciting trend where the BlackRock and other institutions are allocating real assets looking for deals, but you know, recent quotes from Larry Fink and others echoing a real problem, which is there’s not that many good deals.”
Carol and the Milken Institute have advocated for a pre-development fund to support deal flow.
“Only the public sector will do the work to … turn it into an investable project. And whether it’s $2 million, $10 million, a $100 million or utility scale, the European investment bank, the Canadian infrastructure bank has been setting aside 5% or more for essentially equity risk capital,” he said.
Carol also notes that Ed Markey (D-MA) recently introduced a $15 billion pre-development investment bill, which he thinks has a good chance to be a good deal starter and pipeline builder for investors to get into this space.
“There’s lots of low costs, debt out there, but equity risk capital to develop these projects. So we’re hoping to have investors lean in more to get the second round of work in this area.”
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.