I would expect that any real world version of this would be a public/private system, with the government acting as a collection agency and bank’s bank, while the actually underwriting and lending would be done by specialists who are tasked to evaluate projects based on technical and financial criteria less subject to political whim.

If lenders are further rewarded for issuing good loans and penalized for defaults, as they should be, a system like this should function pretty well.

Of course, if you don’t accept risk, you’re also guaranteed not to invest in projects that generate great returns. So it’s all about finding the right balance that allows for the right amount of experimentation.

http://tyler.blogware.com/blog/_archives/2008/5/28/3717596.html

Personally, I like the idea but have some of the same concerns raised above. Who manages it? Where does the money go? How can I control whether it goes into a nuclear plant or not? That said, projects such as commercial building or home retrofits, or the deployment of renewable energy systems with long-term paybacks, could be done on the kind of scale we need to make a significant dent on emissions. Too many building owners, municipalities, etc… are afraid to take the plunge, even though the payback can be three or five or 10 years depending on the path chosen. Part of the reason they’re afraid is because the upfront capital required will take away from other, more pressing concerns — i.e. replacing aging sewer infrastructure, schools, drinking water systems, etc… A green bond would create a fund that allows us to plunge into purely cleantech/energy projects, create green-collar jobs, and stimulate the economy on the kind of massive scale we need.