What Silicon bank collapse could mean for climate

What Silicon bank collapse could mean for climate

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A woman who was part of a line entering the Silicon Valley Bank's headquarters pauses for a selfie in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy)

The Silicon Valley Bank’s headquarters in Santa Clara, California. | Benjamin Fanjoy/AP Photo

The collapse of Silicon Valley Bank could have major implications for startups working to reduce planet-warming emissions, potentially undercutting President Joe Biden’s climate agenda.

The Biden administration took steps over the weekend to avert the immediate failure of companies that relied on the California-based lender, including thousands of climate technology and low-carbon energy businesses. But it has yet to find a buyer willing to take on SVB’s domestic lending portfolio.

That has left some major companies scrambling to secure new lines of credit, write POLITICO’s E&E News reporters Corbin Hiar and Avery Ellfeldt.

“[It] is a major blow to early-stage and even late-stage tech startups looking to get financing,” Daniel Ives, a technology sector analyst at Wedbush Securities, told Corbin and Avery.

The banking crisis, which is the largest U.S. failure since the financial collapse of 2008, comes at a critical moment for climate technology, just as the administration is beginning to roll out the $369 billion in clean energy incentives in the Inflation Reduction Act. Scaling up the country’s ability to produce low-carbon power and remove planet-warming pollution from the atmosphere is key to meeting national and international climate commitments.

How SVB tanked: The bank, which has catered to the tech industry for decades, largely housed its assets in government bonds whose value started to plunge as the Federal Reserve raised interest rates. That set off a panic among depositors who moved to withdraw their money. The bank didn’t have enough cash on hand to pay depositors, so regulators shut down operations — in other words, an old-fashioned bank run.

The administration’s weekend intervention, which created a backup fund to loan money to eligible banks, aims to prevent bank runs at other lenders by convincing depositors their dollars are in good hands.

Green fallout: The collapse has hit regional banks particularly hard, which is bad news for environmental startups, especially ones that don’t have established business models. That’s because midsize banks are generally more amenable to working with niche sectors or smaller markets.

Community solar projects, in which a group of homeowners goes in together on a large off-site installation, have boomed thanks to the support of midsize banks. SVB was a major player in the space, participating in more than 60 percent of community solar financing deals.

Climate tech companies are now waiting to see if the financial industry treats the collapse as an isolated incident or a larger problem that merits tightening lending standards for startups.

“If the reaction in the industry is instead that this is a systemic problem, that’s going to have a much larger, much more pernicious impact on climate tech,” said Ethan Cohen-Cole, a former economist at the Federal Reserve Bank of Boston who now leads the direct air capture startup Capture6.

It’s Tuesday thank you for tuning in to POLITICO’s Power Switch. I’m your host, Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to [email protected]

A message from Renewable Fuels Association:

Adding ethanol to our fuel supply saved American drivers 77 cents per gallon of gasoline purchased between 2019 to 2022, according to economists at the University of California, Berkeley and other leading universities. That’s over $750 per household each year, representing total savings to U.S. consumers of $95 billion annually. To ensure consumers continue to enjoy these savings, President Biden should take action now to allow year-round sales of E15. Learn more here.

Today in POLITICO Energy’s podcast: Ben Lefebvre breaks down the Willow oil project, how the administration is defending its approval and the reaction from environmentalists.

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Sen. Lisa Murkowski (R-Alaska).

Sen. Lisa Murkowski (R-Alaska) on Capitol Hill. | Francis Chung/E&E News

Murkowski’s long game — For nearly two years, GOP Sen. Lisa Murkowski of Alaska waged an ultimately successful pressure and education campaign to move President Joe Biden to approve the Willow oil project in her state, writes Emma Dumain.

“When he was first was elected, I made sure that he knew — by way of letter, by way of any time I saw him — I would mention [Willow] until it became almost a bit of a joke because he knew that I was going to raise it,” Murkowski recalled.

“And equally so with his senior team. I made clear that they knew.”

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Drilling operations in the National Petroleum Reserve-Alaska. | Judy Patrick/AP Photo

Legal battle begins
A coalition of environmental groups filed a quick legal challenge against the the Biden administration’s decision to approve the controversial Willow oil project in Alaska. The groups argue the approval violated four environmental laws, writes Alex Guillén.

The new high-profile legal brawl aligns the Biden administration and Republican lawmakers against environmentalists who have largely backed the president’s climate agenda, writes Niina H. Farah.

Electric future
The Biden administration today announced $2.5 billion in funding to extend the coast-to-coast network of electric vehicle chargers, writes Andres Picon.

The Charging and Fueling Infrastructure discretionary grant program will complement the $5 billion in funding announced last year to put EV chargers every 50 miles along interstate highways.

A tepid approach
Soaring power prices in Europe last year prompted calls for a dramatic overhaul of the EU’s wholesale power market, writes Gabriel Gavin.

But on Tuesday, the European Commission put forward a much more cautious proposal mainly focused on shielding households and businesses from future price surges.

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Fish swim near bleached coral at Kisite Mpunguti Marine Park and Preserve in Kenya. | Brian Inganga/AP Photo

High Seas Treaty: Can a new United Nations agreement to protect open oceans help limit global warming?

Heat fallout: The climate is changing too quickly for the Sierra Nevada’s “zombie forests.”

Pick and choose: Eminent domain is frequently used to build natural gas projects in the U.S., but a new Louisiana bill would end the practice for carbon capture pipelines.

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In February 2021, at least 246 people died in Texas from a storm that triggered rolling blackouts. | LM Otero/AP Photo

Natural gas’ growing dominance of the U.S. power supply is facing a potentially serious stumbling block: a string of failures in keeping the lights on during the harshest winter storms.

Maryland is driving toward an EV future after a state air quality panel voted Monday to phase out new gasoline-powered passenger vehicle sales by 2035.

Rhode Island’s request for offshore wind bids attracted just one confirmed proposal Monday — from Danish offshore giant Ørsted A/S.

That’s it for today, folks! Thanks for reading.

A message from Renewable Fuels Association:

Adding low-carbon ethanol to our nation’s fuel supply saved American drivers an average of 77 cents on each gallon of gasoline purchased between 2019 to 2022, according to a new study by economists at the University of California, Berkeley and other leading universities. That represents a total savings to U.S. consumers of more than $95 billion per year, or over $750 annually per household! As Putin’s war in Ukraine continues to wreak havoc on global energy markets, and as abnormally high inflation rates continue to challenge family budgets, the Biden administration and Congress should support the Renewable Fuel Standard and act immediately to allow year-round sales nationwide of lower-cost, lower-carbon ethanol blends like E15. Ethanol is a proven solution for reducing prices at the pump, cleaning the air, and enhancing our energy security. Learn more here.

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