Clean Energy Bond Finance Model: Industrial Development Bonds (IDBs)

January 9, 2013

Clean Energy Group, Council of Development Finance Agencies | Clean Energy and Bond Finance Initiative

The Clean Energy and Bond Finance Initiative (CE+BFI), a joint initiative of Clean Energy Group and the Council of Development Finance Agencies (CDFA), has released a recommended financing model for clean energy development. The Industrial Development Bond (IDB) model leverages bond financing to achieve relatively low cost capital for renewable energy.

IDBs are a form of qualified private activity bonds, which provide tax-exempt interest rates to private borrowers who meet certain public benefit requirements. In the case of IDBs, borrowers must be small- or mid-sized American manufacturers. This financing tool can be important to clean energy development as manufacturers of energy components seek capital to expand. Manufacturers in any industry could also use IDBs to purchase more energy efficient equipment.

The paper on the IDB model is one of a series published by CE+BFI. The series of recommended financing models is intended to provide state and local governments with a menu of options for supporting and financing clean energy development in their communities.