Maryland approves landmark loan guarantee for natural climate solutions

January 12, 2023

A forest of pine trees

Credit: Canva

This week, Maryland became the first state to approve a loan guarantee through its Water Quality State Revolving Fund (SRF) to finance “natural climate solutions,” which are practices that reduce and store carbon in forests, grasslands, farmland, and wetlands.

The $2.5 million loan guarantee for the American Forest Foundation, a conservation group, will help it to unlock private capital to generate carbon credits through the organization’s Family Forest Carbon Program, which assists landowners in implementing practices that enhance the role forests play in protecting water quality and sequestering carbon, the organization said in a statement.

The loan guarantee was made possible by legislation enacted in 2021 that was sponsored by Maryland state Delegate Dana Stein, who is a member of the CSG East Energy and Environment Committee. “This is exactly the type of project I envisioned when I sponsored and passed House Bill 94 in 2021 to expand the authorized uses of the guarantee authority under the state’s SRF program,” Stein said.

In its statement, the American Forest Foundation said the project sets a national precedent for using SRFs to fight the effects of climate change through forests.

Clean Water SRFs, administered by the U.S. Environmental Protection Agency, are self-perpetuating financial assistance authorities for water quality improvement projects in the United States. The EPA provides grants to all 50 states, plus Puerto Rico, to capitalize state SRF loan programs.

The programs function like environmental infrastructure banks by providing low-interest loans to eligible recipients for water infrastructure projects. As money is paid back into a state’s revolving loan fund, the state makes new loans to other recipients for high-priority water quality activities.

At CSG East, Delegate Stein played a leadership role in organizing a working group that explored innovative financing mechanisms and best practices to promote carbon sequestration in agriculture and forestry. The task force met with experts from nonprofits, the public and private sectors, and held a virtual summit in 2021.

Delegate Stein said these conversations helped inform his efforts in Maryland.

“CSG was instrumental in connecting me with potential funders of sequestration efforts,” said Stein, who is vice chair of the Maryland House Environment and Transportation Committee.

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