With short term borrowing costs skyrocketing, banks are being forced to charge a premium to companies looking to access their balance sheet for longer term financing. This secondary effect of the banks' retrenchment is cause for concern at it will affect the speed with which the US is expected to recover from the current banking crisis. 

Higher credit costs will make the economic hurdle for the investments needed to grow our economy even harder to reach. In particular, this higher risk premium is expected to weigh heavily on investments in industries with longer lead times such as energy and transportation.

The situation unfolding in the auto sector is a case in point. Both GM and Ford are teetering on the brink of collapse given their high cash burn rates and their inability to access the markets for term financing. The US government understands how grave the situation is for the autos and has given them access to a $25bln borrowing facility to speed their transition to a more fuel efficient vehicle mix. While this credit subsidy should have been enough to provide Ford and GM with some breathing room to get their acts together, the creation of this new lending facility has not materially improved GM or Fords borrowing costs in the markets which have reached credit card levels over the last six months.

Clearly, the re-tooling investments needed to re-position Ford and GM's businesses require a capital commitment from both the public sector as well as the private sector. Without a mechanism with which to provide a significant amount committed capital for these re-tooling programs, the banks will remain unwilling to lend the autos the money needed to get them back on their feet and the American taxpayer is likely to be burdened with yet another bailout down the road.

The energy sector is another area that will likely suffer under a higher term premium for financing. This will be especially true for the more innovative energy solutions, like wind and solar, which are currently being developed and deployed to scale to help reduce our demand for imported oil. Without a stable pool of committed capital to provide the funding for new energy solutions, we will be allowing these industries to fall short of their promise to create jobs, increase exports, and help us maintain our position as a market leader in innovation.

Indeed, this is not just the case for innovative energy technologies. Under the current environment, the banks are even starting to second-guess their ability to meet the funding requirements for America's business as usual energy investments.  According to the EIA, the US will need to fund $4trln in energy infrastructure projects over the next several decades to meet the energy needs of its growing population. The problem won't be that the funds won't be there to provide the investment capital, the problem will be the rate that utilities will be charged to tap this capital. Higher premiums on loans will translate into fewer projects being done. This is not to say that business as usual energy investments won't be made but the pace they are built out is certainly expected struggle to keep up with demand, raising the risk of a future littered with brown outs.

So how are we supposed to address the fact that the banks are retrenching and lending will be restricted going forward? How can we make sure that the committed capital is there to grow our economy and allow America to continue in its role as a leading innovator in the marketplace? Counterintuitive as it may seem, putting a price on carbon dioxide through a "cap and invest" policy is the answer. "Cap and Invest" is not just a plan to curb carbon emissions after all, it is an investment plan. By taking a significant portion of the revenues from carbon emissions and investing those in technology driven businesses in the early years, we will be growing industries and encouraging investment into a new energy economy. A new energy economy which Thomas Friedman describes in his new book "Hot, Flat, and Crowded" as having the potential to make the country "stronger, healthier, more secure, more innovative, more competitive, and more respected".

How does "cap and invest" actually work? The cap forms a limit on the amount of CO2 that can be emitted in a given year. This declining limit is then broken up into permits that are then auctioned off to emitting entities, creating a huge pool of revenue in the process. The capital from these auctions can then be used in the early years to invest in the benefits of new technologies that will further reduce our dependence on high carbon fuels. Once sufficient capital has been deployed to jump start emerging energy technologies, this program would then be transformed from a "cap and invest" program into a "cap and dividend" program that would rebate energy revenues back to the American people.

Indeed, if a new set of high-growth industries is needed to get America back on track, from re-tooling the auto industry to retrofitting buildings to building the transmission infrastructure needed for a new energy economy, a cap on carbon dioxide can get us there.

The main benefit of a "cap and invest" style program from the banks perspective is that is comes with its own revenue stream. A revenue stream of roughly $150bln a year over several decades that can be used to help collateralize the loans needed to put America back to work and move us in the right direction. This amount of committed capital would provide a total of over a trillion dollars in the early years of a "cap and invest" program that could be deployed to help finance innovative energy solutions for our economy. This revenue stream would affectively be used as a form of collateral, giving the banks confidence to once again finance longer-term investments at reasonable interest rates. Investments that will pay dividends both in terms of their economics under a carbon cap, as well as for their ability to help reduce our greenhouse gas emissions profile.

In sum, the credit crisis that we are facing today is expected to have a severe impact on the US economy. The premium being placed on term financing is expected to limit our future growth as technologies that are forward looking will struggle to find the financing In order to ensure that committed capital will exist to develop these new more efficient, low emission technologies that will not only provide jobs and export opportunities for American companies but will also increase our nations energy security, a "cap and invest" program on carbon needs to be put in place. Indeed in this uncertain financial environment we are now faced with, putting a cap on carbon emissions is fast becoming an economic necessity. We need to get to work, starting today, to design the best "cap and invest" program that we can to provide America with the necessary economic, environmental, and national security incentives to not only move us beyond the current economic crisis but to make sure that we are not faced with another one anytime soon.