Your idea: A National Green Loans Program
A National Green Loans Program
Rodney Wilts
Green buildings are recognized as a universally desirable objective. They reduce carbon emissions, lead to better health and productivity, and reduce demands on city services. McKinsey’s Cost Abatement Curve for GHG reductions shows that green building retrofits are one of the few cost positive measures that could be taken today to reduce GHG emissions. Despite the attraction, deeply sustainable buildings still make up a tiny percentage of the building stock in Canada.
There are a series of barriers to deep green development, but of the more significant include the challenge of fixed capital budgets, and a disconnect between who invests the funds (the developer) and who ultimately benefits from the energy savings, the health benefits and the reduction of demand on services (the ultimate building occupant, the municipal government and society at large).
One remedy for this is a comprehensive national green loans program. The concept behind green loans is simple – a lender provides funds to allow for green enhancements that save on utility bills (e.g. better windows, a better boiler etc). The loan is then transferred to the occupant, and the occupant uses the utility savings to pay off the loan. Ultimately everyone wins. The developer can build a better building without additional capital expense; the occupants get a better building and recognize savings once the loan is paid off, and society gains through more efficient buildings. We have had first-hand experience of the power of these loans in projects such as The Currents, a LEED Platinum mixed-use building in Ottawa. The loan allowed Windmill Developments to invest in additional energy efficiency measures that would not have been otherwise justifiable. The loan was transferred to the condominium board that will have it paid off in several years.
Although there are a handful of precedents in Canada there is no national program. Each loan needs to be set up individually, resulting in a tremendous amount of time and money spent on each loan. Small projects, particularly retrofits, are not in the position to custom develop these green loans and therefore do not have access to this powerful tool. The federal government could set up a revolving green loan fund on a cost-recovery basis making this tool available for all projects aiming to go green. Alternatively, the federal government could act solely as guarantor of the loans. Using existing government resources the government could review energy modelling data, confirm anticipated savings, and guarantee the loan (for a fee) and allow the private sector to provide the capital (not entirely dissimilar to the role CMHC provides in insuring mortgages currently).
Green loans could be a very powerful tool to foster and enable green retrofits without needing to provide for ongoing subsidies and grant programs.
Green Loans and LICS such as being discussed here can only work if the appropriate ROI has been successfully established and then the challenge lies in the home owner’s consistency in paying back the loan. Unfortunately, alot of the residenial thistoric retrofits that we work with are often in lower income areas of urban centers or in rural regions. These buildings require the retrofit mostly because of their age and method of construction. It is imperative to understand the social contract of the technology and how it engages with the homeowner and their goals towards the property before we can engage the technology successfully. It is niave to think that we can just throw money at the problem to create opportunity. We must first understand what goal the technology is required to reach before we engage tools to assist in financing. We need money to assist more professionals who understand the social contract of the technology and the consumer to put the right technology in the right conditions with the right homeowner, so that we can create successful retrofit transitions that don’t break the homeowner in the process. We also need user friendly engagement policy and longer transitionals incentive periods to assist consumers with the transition in lower income homes. Eighteen months to two years does not give low income home owners alot of time to work their technology into a viable construction plan and implement it. Very often energy auditors do not assist low income homeowners in their plan to implement the technology properly, therefore; the home owner is often left to their own devices in making their transition plan. More time would allow for better planning.
Your loan program will work.
I think it needs to start from the banks though.
The green loans concept is great and could play a significant role in the refitting of existing buildings. We have a lot of work to bring the renovation industry up to speed on how to do it cost effectively and a program similar to Alberta’s long cancelled “Energy Matters” program would assist. It provided a clearing house for unbaised iformation of equipment and technology – The computer simulation program used for Energuide for Houses and the R-2000 program would also help given the availability of enough well trained evaluators.
Setting higher standards in the building codes would be the most effective strategy for new construction since it has been well estalbished that with good design there is no increased total cost in larger buildings since investements in efficiency reduce capital costs in equipment to satisfy the energy demands.
The building process does have to be productive and constructive concerning outcomes and results. Misinterpretation of a single fact is going to block the sense of building let alone the understanding in every single fact. It does not have to be harrassment and abusive control of claimed power.
I think the Green Loans is a good idea: it’s simple and straightforward – like Grameen’s Nobel Prize idea for poor rural farmers in India. I would like to provide another perspective on sustainable development in Canada. But first I would like to ask: what does ROI mean? Most people reading Internet comments, which are similar to reading newspaper articles such as this skim and wouldn’t waste their time doing an in-depth study of the subject, also Karen: What, who, where, are the “right homeowners”?
Over the past 10 years new homes have changed. A positive change is that developers are building smaller single family homes, in the past huge monster homes were built; but I am still astonished on the extent of development in the Lower Mainland of Greater Vancouver. My son’s home is one of these homes; but sustainable living in this area leaves a lot to be desired particularly with respect to vehicles. In Langley where I live, I think I am the only one who rides a bicycle and I gag on motor exhaust and feel endangered on the roads whenever I bike or walk.
In my opinion we (Cda) has a long way to go in sustainability. Regarding being a homeowner, it is unlikely that I will ever be one. Come to think of it- even if I did have the money – I would never live the way Cdns live here (I am Canadian, born and bred). I have lived in Asia where open space is efficiently used and more people ride bicycles, even though they are now buying cars at a faster rate, i.e. Japan, Thailand, China and Korea. Vegetable gardens are planted everywhere: next to parking lots, under bridges – in many areas ground is used to grow vegetables. Here in Cda open space is often dominated by vehicles and Cdns live like silk worms holed up in their cocoons, they shut their windows and fret over the least inconvenience – they don’t think locally. At my son’s home, there is space to have a little vegetable garden, but I assume that if I did plow up the ground (instead of having a lawn out front) to grow some tomatoes and lettuce like they do in Korea [the weather is cold like here] the neighbours may complain about it.
So my green idea: First, let’s promote GREEN at the local level in every sense of the word.
I think that the Liberal Party should do as the Liberal Party of 1938 did and bring the money creation powers and the federal debt back to the Bank of Canada from the chartered banks. We could then make low-cost loans, not only to the business community for the green buildings, but to the cities and provinces for infrastructure , some of which is over 100 years old. We could then really manage our debt and any interest raised thru those loans could be used to pay down the debt! This philosophy served Canada well from 1938 to 1974. There is absolutely no reason it could not serve Canada again except for the powerful banking lobby that should be extinguished. The government is there to serve the Canadian people, not just to make bankers richer~!
I think this is a very elegant and worthy idea. It would be great if the lending institution (the federal government , or whoever else) could couple up with the power utility to have the estimated power savings taken off the bill and added to the loan repayment account. The bill could even include handy details like time to repayment of power saving additions. If marketed and presented well this could be very sleek and convincing. My two cents, but really a great idea to begin with. Thanks for listening.
This approach can and should work. Moreover, it is far superior to subsidies, as both the administrative and subsidy costs would dwarf a loan program.
I proposed this several years back and believe that it could even be extended to include energy efficient appliances. If someone can provide an e-mail address, I would be happy to forward the PowerPoint.
I also think that it would make sense to determine whether there is an efficient means of delivering this program through banks via a CMHC loan guarantee that would enable the bank to quickly and efficiently add the incremental cost to an existing mortgage. Alternatively, it would be worth looking at whether it would be possible to attach the cost to a utility bill in such a way that it would attach to both the home/building and the occupant, and become due in full, if and when a home/building was sold. In effect, could it be made to have the positive characteristics of a mortgage while avoiding most of the associated administrative costs?
I have a PowerPoint on this