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“Pay as you save” concept from Britain an environmental idea worthy of consideration.

I was alerted to this article in the BBC a few days ago, thanks to CuriousityCat, who advocated the Liberals should consider making this idea part of their platform plank to do with the environment in the next federal election.

The idea is being put forward by an organization in the UK called the UK Green Building Council, which focuses not on business or industrial emissions, but on cutting down on GHG emissions from homes – over 27% of CO2 emissions in the UK come from energy that is used to heat and light homes – a figure that surprised me a bit, and makes me wonder if the amount here in Canada is comparable.

The premise of the article is that most homeowners will not do renovations to make their homes more efficient, because of the cost upfront, and because homeowners believe that the savings will not benefit them. This plan, called “pay as you save”, is designed to address this problem:

It’s based on a simple premise: that the cost of installing energy efficiency measures be funded through the future savings made on that household’s energy bills. So how does it work? The majority of home energy efficiency measures pay for themselves over a period of time. Firstly, the upfront cost of measures, for example £10,000, is put up by a third party (such as a bank, retailer or local authority), not the consumer. Next, your home gets its makeover, carried out by trained and accredited builders, and as a result energy usage is slashed by around half. Then, from the savings on energy bills, a “standing charge” is repaid, every month, until the original lump sum (plus some interest) has been paid off. The trick is to structure the scheme so the householder, or tenant for that matter, starts saving money from day one, and always saves more each month than they pay back. The other key part of the package that enables this to work is that the monthly charge is attached not to the person, but to the property itself and would be paid off over a period of 25 years. So when the householder moves on, the home’s new occupant continues to repay the charge – and recoups more than that in savings.

This type of scheme appeals to me for the fact it helps ease the burden of the homeowner, and the property is what is charged, not the person.. if they move from this house to another one, they won’t be worried about carrying around loan payments of a property/house they no longer live at. It also quantifies the environmental debate down to quantifiable measures for the regular homeowner to do.

I alerted Jim Harris, former deputy leader of the Green Party, who recently has become a regular columnist at the National Post talking about different environmental issues (one of the few times I will actually link to anything written at the NP) and asked him what he thought of the idea. He posted the BBC story at his Facebook column and summarizes his initial thoughts to the idea:

“Simple solution to kick start energy efficiency in homes. When the electric utility builds new generation it issues 40 year corporate bonds. But when the home owner retrofits they’re looking for a one year payback. That means building supply is favoured 40 to 1 over energy efficiency. This scheme levels the playing field so the capital costs aren’t a hurdle for homeowners.”

I’m hoping he’ll expand on this a bit more with either some questions I sent him that he will hopefully reply to, so if he does, I’ll post an update to the above summary.

In the meantime though, I think something like this would be a policy that is worthy of consideration here. For myself, like at CuriousityCat, I would hope the Liberals would seriously consider this idea as something to advocate as part of our election platform plank that we would look to implement if we were elected following a Liberal election victory. There are some in the party that would like to shy away from environmental issues altogether after the “Green Shift” failed to resonate amongst the population. My argument is that just because one 1 particular idea we tried didn’t resonate last time doesn’t mean we should shy away from stuff – particularly on the environment. If the idea gets attacked, you do a better job of vigorously defending the idea and getting our messaging out to the public – something that was sorely lacking last election. All people have to understand is that they don’t have to pay to refurbish and the energy savings pay back the loan (“pay as you save”).

We’re not in government right now; we need to give the populace more substance and reason to vote for us then just saying we’re not Harper. That isn’t going to work. Some boldness is called for, and quite frankly, I don’t think this plan is that big of a risk, and I hope the policy wonks at LPC central will at least consider the merits of this idea. People still care about the environment as an issue, despite some saying otherwise, and I’d like the Liberals environmental platform plank to be a lot more extensive then our leader saying he thinks the Tarsands are a national unity issue.

UPDATE @ 1:02 pm: Antonio also likes this concept, and adds some more specific ways it could be put into operation here in Canada.

UPDATE @ 3:33 pm: Steve likes the idea as well, both in theory and for the Liberals to take a serious look at it in order to beef up their environmental plank. He also thinks the Liberals shouldn’t be running scared from offering ideas like this on the environment either.

1 comment to “Pay as you save” concept from Britain an environmental idea worthy of consideration.

  • kwittet

    On the surface this seems to look like a good idea. The problem is there are too many variables to it that will make it a nightmare to impliment. First of all is the part where the house is charged and not the person. Is this hidden loan applied to the cost of the house when you purchase it? Imagine a house that would normally cost say $200,000 but the previous owner has spent the say $20,000 on upgrades and now the price is 220,000? So you have been pre approved for 200,000 and now this home is out of your range? What if it is a rental property which is all inclusive(and yes there are some houses that still have this option) and the tenants dont care whether the windows are open in the winter to get some fresh air? What if the house is destroyed by some natural disaster or fire flood or anything that renders it unlivable. Who or how is this loan going to be repaid? Hopefully not out of tax payers pockets. Another issue is when schemes like this are implemented is that contractors usually inflate there rates just because it is goverment related. can they be made to hold rates for such work in a free market society? Can they be expected not to raise there rates in a free market. What happens if a property sits vacant for a long period which is very possible in this recession. Who pays back the loan? What if the property is taken back by the bank? Are they now on the hook for the payments?
    It really is not a bad idea to help the enviroment but at the same time it is a bad idea from an administrative point of view.

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