Policy-As-You-Go

I will always be a policy wonk at heart. There is an idea coming out of England known as "pay-as-you-save" where homeowners would pay off a retrofit loan with the money they save on energy due to the retrofitting.

Sounds easy doesnt it?

Here is how it works:

Joe buys a house. Joe finds out that by spending $5 000 retro-fitting his home, he can save 20$ a month. That is 240$ a year. Within 21 years, Joe would be saving money. However, Joe doesnt know if he will own his house in 21 years, so retrofitting the house just is not worth the risk. The "pay-as-you-save" loan takes the savings from retro-fitting the home and applies them to the loan. If Joe sells the house, he also sells the loan. After the loan is paid off, the house's value increases as it is energy efficient. If Joe has the need to move, he sells the loan with the house.

The British Plan requires banks to provide these loans. However, I personally don't see the issue with Environment Canada putting up the money. Let's face it, these are micro-loans. While the full costs for retro-fitting a home can be up to $20 000, some measures costs a little as a few hundred dollars. This is money that is directly injected into the economy that is 100% guaranteed to reduce greenhouse gas emissions because less energy is spent. It may be the most direct way to turn money into reduced emissions while helping kickstart the green economy that Canada needs to be a part of.

The department needs to put up a website that is interactive. On that website, homeowners can find out what changes can be made and how much money these changes would save them. The homeowners can then make a decision as to what changes need to be made and how much these changes cost, depending on the region. Estimates are made and submitted for approval for a "pay-as-you-save" loan. Payment is determined by the amount of money that is expected to be saved on each energy bill.

Now to rebut a few arguments:

Anthony, this will require a huge bureaucracy to manage.

If consumers are choosing from government approved options, the loan approvals are pretty much automatic, provided a simple credit check is performed. The Canadian government has been managing loans for students and businesses for years. This is not a novel concept.

Anthony, what prevents people from taking the money and using it to buy a new car?

As the estimates themselves are approved by the department loan officer, the contractors can bill the government directly for the amount they estimated and are legally bound to do the work once they bill the government. This is also less headaches for the homeowners as well.

Anthony, what about people with new homes?

Getting this work done in new homes is far less expensive. However, I do not see how the extra cost cannot be used to apply for a pay-as-you-save loan to help alleviate some of the mortgage on the original cost of the home. Think of it as an incentive to get off to a good start.

 

I am open to other suggestions and questions. I am not proposing it to any particular party like some of my other blogging friends, like Scott who sent me the article over the weekend.

This is a good idea. It will help Canadians. It will help the economy. It will help combat greenhouse gas emissions.

Who knows? If this works, maybe pay-as-you-save loans can be applied to hybrid cars to bridge the extra cost, with savings at the pump applied for the first couple of years.