August 27th Afternoon: The Recession Diaries

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a1_nobrainer.jpg A good idea is a good idea – or at least a partially good idea. Tom Parlon, former PD parliamentarian and currently construction lobbyist supremo (yes, the same guy who said construction workers’ should be grateful to have their pay slashed) – he’s come up with a germ of a good idea. He reckons there is a €9 billion market in eco-fitting houses. To tackle this market would divert resources into a sustainable and socially beneficial activity. Jobs are created, housing stock is upgraded, people save money on energy costs and we emit less carbon – everyone wins all around.It’s not terribly original. Politicians from all sides of the House have been calling for similar initiatives. What they all have been silent on is – how do we kick start this market activity. The difference is, Mr. Parlon is not so silent. The Construction Industry Federation, along with Sustainable Energy Ireland, are to meet with the Bankers’ Federation to discuss the possibility of banks providing loans at lower interest rates (e.g. 1 to 2 percent lower) for energy saving improvements.

Well, its a start. I would be dubious about relying on lower interest rates. First, banks do as banks do. Politicians get all macho about ‘putting it up to the banks’. Enda Kenny talked street-tough down at Humbert (as if he would charge into the CEO’s office, pound the desk, strip to the waist, and threaten all manner of vase-breaking unless more liquidity was flooded into the system). Even if banks did the socially responsible thing (don’t snigger), is a 1 to 2 percent reduction in interest going to launch the market?

Mr. Parlon reckons eco-retrofits would cost between €10,000 and €20,000. A home improvement loan at the upper end would cost upwards of €5,000 per year over five years. A 2 percent reduction in interest would amount to €20 to €30 per month less – not a major incentive. With people more worried about their jobs and cutting back on spending – well, recessions are not the best time to expect people to invest in eco-upgrades.

What about state grants? SEI operates a number of grants. But they are only partial grants, which means the beneficiaries are those income groups that can already afford a substantial investment. These, in effect become a two-fold subsidy to wealthier income groups – the first is the state grant towards the retrofit, the second is the resulting lower energy costs arising from the retrofit. Paid for by those who can’t afford the retrofits themselves.

Is there another way – one that all people can access at an affordable level? Yes, if we get creative. The Government could

    • Pay for all eco and conservation work on domestic dwellings (environmental investment)
    • The upfront investment would come from the National Pension Reserve Fund
    • All work would be repaid by the householder, but only at a set percentage of income above a certain level (say, 1 percent of income above €20,000 per year)
    • The remainder of the repayments would be made when the house is sold or transferred through inheritance

      In effect, this would act as a loan to all householders, to be eventually repaid at prevailing interest when it can be afforded. This would ensure that all householders – regardless of income or age – would be able to access an eco retrofit, and begin incurring savings through reduced energy costs.

      This would mean no loss to the pension fund – in fact, given the recent losses, this programme would guarantee a vastly improved return to the fund (7.4 percent at current interest rate level).

      So: universal access to environmental upgrade, no penal repayments, jobs created, business activity stimulated, and reduced carbon output – this is no-brainer territory.

      But we first have to have policy-makers with brains to implement such a programme.

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