Saving More Than Money
by Bob Massie
As Barack Obama prepares to tackle the vast problems ahead for America, he has consistently made two bold proposals.
First, he intends to make an immense investment in infrastructure – roads, bridges, railways — to jump-start jobs. Second, he plans to boost clean green technologies to make up for the squandered opportunities of the Lost Decade.
Both powerful, worthy ideas but they would be far more powerful if they were directly connected. Many people have argued for this, especially Van Jones – most recently in his book, The Green Collar Economy and there are signs that the Obama team is seriously considering making the commitment. We need to do what we can to encourage them.
The incoming administration has an historic opportunity to accomplish five major goals at once through a massive investment in stopping the waste of energy and dollars pouring out of American homes.
Think of this as “infrastructure spending for American families.” To date, our efforts to promote energy efficiency have been locked in a paralyzing cycle. When oil prices are high, we can’t afford efficiency improvements because our wallets are empty. When oil prices are low, we won’t pay for improvements because the payback seems too long.
This is reminiscent of the dilemma in “the Arkansas Traveler,” a 150 year old folk song. A man is riding by a shack in a downpour and comes across a local resident who is happily playing his fiddle on the porch while water floods into his house through large holes in his roof.
Why don’t you fix your roof? asks the traveler.
I can’t, says the fiddler, it’s raining.
Okay, says the traveler, so I guess the next time the sun is out you’ll do the repairs?
The fiddler pauses his tune and tells the visitor to stop annoying him.
“Get along,” said he, “for you are giving me a pain.
My roof doesn’t leak when it doesn’t rain!”
That’s the basic problem with any long term investment under conditions of volatile prices: the signals careen from stop, to start, to stop, or, as Obama put it so memorably two weeks ago, through a business-crushing vacillation between “shock and trance.”
So how do we fix our roofs – and windows, and heating systems – no matter what is happening to the weather or the price of oil?
The solution is both simple and powerful: the government should set up a large bond fund into which institutional, pension, and other private dollars could be invested for a guaranteed rate of return. A $50 billion fund, for example, could be set up to deliver a mouth-watering 6% interest for just $3 billion a year.
The fund would, in turn, channel the dollars through a variety of mechanisms – most likely banks or state agencies – into $5,000-$10,000 residential chunks with zero or very low interest. The funds could only be spent on upgrading the energy performance of a house or apartment – insulating walls, weatherizing windows, swapping out heating systems, installing solar panels, digging geothermal heat pumps.
The loans would be paid back directly from the savings, perhaps through on-bill financing. Depending on heating and electricity costs, the family would begin saving money almost immediately. Renters could split the savings with the owners of their houses or apartments.
What impact would such a program have? It would accomplish five goals at once.
First, it would create local jobs at all levels of expertise.
From blowing insulation into walls and training new energy auditors to installing super-efficient boilers whose computer brains would adjust the temperature in response to many factors, like a living body.
These jobs would swiftly pay back the original investment by government, since workers would pay state and federal taxes, and there would be an additional multiplier effect as both families and workers had more money to spend. Estimates of how many jobs this could create vary by region, but $50 billion – again of private money with minimal public rate guarantees — could generate as many as 1,000,000 jobs.
Second, it would improve housing values.
We have efficiency stickers on appliances; why not on houses? When a house is advertised for sale, the announcement usually lists the taxes, but not the energy costs. States should fix this through mandatory disclosure of the likely energy costs – or savings – of any home on the market. An energy audit would thus become a routine part of the home inspection normally required for a mortgage. Homes with upgraded efficiency would instantly be worth more.
Third, it would increase disposable income for families.
Right now the Federal government spends billions of dollars in fuel assistance a year to help keep poor families from freezing every winter. These costs are an important social imperative, but economically they are equivalent to burning crumpled dollar bills to keep people warm. Morally they hold low and middle income families hostage to the profit demands of energy companies. Rather than spending endless cycles of fuel assistance dollars, or passing a blunderbuss stimulus bill that simply feeds our consumer lust for foreign products sold at Wal-Mart, let’s boost lasting, transformative investment in the basic of American structures, the home.
Fourth, it would bring new technologies rapidly to scale.
Did you know that you can install a one-cylinder, low emission generator – known as the Freewatt system — in your basement that would create hot water, heat, and dramatically cut your electric bill? Of course, it was invented in Japan while we were drunk on our supposed right to waste energy. One home-owner in the most densely populated neighborhood in my state dug insulated his house, then dug a 250 foot well in his postage-stamp backyard, and uses the stable temperature of the ground water to heat and cool his house for less than $150 a month. These are just the beginning of the new technologies that will revolutionize American family life. But any person familiar with business knows that to bring the price of a new technology down, you have to push the volume up.
Fifth, it will drive down green house gas emissions and slow our suicidal path towards climate change.
In my home state of Massachusetts, approximately 1 million homes burn nearly one billion gallons of home heating oil every winter. Every gallon of incinerated heating oil sends eight pounds of carbon dioxide into the atmosphere. Cutting emissions from this single sector by 25% would lower Massachusetts emissions by 1 million tons a year – or more. And that’s just the beginning.
Once again, these five goals – more jobs, higher income, improved housing values, cheaper technology, and lower greenhouse gas pollution, could be achieved for a tiny percentage of the monies that have been thrown down the rat-hole of Wall Street incompetence. And the money would be returned to the government in taxes, and then deliver billions in savings to American families, year after year after year, for the life of the home.
Is this really possible?
But it will only happen if President-elect Obama takes his two good ideas – investment in infrastructure and green technology – and presses them into one. The joint gains would be astonishing. Conversely, it will not help American families over the long run if they get to drive down big roads in new cars and then have to park them in front of cold houses.
The most fundamental infrastructure for American families is our homes. Our new President-elect has referred to this time as a “crossroads of history” for America. We have the ability to create savings for the present and for future generations while safeguarding our planet.
The only question now is whether we can muster the will.
Author, minister, historian, and organizer Bob Massie has served as the president of Ceres, the largest coalition of institutional investors and environmentalists in the US. He co-chaired Massachusetts Earth Day 2000, chairs the international Global Reporting Initiative, and recently coordinated the Energy Empowerment Revolution Rally in Faneuil Hall. As owners of a leaky old house, he and his wife Anne learned a lot about the challenges and benefits of energy efficiency when they insulated their walls and installed a new heating system with a low interest loan through the MassSAVE program at National Grid.