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The Case for Interest Free Sustainable Energy Financing

clean energy money

According to Ceres, the non-profit advocacy group dedicated to sustainability leadership, “In order to limit global warming to 2°C and avoid the worst effects of climate change, the world needs to invest an additional $44 trillion in clean energy—more than $1 trillion per year for the next 36 years.”

Financing these investments at a nominal rate of only 5.3 % interest over 30 years would double their cost, making many projects unaffordable. It seems self-evident therefore that the chances of avoiding the worst effects of climate change would be greatly enhanced were the transition to clean energy financed with zero interest loans.

I was surprised to learn recently that Canadian projects like Canada’s Second World War effort, the St. Lawrence Seaway, the Trans-Canada highway, as well as hospitals and universities across the country were all financed by the Bank of Canada interest free for 36 years.

The Bank of Canada, the nation’s central bank, was set up in 1935 to promote the economic and financial welfare of Canada and did this from 1938 to 1974 by providing interest-free loans to government to finance infrastructure investments.

This ended in 1974 however as a condition of the Bank of Canada becoming a member or the Bank for International Settlements, whose mission it is “to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.” And as a consequence, according to economist Ellen Brown: By 2012, the Canadian government had paid C$1 trillion in interest — twice its national debt – to private international and domestic financial institutions providing them with enormous, absolutely risk free profits for almost four decades.  And Canada is but one of the 60 countries whose central banks are members of the Bank of International Settlements.

The Committee on Monetary and Economic Reform is a group of Canadians concerned about the destabilizing effects current economic and monetary policies have had, and are having, on the citizens of Canada and other countries. It has brought a case in Federal Court aimed at returning the Bank of Canada’s lending practices to pre 1974 conditions because it claims private banks lending to government, contravenes the original act that established the Bank of Canada.

Canadian taxpayers hope and pray this case is successful but more importantly the operations of the Bank of Canada between 1938 and 1974 should serve as a template for how clean energy should be financed. No more important infrastructure investments are required and there is absolutely no reason for private international and domestic financial institutions to make enormous, absolutely risk free profits on the back of those investments over the next four decades.

The world runs on energy, not interest and that energy needs to come from clean sources.  Surely creating a safe planet for ourselves and our children is no less of an imperative today than it was during the Second World War.

Photo Credit: Financing Sustainability and Reducing Risk/shutterstock

Jim Baird's picture

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Bob Meinetz's picture
Bob Meinetz on May 12, 2015 3:16 pm GMT

Jim, what distinguishes what you’re describing from a subsidy?

It’s true it’s unlikely Canada would ever default on a loan, but such loans aren’t risk-free – the risk is simply shifted. If a developer decided that instead of building a solar or wind farm funds would be better used to finance a permanent vacation in the south of France, the Canadian taxpayer is left footing the bill.

And ironically (if Canadian monetary policy is anything like that of the U.S.) Canada will tack the deficit onto the national debt, so Canada’s next generation will repay the loan, with interest, for improving the climate of only the developer.

Josh Nilsen's picture
Josh Nilsen on May 12, 2015 4:07 pm GMT

0% interest rates help those with millions in assets.  They are a giant middle finger to anyone else.

Does Canada think they are alone?  I think it’s pretty obvious who in the US is profitting off the FED carrying 0% interest rates indefinately.

0% interest rates are for large fossil investors that made poor choices over the last 10 year investment cycle and are now RAMMING it down our throats to make up for it.

 

Hops Gegangen's picture
Hops Gegangen on May 12, 2015 10:01 pm GMT

 

I think you are both right. 0% interest is a subsidy, as is trashing the environment free of charge.

In a sense, in the early days of the US, the objective was to extract the riches of the vast territory. 

Now, what we need to discourage rampant consumption. Instead of a tax writeoff for depletion of resources, we should tax it. That would be a tax on carbon on its own.

Grace Adams's picture
Grace Adams on May 13, 2015 6:47 pm GMT

Considering what it will cost if we fail to not only reduce greenhouse gas emissions to net zero but also capture a lot of CO2 to getmospheric concentrations down to about 320ppmCO2eq., we had better replace fossil fuel with renewable energy.  Michael Bloomberg and his hedge fund manager pals claim it should be possible to do including upgrading our electric grid to integrate lots of wind and solar for $200billion/year with some offsetting savings from reduced damage from weather-related disasters. US GDP is expected to be something like $18 trillion for 2016, with 9% or $1.62trillion from energy sector. If energy demand coefficient is still -0.37 as claimed by US Bureau of Labor Statistics in 1968 then prohibitive tariff effect of 10% user fees on all energy regardless of carbon footprint should be$59.94billion, leaving $146billion gross revenue from user fees and $86billion net revenue after compensating too big to fail energy firms (fossil fuel giants have HUGE political clout.) for loss of business to prohibitive tariff effect. Since our Generals and Admirals want fossil fuel replaced with renewable energy and also want even more urgently to upgrade grid to withstand any EMP whether from solar flare or enemy attack, and most of our MIC firms are able to make most of the equipment needed, it should be possible to divert some money from weapons to military grade wind turbines, solar power systems, and parts for upgraded and ruggedized electric grid.  It might be possible to pay much of the cost from current revenue.

Robert Bernal's picture
Robert Bernal on May 17, 2015 11:26 pm GMT

And use that tax to remove the excess CO2 via mineral sequestration. It seems that mining and crushing olivine rock would remove 20x its own enissions (conventional diesel powered heavy equipment).

http://www.innovationconcepts.eu/res/literatuurSchuiling/olivineagainstclimatechange23.pdf

Also, I hear that OTEC can convert CO2 into carbonates in the process of making hydrogen.

Only by use of efficient machine industrialization could we ever actually solve the excess CO2 challenge.

Grace Adams's picture
Grace Adams on May 18, 2015 2:43 pm GMT

If run with an open loop, OTEC should be able to produce desalinated seawater as a byproduct.  Considering how small the electricity main product is, it almost seems that getting most of the return from OTEC as desalinated water suitable for irrigation might be worthwhile.

Grace Adams's picture
Grace Adams on May 19, 2015 2:16 pm GMT

Is this a reasonable Reader’s Digest condensed version (very condensed) of what you said about OTEC?

Ocean Thermal Energy Conversion using ship mounted heat pipes to generate electric power and electrolysis of seawater to move most of the energy and water uphill (hydrogen is very light and floats over everything including air) to hydrogen fuel cells seems to be a leading contender for a low-cost way to produce both electric power and fresh water for much of the less developed world. There is a large area very suitable for using these ship mounted heat pipes to do Ocean Thermal Energy Conversion to provide energy and water to less developed world just east of Indonesia.  There is another not quite as large area just east of the Caribbean.

Everyone can use the contact button at whitehouse.gov to fuss at our federal government.  I do quite often, and I want to fuss at them to at least try contributing to helping the third world with this–maybe try it at that spot just east of the Carribbean (maybe enough hits Florida to help our deep South with both water and electric power while practicing using this before going to the area east of Indonesia.

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