Financing green initiatives
Today’s economic system is driven by consumption. This workshop shows how to move our economy towards conservation through a simple change in the way we increase our money supply.
Background presentation
Financing-sustainability
Presenter
Kevin Cox. Founder of Edentiti (www.edentiti.com). Previously Lecturer in Information Systems at City University of Hong Kong and University of Canberra.
Sustainable economic growth
To achieve a sustainable future Australia first needs Energy sustainability. With abundant cheap sustainable energy it is possible to address other problems through the application of energy, whether it be the provision of water, food, shelter, transport or clean air. To that end the initial focus for any sustainable future should be Energy.
Energy sustainability means that the citizens of Australia will produce all the energy they require without contributing to the level of greenhouse gases in the atmosphere. To achieve this goal within ten years will require the investment of about thirty billion dollars per year for the next ten years.
There are two ways of achieving this level of investment. One is to put a price on greenhouse gas emissions so making investment in renewables and saving energy more attractive than investing in polluting energy. The other is to reduce the finance cost of investment in renewable energy production, in investments in reducing energy consumption or in removing greenhouse gases from the atmosphere. This workshop will concentrate on renewables, reducing energy consumption and extracting greenhouse gases from the atmosphere.
The financial cost of investment in renewable energy is three or more times that of energy obtained from burning coal. As renewable energy does not have a fuel cost, its biggest operating cost is interest. Eliminating the cost of interest can at least halve the cost of generating power from renewable sources.
In practise the price of money demanded by investors is determined more by lack of supply than by the risk of investment. To eliminate the risk cost of money, banks could be allowed to obtain interest free credit from the Australian Treasury or the Reserve Bank of Australia for self-financing public infrastructure on condition that the risk of the credit created not being cancelled is fully insured by non banks. In this way the cost of money becomes the cost of the insurance. The cost of the insurance then becomes the risk of the sustainable energy producers not being self-financing from future sales. The risk of revenues being insufficient to make the project self-financing is best guaranteed by those who consume the power. It is this risk that the Australian government could contract to accept on behalf of all Australians. The risk of operating failure in production should be taken by the manufacturers of the renewable energy technology. So the residual risk of the project should be trivial and in turn make the cost of finance trivial.
This approach to investment, of paying for the investment from the income generated by the investment, changes the importance of time in the finance equations because there are no fixed interest charges. It becomes more important to build systems that will last rather than systems that return income quickly. This will bias development to long term returns rather than to short term returns. In other words we will build systems to last and continue to earn income rather building systems to give a short returns on investment.
In this workshop we will outline a practical mechanism to allocate zero interest loans, a method of monitoring investments to ensure the loan money is spent wisely and describe some possible investments. We will work on the business case for one or more investments such as solar panels, insulation, investing in a geothermal company, investing in biochar, investing in a solar thermal power plant or participants can come with an idea for an investment and can work on their own business case.
