The Green New Deal doesn\’t make sense

So Caroline, Ritchie and all are going to get a piece of their Green New Deal.

And they\’re whining about it. Quelle Surprise.

A report from the environmental thinktank E3G and research by the Green party MP Caroline Lucas suggest that householders\’ bills are likely to be so high there will not be enough of an incentive to \”energy refurbish\” a home.

The chief problem is that householders will be charged interest at a market rate on the loans for their refurbishment. E3G\’s report says that relying on commercial loans, which could mean interest at 8%, is not viable as homeowners will not see enough benefits in the form of energy savings to make up for the rates charged. High interest rates would even make it hard for the green deal to meet the government\’s own regulations; under the Treasury\’s \”golden rule\” the savings on energy bills from the increased efficiency must exceed the cost of the loan over its term.

Lucas said that in Germany the success of schemes that retrofitted buildings with energy efficiency measures had been achieved by offering interest rates on the loans of 2.65%.

Prices are not something that you just change so as to make your plans work. Prices are information about whether you should be following your plan.

If the savings from insulation do not cover the cost of installation then you shouldn\’t be insulating. And yes, market interest rates are part of the cost of insulating. For what is embedded in that market interest rate is the price of all of the things that we\’re not doing by insulating: the opportunity cost of sending the capital this way rather than that.

We\’re not putting up windmills for example, because we\’re spending the money on insulation. We\’re not discovering the cure for cancer because the money\’s already gone, we\’re not extracting rare earths from titanium sands to make the magnets for windmills because we\’ve already splurged the capital on rock wool.

That\’s what the market interest rate tells us: that if your scheme requires less than it to be viable then there are other schemes which are more viable than yours.

Prices inform.

And if your own report says that prices are informing you that your plans are a bad idea than yes, your plan is a bad idea.

7 comments on “The Green New Deal doesn\’t make sense

  1. I can’t understand why Ritchie, as a “successful entrepreneur” having “employed 1000s of people” doesn’t invest his own cash is his Green New Deal, and Pensions thing, and people’s bank. He could even work with Steve Packard again who is doing Green things…

    http://www.tridentenergy.co.uk

  2. So, those green taxes the greens want will push energy prices up so high that people cannot afford to insulatr their own homes.

    Who would have thought it, entirely predictable unforeseen consequences fucking up another Progressive/far left wheeze.

  3. Rob, I think the point is that despite the fact that energy is going to be so high cost, insulation still isn’t going to be viable without Government subsidy. In other words they have hit the law of diminishing returns.

    My mother is having extra insulation put in her loft for free next week. Apparently she gets this because she is over 75. Whether it makes any sense or not, who can say. At the same time she is having a new door put in, and she is paying for that herself, simply because she wants to be warm.

  4. You mean money doesn’t just pour magically from the coffers of the Treasury? It must be because evil tax avoiders are avoiding taxes!

  5. I can borrow on my credit card for 2% a year. If I thought it would be worth my while borrowing to insulate to cut my energy bills I would. But even at that rate I doubt it is worth doing so…

  6. Forget all that, what about this:

    ‘The scale of the green deal is also in doubt. About 14m households should be insulated in the first phase of the policy, according to government estimates. But Lucas said: “While I support the aspiration it is very hard to see how it will be achieved through the current proposals. Retrofitting 14m homes by 2020 amounts to over 1.7m a year, or about 4,800 homes a day. That will be a massive step change, which will require an extraordinary ramping up of the supply chain and the training of engineers.”

    Germany, she said, carried out only about 100,000 retrofits a year under its leading programme.’

    So we need this insulation so we don’t all drown from the impending Great Flood of AGW, but even if we run at German rates it will still take 140 years to get the first phase complete.

    Do Greens think in another dimension? How does any of this make sense when even the Green MP thinks it will take hundreds of years to complete?

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