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.
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.